If cash gets damaged, this Treasury team will make sure it’s not a lost cause | Hacker News Reader

If cash gets damaged, this Treasury team will make sure it’s not a lost cause

washingtonpost.com

103 pointswallflower31 comments

There is a great Planet Money episode that covers this: https://www.npr.org/sections/money/2017/06/30/535062249/epis...

The Bretton Woods Agreement pegged the dollar to gold ($35 for an ounce of gold). I understand that this can work if the central bank emits $35 for every ounce of gold they store.

But how does that account for destroyed/damaged/lost dollar bills ? The loss is very hard quantify and monitor, but needs to be compensated either through re-printing of new dollars, or through the destruction of stored gold to maintain the desired exchange rate.

Could someone with better knowledge than me explain how this works ?

Do you need to monitor the exact supply or even have any gold on hand or just monitor the (black) market price of gold?

I think you just assume that unless bills are returned to you as damaged and you need to replace them, all the bills printed are in circulation.

And I don't think the peg needs to be exact. If bills are destroyed and the peg becomes 1 dollars = $35.05, things aren't going to fall apart.

Cash money is replaced at face value if it is damaged - presumably the owner of the cash has an interest in seeing it kept safe.

But unless the Treasury is notified and presented to their satisfaction with damaged bills for replacement, by definition, there is no way of tracking destruction/damage to cash money.

The amount of cash in circulation is tracked: https://www.federalreserve.gov/paymentsystems/coin_currcircv...

In the Euro zone - with negative rates, holding on to paper money can mean a positive return: "German Banks Are Hoarding So Many Euros They Need More Vaults" https://www.bloomberg.com/news/articles/2020-01-31/german-ba...

The Bretton Woods agreement never had anywhere near enough gold to account for all of the currencies pegged to it. The US held all the gold and agreed to the fixed conversion and everybody else agreed to never convert. It never had to balance presumed destroyed bills with the gold reserve.

> Could someone with better knowledge than me explain how this works ?

The short answer is it doesn't. We haven't been on the gold system for a long time, and BW was a sham, no one really did what the agreement said, there wasn't nearly enough gold to do so anyway. Breton Woods was a fictional agreement, basically. But once Nixon stopped pretending, we've been purely a floating currency like most others since.

I appreciate dearly that this team exists and wouldn't be surprised if their specific techniques for uncovering mutilated cash can be used in other scenarios e.g. criminal forensics, but I feel like this is one of those groups that would be targeted for a government cost-cut in the not-too-distant future.

> If you're still using cash, it's at your own risk. We no longer have a recovery service for paper money.

A. This the hard-core disaster recovery for cash. For mundane stuff (my bill got ripped in half) you can go to a bank and they will give you new bills and ship the damaged ones to the Treasury.

B. If you have a stomach for cheesy movies, The Hurricane Heist (2018) is about a fictional plot to steal $600M from a cash destruction facility. (Cash that is too old/damaged to be in circulation, but is still legal tender.)

Someone should do the same thing for lost cryptocoins ;)

Plot twist... Satoshi' Bitcoins were in cold storage, but got burned up in a fire.

I mean that is certainly possible, maybe unlikely (because of the amount you'd assume they'd have backups), but possible.

CBS Sunday Morning (my favorite news show) had a segment about this too: https://www.cbs.com/shows/cbs-sunday-morning/video/GZb3nlcVQ...

I'm surprised it's a free service. How long are they spending on these $100k+ cases?!

I guess an argument for it being free is to garner trust in the currency.

I would say it is a free service because most people take very good care of their cash.

A lot of very old government services are like that, they hail from a time before everything was expected to be "free market" and needed to turn a profit to justify its existence.

It's not really a free service we are all paying for it via government spending.. which is loosely related to taxes.

For those struggling because of the paywall you can try outline. It's a pretty decent site that can bypass a lot of paywalls and is actually usable compared to most news sites. Ad block doesn't work here as it only shows the first paragraph.

https://outline.com/crbq2m

Note to moderators, If the direct link isn't allowed please change it to just outline.com

Thank you so much.

You can also read WaPo by carefully timing a click on your browser's Reader Mode icon when the article loads. (The icon disappears once it detects that you're not a subscriber, so you need to snipe it)

I wish we had a team that cared as much for our democracy.

A solid monetary system is a prerequisite to democracy.

It's kind of hilarious that they still spend money on the PR team to push these stories about how important and sanctimonious cash is while at the same time printing billions of dollars every night and just transferring to any bank or hedge fund that wants it in the overnight repo market.

A whole set of theatrics for the commoners who still use cash, meanwhile we just press some buttons and poof a billion dollars appears out of thin air in your account (if you're rich enough).

Those two issues seem completely unrelated to me.

One has to do with replacing damage cash, the other with control over the money supply.

We crossed the Rubicon in 2008 with government intervention in money markets.

Consider this: "France's Richest Man Gets a Free Lunch From the ECB" https://www.bloomberg.com/opinion/articles/2020-02-07/louis-...

Or this: "All-star economists urge Fed to use QE and ‘new tools’ to fight next recession — just move sooner and go bigger than crisis" https://www.marketwatch.com/story/all-star-economists-urge-f...

>A whole set of theatrics for the commoners who still use cash, meanwhile we just press some buttons and poof a billion dollars appears out of thin air in your account (if you're rich enough).

It does seem as if an identical-ish puff piece finds its way through the aggregators at least quarterly. I think the actual content of the story is irrelevant enough and I have some misgivings about attributing nefarious motives to this participial puff piece, but I do take issue with the kinds of non-story this article represents, and the collection distraction that journalism as infotainment represents (being neither truly informative, nor particularly entertaining).

I don't think that this article is uninformative. Many citizens are unaware of this program and it could come in handy some day (hopefully not, but it's a good thing to know). More useful than reading something dumb a politician said today.

commoners who still use cash

You're right, it's much better to use payment methods that track my wants, needs, desires, habits, location, companions, financial status, political and religious preferences; and then weaponizes it against me. Stupid commoners and their freedom.

Whatever the merits of the parent comment, I think you're misinterpreting their intent.

Their stance is that the average citizen is made to jump through hoops to get their cash replaced, while major players are handed money freely. The "commoners" appellation is sarcastic.

This is like 99% off topic, but my understanding of the repo market is that the loans are:

Short term, often overnight, but some are 7 days

Fully collaterialized, with good collateral like treasury bills

Interest bearing

So it seems to me like risk free money is to be made here, and sure, there's a market failure if there aren't enough private lenders, but why is it a problem for the government to step in?

Not to mention that it was normal to do repos in the US before the post crisis money market moved to the floor system (IOER), and currently is normal for most money markets around the world.

The grandparent has a point but he's barking at the wrong tree. It's all about the artificially low interest rates, world wide. Money supply is a prisoner of rates. Let's see how this setup unwinds...

Reply on news.ycombinator.com