Meet America's Money Destroyers | Hacker News Reader

Meet America's Money Destroyers

theatlantic.com

44 pointsacconrad41 comments

Not the deepest bit of journalism you'll find on our monetary system. He leaves out quite a bit; money creation other than printing, measurement (M0, M1, ...), and a complete picture on how the Fed attempts to (or believes it can) control money supply.

Although I agree that the issue of money supply is not described well here, it's not a very long article, nor is it really aiming to explain all that. I think it's fun to see the average lifespan of bills. Who'd'a thunk that most small ones are in use for less than 5 years??

I noticed that they left out $2 bills. Many people save them for some reason (they're lucky! they're rare!) and some of the charts showing lifespans that include $2 bills show their lifespan about 10x the life of other bills.

I found the lifespan of each note interesting too. The rest of it was far oversimplified for my taste. But hey, I'm not everyone! :)

I'd be more interested to hear how they prevent theft by employees of the money to be destroyed. How hard is it to steal money that nobody will ever be looking for again?

There is a mint here in Denver, and I've chatted with some of the mint employees on the bus and light rail a few times. I'm going by memory here, so things might be a little messed up (some things they mentioned were fascinating to me at the time, others were boring and forgotten). This mint makes coins and there is no "employee discount."

One of the security procedures is that you are not allowed to carry money into the facility at all. Basically, you empty your pockets at the locker room and if you have more than about $20 in cash, it has to be documented and held by the shift supervisor. All entrance and departure is through a sally port at regular times. If you're late for work, they're not letting you in. Randomly, people are stopped and searched.

Finally, they take a no-mercy stance when it comes to prosecution, as theft from a US Mint has draconian penalties (like 18 years in the pen for stealing $100). Any arrests and prosecutions are covered quite well to the other employees (probably to remind them to "don't do this"). One of the thefts involved someone with one of the larger music players (it might have been a CD player) who had hollowed out part of it to be able to stash dollar coins in them, taking out about $20/day.

A friend of a friend worked at one of the large megachurches in Colorado Springs. People working in the mailroom would be required to change into pocketless jumpsuits before their shift as many people mail cash to the ministry, and opening an envelope with thousands of dollars in cash was not rare. With casino-grade surveillance cameras and pocketless clothing, this made it difficult by design to pilfer cash. People worked in pairs (someone in front of you and watching you makes it hard to stuff cash down your sleeve) and the pairs were rotated (so you could not make deals with some partner).

The big question I wanted answered and this article failed to address is the actual cost of destroying and reprinting bills. Is it trivial and something we shouldn't worry about? Does it cost tens of millions of dollars, and would there be a benefit to finding longer lasting currency solutions? I believe Switzerland uses plastic based currency which lasts much much longer.

Any changes have to survive the public. The sort of anti-counterfeiting measures that many countries use are not common in the US because the public has very strong resistance to changing the look (must be green!) and feel of our currency. One of the most effective changes is to make larger denomination notes physically larger (since matching the paper is the hardest thing for most counterfeiters, they used to take $1 notes, remove the printing and then print a $20 or $50 on top of the paper).

50 cent and $1 coins are not commonly used in the US due to decisions of the companies that made coin acceptors (the part of the vending machine that takes, counts and validates coins) back in the 1950s and 1960s. Basically, they did not want to hand out 45 cents of change from a 50 cent piece (nor 95 cents change from a dollar coin) so they deliberately chose not to support those coins. Consequently, they stopped being used by many in the public as they were "inconvenient." As those coins became less common, the companies that made cash register drawers chose not to make bins for coins that weren't in common use, so there became no easy way for businesses to take those coins.

The low usage of $2 notes is also reflected in cash register drawer designs - there is no place for those notes, so most cashiers toss them under the drawer along with checks and large ($50 & $100 notes), so the circulation of $2 is very low. I personally like to get stacks of them and spend them instead of carrying $20 notes around. Some places, like at the Renaissance Fair, hand them back as change to the next guy (there is no slot in the till for them) so the next guy gets something they've rarely seen and they get thrilled.

The U.S. Treasury has tried a variety of solutions over the years, Kennedy half dollars, Eisenhower dollar coins, two dollar bills (twice), Susan B. Anthony dollar coins, and Sacajawea dollar coins, that I remember. None have been accepted by the American public. All were to reduce the burden of printing more dollar bills.

When they introduced the Sacajawea dollar coins, IIRC people started hoarding them because they were 'different.' For some reason people though that if they held on to them they would be 'worth something some day' which is a useless thing to think when everyone is collecting them. I think that the fact that they were gold colored didn't help either. People (even if only on some subconscious level) didn't view them as money.

How about a no currency solution? I use credit cards for most transactions over $10. There should be a way to pay for small items with no transaction fee. Real cash will last much longer and payment lines will move quicker.

Call me paranoid, but I don't like the idea of all my money transactions being traceable. It's less that I worry about my bank or government but about, for instance, super-market chains linking my buying-behavior to my bank account or card number.

You're not the only one. There's a sizable underground economy in this country that feels the same way about traceability. Organized crime, drug transactions, and black market goods represent an enormous amount of currency exchange. Even non-nefarious businesses like local laundromats or sidewalk vendors deal in cash with the advantage of being able to skimp on their tax reporting.

