$100 Bill: The Fed Has a $110 Billion Problem with New Benjamins | Hacker News Reader

$100 Bill: The Fed Has a $110 Billion Problem with New Benjamins

cnbc.com

35 pointsjulian3742 comments

Talk about your disingenuous headlines - it's not like this printing problem has cost the government $110 billion, it just represents $110 billion in printed currency that is not yet in circulation.

That means the government spent about $120 million to produce bills it can’t use. On top of that, it is not yet clear how much more it will cost to sort the existing horde of hundred dollar bills.

In other words the true cost (so far) is one one-thousandth of the sensationalist headline.

And then there's this:

"A very high proportion of the notes will be fit for circulation," said Darlene Anderson of the Treasury Department. "We are working really hard to try to get a solution to the problem."

So basically, if estimates are correct, most of the costs will be re-couped and a minority will be true losses.

Yeah was listening to NPR talk about it and the two problems they're trying to deal with is fixing the problem that causes the faulty notes and sorting the faulty notes for the good ones so the good ones can be used.

I have a three step solution.

1. Create an amazing dream programmer job opening.

2. Use this as the interview problem.

3. Hire the one with the best solution and put it into practice.

I bet it turns out you only need two weighings.

Why would someone bother to counterfeit the new bills when the old bills will be around in circulation for over 100 years?

Wouldn't they just counterfeit the old bills?

Paper doesn't last very long. Five year from now, the old bills will still be in circulation, but they'll be uncommon. Ten years from now, any time you try to use one of the old bills, the merchant will look at it very carefully before accepting it.

The trick is to keep security measures a decade ahead of counterfitters, so that the only counterfit bills are the ones which are antique enough to attract extra attention.

I had the cashier in a toll booth refuse to accept a perfectly valid old-style $20 bill last week. I asked him what was wrong with it and he whipped out a new-style one and said "they're not the same, it's fake."

He even halfheartedly threatened to call the police.

Dollar bills are actually made from more than just wood pulp, they also include cotton, silk and linen -- along with red/blue fibers inserted to create texture.

According to the federal reserve, bills have the following lifespan before they wear out:

$ 1.....22 months

$ 5.....16 months

$ 10.....18 months

$ 20.....24 months

$ 50.....55 months

$ 100.....89 months

http://www.federalreserve.gov/generalinfo/faq/faqcur.htm#13

89 months is over 7 years.

And those numbers assume they are in circulation.

So it's perfectly plausible to have the old $100s in circulation for the next decade, assuming some are kept in security boxes, etc.

But I guess they are planning for after 2025 to have some kind of lock against fakes finally.

> Paper doesn't last very long.

This is an argument for polymer bank notes. Australia has these and they're very durable.

Or an argument against them; if they stay in circulation forever it gives counterfeiters longer to work on them.

They have transparent sections, holograms, angle variable colors - they are extremely difficult to counterfeit. US notes you can copy with half a carved potato

I'm going to call shenanigans. Do you have a source for that claim. I'm not disputing the quality of Australian currency, but I don't see how American currency is trivial to counterfeit.

I've heard of cashiers being fooled by colour photocopies of paper bills. I've never heard such a story about plastic currency.

> US notes you can copy with half a carved potato

kjhughjkjh, I have a call for you on line one. claims to be from the Secret Service? ;)

Does the DMCA ban potatoes now ?

Except that the polymer used is hard to obtain and the process to print on it is difficult to achieve without some serious equipment and know-how. Some of the notes have now been in circulation for more than a decade without realistic forgeries appearing.

So whereas a passable USD forgery can be made with a photocopier and some soft paper, the polymer notes are so expensive to reliably forge that it's not worth the effort. In practice Australia has very little in the way of forgery and it's usually detected by merchants almost immediately.

The main blight on polymer notes is that the company (Securency) which manufactures them has been accused of bribing officials in various countries to switch to polymer notes. Given that Securency is half-owned by the Reserve Bank of Australia, it is tremendously embarrassing.

the second problem a counterfieter faces after making the bills is safely disseminating them. Large numbers of old bills is suspicious. It's true right now the 'old' bill is still common and thus not suspicious, but once it has mostly phased out it will be.

One of my favorite stories is about perhaps the most conscientious counterfeiter: http://www.snopes.com/business/money/mister880.asp.

