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Comment by gcb0 | Hacker News Reader

So it is just a way to pick a (random) number that will be shared and compared between three parties?

It would seem so, with a trusted fourth party (the US treasury) acting as the RNG.

But after the initial exchange, another random element is generated: the bill is torn in half, so if you want to forge your part, you'll have to tear it in just the right way to match the other part. This is probably going to be even more difficult than forging dollar bills in the first place.

That's good for the treasury taking that money out of circulation is a gift to the government of $1.

How is it a gift to the government? The undamaged dollar isn't a liability of the government. It's a gift to everyone who holds USD by virtue of slightly reducing the money supply, therefore slightly increasing the purchasing power of the dollars that still exist.

A gift in the amount of $1 divided by the total number of dollars.

> How is it a gift to the government?

The parent is wrong that it's a gift of $1 to the Treasury.

It is a gift to the government however, as you note in your own explanation. It just increased the government's USD purchasing power. The US Government is an epic scale spender of USD (millions of employees, $4.x trillion budget).

If $1 is destroyed, that should make everyone who possesses dollars collectively $1 richer, all else being equal.

The government does not possess all wealth.

The government is a large spender of USD.

It also issues a lot of USD-denominated debt; deflating the dollar makes that worse.

If the government's dollar liabilities exceed its dollar assets, the impact of destroying a dollar on the government's financial health is negative.

The government hold the power to print money. They can print a fresh 1$ to replace the torn one.

Outstanding currency is a liability on the balance sheet of the issuer. The trick with issuing fiat currency is that you can redeem that liability with another, just the same.

Just getting the information to forge half the bill is hard enough: Either you have the original, in which case you don't need to fake it, or you have the other half, in which case you've already compromised the bad guy.

Not for the Treasury, who issues coins but not bills, but for the Fed. Every bill is a liability on the Federal Reserve’s balance sheet. Destroy the bill, destroy the liability. That the Fed doesn’t know you destroyed it [0] is irrelevant.

If you destroyed a coin that would be a “gift” to the Treasury, except the metal and cost of production to replace the coin might be larger than the worth of the coin (I.e. you destroy an old copper cent)

[0] dollar bills circulate like mad and are accounted for every time a bank gets a hold of them (often, due to vending machines, strippers, and diner waitresses). If a bill stops showing up, you can assign a high degree of probability that it will never show up again. Every one bill is probably long tailed, but money is fungible, so who cares if any one bill ends up re-appearing?

In high-inflation economies like Turkey, they do full emission replacements periodically to avoid disappeared currency issue.

> Destroy the bill, destroy the liability

Except it is illegal to randomly destroy a banknote (coins are different).

> Except it is illegal to randomly destroy a banknote (coins are different).

We're talking about drug dealers and other major crime perpetrators... And you're thinking they care about the crime of 'destroying a bank note'?

I think it'd be safe to chalk that up to "I don't think they care".

So what?

Do you think bills are scanned, loaded into a database, to see what they’re up to? I mean on a massive scale...

It's a one-time pad . Ripping the bill makes it unable to be reused, so two different drops can't claim to both deserve to receive from the courier.

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