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Lets say Jeff Besos and Bill Gates get really high one day and decide to liquidate all their assets, buy up all $100 bills they can get their hands on (lets say 90% of all bills in circulation) and burn them all in an attempt to summon a shadow demon or something.

Would the price of a $100 bill rise? Would all remaining physical money be worth more than digital money?

Would the dollar in general be worth more because a big part of it was destroyed?

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    I'm not sure I see this as a Personal Finance question; especially given the answer and the comments on said answer, it's clearly an Econ question. – Joe Feb 10 at 20:53
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    @jamesqf it's simple, the Fed doesn't account for them. If you have cash and you destroy it, you simply no longer have that cash according to any monetary system in use (e.g. banks, lenders, etc.). This is why people don't typically do such a thing. Either you just destroyed your own money, or you destroyed someone else's and now you owe them money you don't have. – TylerH Feb 10 at 22:00
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    @Joe Perhaps the OP actually is Jeff Bezos, and is trying to decide what to do with their personal finances. – Acccumulation Feb 10 at 23:47
  • @TylerH: People do do such things as lighting cigars with $100 bills, at least sometimes (see "conspicuous consumption"). Likewise, some bills are going to be destroyed by accident - car & plane crashes, house fires, &c - and this amount is probably unknowable, but as it goes on, year after year, it adds up. So how to account for this when figuring the amount of currency in circulation? – jamesqf Feb 11 at 3:17
  • @jamesqf A few points -- 1. I said "typically", not "never" :-). 2. accidents are just that; they're not intentional. 3. Statistics (same way people extrapolate how a large group feels by only polling a small percentage). – TylerH Feb 11 at 14:48
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Lets say Jeff Besos and Bill Gates get really high one day and decide to liquidate all their assets, buy up all $100 bills they can get their hands on (lets say 90% of all bills in circulation)

Can't happen.

https://www.cnbc.com/2019/02/27/theres-been-a-mysterious-surge-in-100-bills-in-circulation-possibly-linked-to-global-corruption.html

The number of outstanding U.S. $100 bills has doubled since the financial crisis, with more than 12 billion of them across the world, according to the latest data from the Federal Reserve.

That's $1.2 trillion dollars. Combined, Besos and Gates are only worth a fifth of that.

Would the price of a 100 dollar bill rise? Would all remaining physical money be worth more than digital money?

Money is fungible, so, no.

Would the dollar in general be worth more because a big part of it was destroyed?

Cash is only 10% of US currency, and the US Bureau of Engraving and Printing would just print more.

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Let's take the question at its spirit: if enough of a particular denomination of currency are destroyed, will that raise the 'cost' of the rest of that currency?

Depends. I mean, a ten dollar bill is worth $10 for two reasons:

  • It's the valuation of the bill according to the united states government. Aka, if you want to use it as tender, it has a worth of $10.
  • It's the valuation of the bill according to people who would use it in a trade with you. Aka, nobody's going to buy your random ten dollar bill for $25.

But that's because there's enough supply of those bills. How about some alternative examples:

  • Older bank notes. I found a $10 bill from 1931 that has a collector price of half a million dollars. If a person walked into a bank, they would happily give you... $10 for it. But a collector's willing to pay a lot more, simply because of the rarity/collectability of it - the value's worth a lot more than it's aspect as legal tender.
  • Inflated Currency. Depressingly, foreign currency in Venezuela has this problem. There's an 'official' exchange rate for the bolivar... and an actual one. The official rate is 10 Bolivars for $1 US Dollar. And the black market rate for it is over 200 bolivars per dollar. So nobody's going to redeem that US dollar in at the official rate.

... aka, if you burn enough of those hundreds, they might be worth more than $100 simply due to collectivity/rarity.

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    "I found a $10 bill from 1931 that has a collector price of half a million dollars." Is this just an example or did it really happen? Totally just curious. – JackArbiter Feb 11 at 0:41
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    Ah, no, no - I think I said that very badly. I don't mean I stumbled across the bill personally. I mean I did a web search and found one selling for that. – Kevin Feb 11 at 3:20
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In general the answer is, no, $100 bills do not get more valuable, because we don't really need them in the first place.

However, it is technically possible for that sort of thing to happen. For example, let's say Americans needed quarters to do their laundry, and there was (for some reason) a major shortage of quarters. If it was the only way to get your laundry done, you might consider trading away a dollar for the three quarters you needed, in which case we could claim the value of a quarter had risen from 25 cents to 33 cents.

If people burned most of the large denomination banknotes in a society where cash was the only form of money, and no new notes were issued, that might create deflationary pressure. Someone trying to sell a car for $10,000 could find no-one could scrape together enough cash to make the transaction, so give up and sell it at a lower price. When prices go down, money is effectively more valuable.

But we live in a society where there are many convenient alternative to $100 bills (bank transfers, $50 bills, etc) so the lack of them wouldn't make much difference.

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To look at it from another perspective, what happens when your local bank runs out of $100 bills when you want to withdraw them? You get paid in $50 bills or $20 bills or whatever else is convenient. Likewise if there were no $100 bills in circulation (either because someone goes crazy, or the banks decide there are too many counterfeit ones & they just won't issue any more) then anyone wanting cash would simply get different bills that would still add up to the same amounts.

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Large amounts of U.S. dollars were destroyed in the 2003 Invasion of Iraq because the central bank was bombed.

Now the Federal Reserve Bank doesn't simply print money, they loan money to U.S. banks that have made loans. But the bank making the loan is often loaning the future profit of other loans and therefor needs the short-term loan from the FRB. Money is created when the FRB loans money to the banking system but when the FRB is paid-back then money is removed. Of course some continuous growth in the money supply is possible.

Here are two links:

https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp

https://www.bankrate.com/banking/federal-reserve/discount-window-banks-borrow-from-fed/ .

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