Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.
That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.
I am missing the logic here
The people who lend money are banks and they don't loan out green Federal Reserve Notes
They loan out money from their pool of assets which are in the form of book keeping entries on a computer. Cash money is a minor part of their assets.
A mafia loan shark would be "stimulated" to loan out more money because he does deal in cash and with this plan 10% of his cash stash would be eliminated each year