Inside Iraq's Cash Economy

By Mark DeWeaver.

Nowadays one reads with increasing frequency that high-denomination bank notes should be eliminated. (Take this NY Times editorial as just one example.)

Hundred dollar and five-hundred euro bills, it seems, are for cocaine cowboys and terrorists. Honest people use credit cards and checks or maybe their mobile phones. Some commentators even look forward to the eventual elimination of cash altogether.

Such claims tend to overlook the essential role that bank notes play in places like Iraq, where the absence of effective banking supervision and the rule of law makes it difficult for deposits to play their normal role as a medium of exchange and store of value.

In conflict and post-conflict economies, hoards of hundred-dollar bills don’t primarily serve the needs of criminals. They provide the primary means of effecting payments and storing wealth for the vast majority of individuals and private sector companies.

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