Question: why, if almost half of us now use cash only a few times a year, are high-denomination banknotes being printed in increasingly large numbers? In April 2024, the value of all the dollar bills in circulation reached an all-time high of $2.345tn, and may well be even more than that by now. The total value of dollars in the world has doubled every decade since the 1970s. Similarly, there are 1.552tn euro notes in circulation, while most other currencies – the British pound, the Japanese yen, the Swiss franc and so on – are all at something like their highest levels in history. This at a time when so many of us have pretty much stopped using cash altogether, and even the people who sell the Big Issue in our streets are equipped with card readers.

When I talk about “us”, I mean those who don’t have to worry about hiding huge cash profits from drug dealing, people-smuggling and so on. And that of course provides the answer to the question: while law-abiding citizens like you and I have to jump through hoops when we move even relatively small sums around for entirely legitimate reasons – buying a fridge or a secondhand car, say – drug dealers just shove bundles of the stuff into their coat pockets or suitcases and whisk them round the world in order to keep their business going. The number of dogs trained to sniff out cash at international airports is growing, but nothing like as fast as the rate at which big-denomination notes are being pumped out by the world’s central banks. And the ways in which money is laundered are growing in complexity and sophistication.

“Money laundering”, by the way, is an expression that started in 1920s Chicago, when Al Capone and his friends had to cope with this same problem: what to do with their vast bundles of greenbacks. They created or co-opted chains of laundries and other small shops to disguise the profits from bootlegging, then bought high-value items such as houses and entire companies (not to mention cops and politicians) with the cash that had been washed clean; “laundering” was a witty way of describing the process. Nowadays the number of men’s barber shops that have sprung up in Britain’s towns and cities may well hint at a new version of the process; though the salivating reporters from the Daily Mail and the Telegraph, hoping to link the Middle Eastern haircut with people-smuggling, drug dealing, immigration and the rise of “lawless” Britain, never quite managed to prove the case. That doesn’t necessarily mean there isn’t one, of course.

Oliver Bullough is one of Britain’s finest investigative reporters. He is thorough, his sources are impressive, and he has a lovely, easy style which takes us through some of the darkest features of the world’s economy. He also has a fine sense of moral purpose, which puts his reporting on to a different level from the show-and-tell paperbacks that fill airport bookshop shelves. As his excellent books from the aftermath of the Soviet Union’s collapse (plus his reporting for Reuters from Chechnya, the scariest war of modern times) showed, he seems to be completely without fear. In the nasty, complex business of reporting international money-laundering, courage is perhaps the most important quality.

Everybody Loves Our Dollars is a much-needed exposé. It starts off in the unlikeliest of settings: Bicester Village, the fashion outlet near Oxford which is built along the lines of a twee New England town; except that the shops bear the names of the world’s most famous fashion brands, from Jimmy Choo to Stella McCartney, Givenchy, Louis Vuitton and Gucci – and the prices are low, low, low. You get there by train from Marylebone in London, and the announcements en route show you who the target clientele is: “We are now approaching Bicester Village,” say recorded voices in Arabic and Mandarin Chinese. People get off with excited smiles, then others struggle on board carrying vast amounts of high-end shopping, often packed into one final purchase: an expensive suitcase that will take everything home to Bahrain or Chongqing.

Bullough maintains that this display of shopaholicism is a major form of money laundering in its own right. You can move large amounts of money around by buying expensive things. As a senior police officer tells him: “Factories in China ship drugs to British gangsters, who then give the payments in cash to Chinese students studying at UK universities. The students either take the cash to Bicester Village, or first pay it into their bank accounts before going; then they buy Gucci handbags or whatever, and ship them back to China.”

Bicester Village was perhaps the least exotic of the places Bullough visited for this book: others include the Marshall Islands, the Northern Marianas and Fort Worth, Texas, where the US Federal Reserve’s Western Currency Facility pumps out unthinkable amounts of $100 bills every day. Which of course leads us back to the question of why, when the demand for paper money is shrinking hugely in the west, are western central banks pumping out more? The answer is depressing. According to one estimate, 70% of all the $100 bills in existence circulate outside the US. The monetary value of each banknote, which only costs a few pence to print, is in effect loaned to the people who take them out of their banks or ATMs. The US Federal Reserve, Bullough writes, earns tens of billions of dollars from this arrangement. It’s an enormous profit, and the big central banks of the world simply aren’t prepared to relinquish it – no matter what the results.

And the results are, of course, appalling. In Mexico, which takes in something like $25bn in US banknotes per year, drug violence kills about 150 people every day. Since 2006, when the Mexican government started using the army to clamp down on the drug cartels, getting on for half a million people have been murdered. Among them was the husband of a woman I interviewed in Ciudad Juárez, a key drugs-trading city just across the border from El Paso. He had been an investigative journalist, like Bullough. After he revealed some of the local cartel’s secrets, he was murdered. The killers cut his head off and stuck it on the railings outside his front door; his young son found it when he came home from school.

This is just one minuscule part of the price the world pays for the profits of the central banks. We have long since lost the war against drugs. Now we’re losing the war against money laundering; the profits for our governments are just too big. The price is paid by people such as the widow of the Mexican investigative journalist in Ciudad Juárez. “I wiped the blood off his dead face and kissed his lips,” she told me. “I’ve never had a proper night’s sleep since that moment.” It’s a very heavy price to pay for a designer handbag.

• John Simpson is the BBC’s world affairs editor. Everybody Loves Our Dollars by Oliver Bullough is published by W&N (£25). To support the Guardian, order your copy at guardianbookshop.com. Delivery charges may apply.