Have you guys heard the Planet Money podcast about hunting for the hundred dollar bills? Apparently, 80% of cash is in the form of $100 dollar bills but when's the last time you saw a Benjamin Franklin? The fact is we don't know where most of the $100s are.
Why is that? And just how many $100s are floating around out in the world? Well, that's exactly what the Federal Reserve wanted to know. They begin with a hypothesis that the $100s are "hiding". They guessed that the $100s are used as long term stores of sketchy wealth, stored in vaults and in between pages of books, by international drug dealers and their ilk.
Working off that hypothesis, they concocted a way to "count" how many $100s are out in the world.
They borrowed a clever technique from fish biologists that wanted to count fish in a lake. Like $100s, fish hide too. What you do is you catch say 100 fish, you tag them and you set them back into the lake. Later, you pull up another 100 fish, randomly. You check to see how many of the fish are tagged. If all 100 are tagged, then there's probably only 100 fish in the lake. But, if only 50 are tagged, then there's probably 200 fish in the lake.
The Federal Reserve used the same trick. They tagged $100s and tossed them into the world's lake of $100s. They waited, they resampled, and they got their "answer".
Regardless of the results, my question concerns their technique. What you do think about their technique? Would it yield accurate results? Would it over or under count?
Source:http://www.npr.org/blogs/money/2014/08/13/339827662/episode-560-hunting-for-the-hundreds5:48 is where they talk about the fish biologists sampling technique
Comments
Hoping I have not just embarrassed myself by raising my hand.
-J
Edit: English.
If their premise is true that the $100 bills are "hiding," this would be the exact reason why their method is flawed. These bills are being hidden by those with ill-gotten wealth. Thus, they have reason to be kept hidden. Why does the Federal Reserve believe that these hidden bills would come out and participate with their sampling technique when they have reasons for hiding in the first place?
By this reasoning, the method they used should be theoretically sound.
Anyone has opinions, questions, concerns, dirty looks?
You were the first to respond, and gave an excellent analysis of a potentially huge flaw in the technique.
You get the secret mystery prize...
Keeping with the theme of this thread you get your very own - untagged - C note, in the form of a $100 Amazon gift card
Congratulations!
Thanks again!