66. Money as a store of value; seigniorage as tax on crime

In the recent Bank of Canada report one article deals with cash holdings. The proportion of all transactions done in cash fall over time, but cash holdings increase in line with spending.
The authors of the article suggest that people hold savings in cash. This is not surprising: with nominal interest rates at record lows, the interest lost from holding cash instead of a bank deposit is minimal.
At the end the article mentions an interesting story that appeared in the National Post on Friday. The Bank of Canada stopped issuing the $1000 bill long time ago, and if a bank receives such bill it is sent to the Bank of Canada and destroyed. Yet there are still almost a million $1000 bills in circulation, with the value of almost $1bln. All this is seigniorage, paid by people using them, most likely for illegal activiites.
By the way, when Euro was introduced in 2002, the largest banknote was 500 Euro. This led to complaints by the US; Americans claimed, correctly, that this was an attempt to capture seigniorage away from the US. The $100 US is the most popular form of cash among criminals; using 500 euro notes instead reduces the size of suitcases cash needs to be carried in :). Cash used outside the country is pure seigniorage; the US would like to keep all of it.
And an interesting factoid: when the war in Iraq started in 2003, one of Saddam Hussein sons reportedly drove up to the Iraqi central bank to make a withdrawal of around $1 billion. He reportedly took $900mln in US cash and the rest in Euros. The money was later used to fund Iraqi insurgency.