• Chris Principe, Publisher at Financial IT


• 01.05.2019 08:15 am
payments , Finance

One of my favorite American historical personalities is Ben Franklin, born 1706 and died 1790.

Yes, Ben is known as a leader for liberty, a politician, an inventor, scientist, businessman, philanthropist and, generally, a genius in his day. He is also the only American founding father to sign all three documents related to the freeing of America from England. He was involved with the signing and drafting of the Declaration of Independence and the Constitution. He also negotiated the Treaty of Paris that officially ended the War of Independence. These documents brought the United States of America into being. Additionally, Ben was the publisher of the Poor Richard’s Almanac and as, a fellow publisher, I am in awe of the breath of his contributions.

Ben Franklin helped build the University of Pennsylvania, raised funds to build the nation’s first hospital, Pennsylvania Hospital, created the first lending library and fire company long before any government provided this for its citizens. He was the First Postmaster-General and the first Minister to France; he was against slavery as an institution and, as a scientist, proved at night with a kite and a key that lighting was electricity. After proving this, he invented the lightening rod to protect buildings as well as bifocal glasses and the Franklin Stove. His genius was centered on leveraging his contacts and connections in the areas of business, social, political, scientific and journalism into a huge network that paid him back tenfold. There are many lessons to learn from studying this man’s networking abilities.

 Unfortunately, for Ben, the generations today do not know him based on his amazing life. If you ask anyone off the street today, they will know him immediately as the guy pictured on the U.S. One-Hundred-Dollar bill. Those people will not be able to tell you much else about Mr. Ben Franklin. They will easily recognize him as a “Benji” or a “Benjamin” slang terms used for the $100 bill that he is pictured on. The slang was made famous by the 1997 song by Shawn Combs (Puff Daddy) “It’s all about the Benjamins” and the 2002 movie “All about the Benjamins”. This is where the trouble starts.

The U.S. Federal Reserve Bank released an interesting fact. At the end of 2017 the $100 bill has surpassed the $1 bill in terms of number of bills in circulation. There are over 12.5 billion $100 bills in the world. Since 2016 over 70% of those $100 bills have been located outside the shores of the United States and are desired by every other country.

Just for fun let me give you a few $100 bill facts:

• The lifespan of a $100 is about 15 years, the longest of any American banknote
• It costs the Federal Reserve Bank printing presses about fifteen cents to produce
• The U.S. $100 is the most counterfeited bank bill in the world
• 1 Million dollars in $100 notes weighs 10 kilos (22 pounds) and fits in a shopping bag. You could walk around the mall with this all day and no one would know!

Printing at the Federal Reserve Bank

While these facts are interesting, they bear out a disturbing trend. The $100 bill serves as the de facto currency of all black-market transactions globally. That means that people involved with money laundering, terrorist financing, arms dealing, kidnapping, bribery, mercenaries, contract murders, gambling, drug money, sex slavery and many other illegal transactions choose the $100. The news isn’t all bad for the $100, according to CBS News: the $100 tested relatively cocaine free when compared to the smaller valued bills in circulation.

War Against Ben

Farmers at the Gate

The issue for law enforcement, which becomes the issue for banks, is the constant adding of regulation and requirements for compliance checking. This is needed to prevent the almost inevitable use of the $100 for illegal gains. Counterfeiting has kept pace to the point where even the banks cannot identify a fake note: not even the so-called Super Note is safe from forgery. This is like an arms race with each side matching its advances and changes to the printed banknote. There are now calls in political circles, and not just in the U.S., to eliminate the $100. The idea is that this will make it harder to move the amount of cash that illegal operations generate. This should be a real concern for many people. It is a way for the government to force people to turn in their saved cash for new bills. This is also presenting the U.S. government with a tax revenue opportunity. People who are using the $100 banknote to avoid paying tax will see no sense in hiding that which no longer has value.

Cash, Criminals Best Friend

The compliance issue for the banks is huge and is a function that – for them - provides no revenue only expense. We have seen the banks become greedy for fee revenue. Fees are earned without using the bank’s capital. This indirect income can be used to offset the cost of compliance. RegTech and compliance checking companies have boomed based on this constant flow of regulations that the banks must adhere to. KYC and KYCC are the acronyms that run the banks now in a vain attempt to reduce the criminal use of money. In years past people would brag that “Cash is King”. Try taking a large amount of cash into the bank today. You will be lucky not to end up in jail or, at least, wasting a massive amount of time answering very intrusive questions.

Bank tellers are now trained on profiling people that bring cash in. I was at a bank training session a few years ago and the trainer brought in a bag of money that was scented like marijuana so that the bank employees could identify a potential drug dealer or smuggler. Even if they do not say anything to you, the bank can fill out a SAR (suspicious activity report) on you and even put a block on any accounts with your name, be it business, personal, or retirement-related.

Dick Dastardly

Benji’s, Or Gold

Over the course of human history, there have been relatively few stores of value as stable as the U.S. dollar has been over the past 100 years. The currency is backed by the U.S. Federal Reserve with the $19 trillion economy it represents, and with over $5 trillion held as reserve assets by foreign central banks. This relative strength means that when you have a dollar in your pocket, you can be confident in its value. Except, that is, when the bill you have isn’t actually a dollar, but counterfeit - or maybe in future eliminated from use - like the $100 – may be.

In other words, the haven of dollars is not so safe. If we look closely through history the most secure store of value has always been Gold.

GOLD is GOOD

Interestingly, during 2018, central banks bought more gold, a record amount, than any year before. This reversed a trend of central banks buying less gold each year for the last decade. Together with this there has been less gold mined each year since 2013. There has not been a new goldfield with over 5-million-ounces found since 2014. Each year before 2014 there have been several finds in the 10-million to 50-million-ounce range - but not in the last five years. The price of a kilo of gold has increased since last year from $39,000 to $42,000.

In short, the gold demand is up, and the supply is shrinking – which, according to the rules of supply and demand, means increasing value. All of this tells me that now is the time to consider an investment in gold.

The times are changing and many of the new trends are represented by Benjamin Franklin, the $100 man.

I have added here some of my favorite famous sayings from Ben:

"Early to bed and early to rise, makes a man healthy, wealthy, and wise."

"Halfwits talk much but say little."

"God helps those who help themselves."

"One today is worth two tomorrows."

"A penny saved is a penny earned."

"Three may keep a secret if two of them are dead."