If you are interested in what it costs to move money between parties (in this case between countries) today’s Wall Street Journal is for you. Prompted by the revelation that the US government sent $400 million in cash to Iran because we did not have a wire or checking account with that country, the WSJ published a fun article, Cash Flies Commercial and Other Secrets of Moving Money. The article provides insights into how cash physically moves around the globe. Interestingly, the article also points out that an estimated 50-66% of the $1.4 trillion in paper currency in circulation sits outside US borders.
I especially love the article’s graphic of a pallet of $5 million in $100 bills:
The different color bands on the different denominations are so cute!
Two Basis Points
My favorite part of the article, is about how banks are paid to move money. According to the article, banks are paid on the basis of the weight of money they move (which makes sense). But I loved that someone figured out that this fee averaged out to about 2 bps.
Two basis points is an average because as the article points out, “a million dollars in one-dollar bills weighs about a ton, while $1 million in hundred-dollar bills is just over 20 pounds.” I found it reassuring to know that a denomination that was 100x another denomination weighed approximately 1/100 as much and that the WSJ could do this math. This also means moving $1s is roughly 100x as expensive and moving $100s!
Two bps to move money is pretty cheap, but ACH is still better–especially relative to moving $1 bills!
Have a great weekend!