All Hong Kong residents know that the $1,000 note is the most worthless piece of cash on the planet. It is almost impossible to use the notes at any retail outlets (one notable exception is Canteen, which gladly beraks my $1,000 note for some grub and a wad of smaller, more useable denominations). In the past week there's been a proliferation of fake $1,000 notes, prompting the government to say "don't panic". Jake van der Kamp at the SCMP takes up the story:

...Few people really want these things [$1,000 notes]. For ordinary day-to-day cash transactions, the HK$1,000 banknote is much too big a denomination. It is an invitation to trouble from merchants and has always been so, not just in this latest counterfeit scandal.

But some people obviously do seem to want it. The 2005 figures from the Hong Kong Monetary Authority (the latest available) say that in value terms the HK$1,000 banknote accounts for 53.6 per cent of the total banknote issue. This, by the way, is up from 39.3 per cent in 1997, which says not only that these bills are in high demand but that this demand has grown.

...the number of [$1,000 notes] in circulation rose from fewer than 40 million in 2000 to more than 80 million in 2005. Take note that we are talking here not of the value of these banknotes, but of the number of them - 80 million individual pieces of yellow paper, 13 apiece for every adult member of our population. Who wants them?

...Issuance of HK$1,000 banknotes has thus grown much faster than the overall banknote issue...Why did we need so much more cash in 2005 than in 2000 for every dollar of GDP we generated?

Perhaps it was because people stuffed cash into mattresses for a few years. Deflation during that period meant that the value of those banknotes actually rose and, with deposit rates at near zero, there was no reason to put the money in banks. The HK$1,000 banknote fits the purpose nicely - more money in the mattress with less bulge.

I think there is another explanation, however. The HK$1,000 banknote is the money launderer's banknote of choice in Hong Kong. Shuffling cash is a good way of hiding the proceeds of nefarious doings and, if you are doing nefarious doings in size, it helps to have a big banknote issued in size.

Would you care to comment, you people at the HKMA, about how our note-issuing banks seem so eager to accommodate money launderers? Could we have a police comment on this, too? Whatever the explanation, I think a good counterfeit scare actually has some welcome aspects. It scares mattress money out of mattresses, it makes life more difficult for money launderers, and it reminds the powers that be that shopkeepers have always had good reason to shun a certain nasty form of yellow paper.