How on earth did they have a 30% failure rate, but not notice until after they had printed 1.1 billion notes? I thought the mint was extremely stringent about their QA!

A broken bill for a broken currency.

Who makes 1,000,000,000 of something before verifying quality?

The Feds need to hire this guy to build an automated sorting machine for them:

http://gamesbyemail.com/News/DiceOMatic

If he can build a machine "Capable of generating 1.3 million rolls per day" on a shoestring budget, I'm sure a sorting a billion notes with a bit larger budget shouldn't be a problem.

It seems surprising that a stack of bills could have a lot (30%) of folds in them without making it obviously bulge in the middle.

Golly, wherever will they find the money to pay for this error?

Surprisingly, the CNBC headline is editorialized and overly-sensational, as is the rest of the article. At worst, they have a $120M problem, and that's if they just burn everything and reprint all the bills. Otherwise, "up to 30% of the bills" will have to be reprinted, for a cost of $36M plus the cost of identifying the broken bills.

Otherwise it's an interesting article - I wasn't aware they were redesigning the bill.

They're going to destroy most of these, and someone is going to smuggle out a few, and they'll be worth a lot more than $100 a hundred years from now.

Why wasn't this caught during printing? I worked for a company that printed newspaper circulars and we had to check the prints every 10 minutes for quality. So the department of engraving and printing can't do the same? My theory is that they discovered someone(North Korea?) printing counterfeits of the new bill and are modifying them again.

Perhaps the anti-counterfeiting measures are too effective if the U.S. Government is having trouble printing them.

The mint produces coins. The bureau of printing and engraving produces bills.

I'm amazed at some of these comments. People seem to be more upset at the article's headline than a government which routinely wastes money and creates problems. After all, the government can't exactly chalk up its (our) $12 trillion debt to tax cheats! Boondoggles like this must be happening on a daily basis.

Are these pieces of paper really worth $100 a piece or only the cost of the paper and ink? Since the notes never shipped, and likely won't, thus won't backed by the government I have a hard time thinking this is a $110 billion problem.

Depends on how you look at it. Yeah, they're "worth" $100 apiece because they can be exchanged for goods and services "worth" $100. (Let the chicken and egg lie.) So it's $110 billion worth of cash that can't circulate. Good or bad thing? That's over my head.

On the other hand, they don't cost that much to print, only 12 cents. But there's 1.1 billion of them. So that's $132 million of work that's not doing any good right now. Still a good-sized problem, without considering the time and expense of sorting and replacing bad notes.

It’s obviously not a $110 billion problem. That’s a sensationalist way of framing it. The only problem is that the production costs will be higher (no joke when more than one billion notes are affected but nowhere close to an additional $110 billion – the article says about $120 million). It doesn’t matter at all how many more notes than needed are printed as long as the superfluous ones are destroyed before anyone could do anything with them.

You remember the $300 hammer? Well this is the same procurement operation!

I can see collectors scouring new bills for this flaw and hoarding them. If they ever make it into production you can be sure they will instantly become collectors items.

*edit s/production/circulation

They made it into production. They printed 1,000,000,000 of them before verifying their kwalitee.

$100 bills with a blank stripe down the middle are going to be valuable in the future.

Is there a non-cosmetic reason the defective bills are unservicable? I say just circulate 'em, unless the blank spot is very large.

I would imagine that since paper money gets its value entirely from the trust the public places in its authenticity and value, any printing defect will cause chaos when the not-completely-uniform bills go into circulation.

This will waste the time of those that need to check for authenticity (imagine the image scanners that need to be adjusted for this), deflate trust in what constitutes an authentic bill, and devalue the "defect" currency as it may not be accepted in all scenarios.

If ten percent of the bills are bad, the actual cost of those bills is roughly $14,000,000. That's about 1/9000 the cost listed by the article.

(1.1 gigabills * .1 [faulty bills] * 0.12 [cost per bill])

Remember how the U.S. was going to print money to get itself out of debt? So much for that idea.

I think they just got a bit confused. You print notes - employing printers, then recycle them, then pay to print more - eventually you have full employment in the printing industry

So when the government prints money it "stimulates the economy" but when anyone else prints money they do jail time?

If printing money is so good for the economy why don't they give us all printing presses?

Clearly you haven't been brainwashed with enough Keynes It's not as though creativity and execution really had anything to do with the economy.

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