It would be interesting to see the effects on these "industries" if we were to move to a purely electronic exchange of money.

HN readers aren't your average slice of America. A large chunk uses cash for everything, and can't get even checking accounts, let alone a credit card.

"A large chunk uses cash for everything, and can't get even checking accounts"

If you mean day laborers or migrant workers, I've seen first-hand some employers now pay them with rechargeable AmEx or Visa cash/gift cards like Green Dot. Keeps the shift supervisor from having to carry conspicuous wads of cash around, and it's directly deposited on their card at the end of the shift, so no need for lineups.

I didn't say the solution had to be a credit card. There are a few options. I bet most people have cell phones. A quick Google says around 17 million people don't have a checking account. You could sell pre-paid cash cards too.

> There should be a way to pay for small items with no transaction fee.

Hm... I'm thinking of something universally accepted, something that doesn't need relatively expensive handling equipment, something anyone can get and anyone can exchange for goods and services...

This something sounds like cash to me.

Why should there be no fee? Square has already removed the fixed portion of their fee so it is just 2.75% (not ~$0.30 + ~3%). This helps with small transactions. Eventually their competition will have to do the same.

Because for some products, that's most of the profit margin gone.

3% is most of the profit margin? Really?

http://biz.yahoo.com/p/s_qpmu.html

The 10 swiss francs I have in my pocket don't seem very plastic, although on the other hand, the colors are... intense. I'd heard about the plastic banknotes in Australia, myself.

I've got some Aussie notes from my last trip in my drawer here. They are indeed plastic. They even have a little clear window in them you can see right through. I'd never really thought about it until now. I don't know if they last longer or not because already some of the ink/paint is rubbing off the 2009 vintage $50 where it gets folded.

Edit: Here you go: they are polypropylene polymer. Wild

http://www.travel-australia.org/money.html

I read somewhere recently that replacing the dollar bill with a dollar coin would save about $5 billion over something like 30 years.

The trick is no one actually wants a dollar coin.

Which seems a bit unusual to us outsiders, seeing as a lot of other major currencies with value roughly comparable to USD do just fine with coins for 1 and 2 denominations (EUR, GBP, AUD, CAD, NZD).

There's a difference between the workability of a currency system using dollar coins and the desirability of dollar coins over paper money by individuals. For the monetary systems you describe there is no alternative to coins. That the systems "do just fine" is irrelevant to the question of whether or not people who use those systems would prefer to use paper "dollars" (or Euros, etc.) if they were available. I'm sure if the US got rid of paper dollars by fiat it would also "do just fine", but whether or not that's a change the public would appreciate is an entirely different matter.

I don't think you're going to find a lot of Europeans pining for smaller denomination bills to replace the highest denomination coins. Especially if you show them how disgusting a random 1 dollar bill looks like. I say this having lived through one full currency redesign and one instance of a dozen countries switching to another currency entirely. People had complaints, but replacing notes with coins was not one that I heard.

Apparently there's a difference in priorities. Some people prefer an illusion of no inflation with a greenback as strong as ever. Others might prefer making the high velocity currency units durable and easy to handle.

Indeed. However, I have not heard of any widespread dissent or disapproval of the changes either. The closest thing was the introduction of the 10 HKD coin (in parallel with the bill) which was not popular and is no longer made. Anecdotally, very few in Canada seem to mind, and I'm glad I don't need 10 quarters to do a load of laundry.

My experience has been that nobody wants to spend dollar coins -- they just collect and hoard them (same with $2 bills).

Nobody else spends dollar coins, so young cashiers sometimes don't even recognize it as currency they have to accept. The government would have to stop printing dollar bills for dollar coins to really see use.

An effect of their rarity.

Most banks have $2 bills available that appear in quite good condition considering their age, too.

Deleted comment

From the title, I expected an article about the parasitic financial industry, which creates no wealth but slices a cut for themselves in moving it around.

The title is actually inaccurate, since money is not destroyed. Nobody is $20 poorer when a bill is shredded, since it is simply replaced.

So when the fed sells a security does the money destroyed exactly equal the money it originally created when it bought the security? Not if the bank that bought the security lent out the money from the fed. The magic of the fractional reserve banking system multiplied the money from the original security multiple times over. I don't think this article addresses this fact.

Of course it does. Eg.

Fed creates $100 by buying a security X. Bank gets $100, lends it out, earns $5 in interest, has $105. Fed sells the security, destroying the $100.

The Fed created $100 then destroyed $100. The $5 used to pay the interest on the security wasn't created as a result of the Fed's buying the security, it was paid with money already in the system.

Interesting how the banks are allowed to sell "securities" to the Federal Reserve.

Presumably the author meant US Treasury marketable securities, but of course The Atlantic doesn't want to intimidate its readers with more than one idea at a time.

The Atlantic is a very average and annoyingly centerist publication. Tons of mildly interesting articles like this that are basically ancillary to how the world works.

It's a pretty clever idea.

It's always surprising to me that technology-saavy people are so skeptical of the monetary system. Corruption aside (which undoubtedly exists), it's a neat solution to a complex real-world problem. Put simply:

Money is just a level of indirection. You could have a barter-based economy based on goods and services, but you introduce money as a proxy to simplify transactions.

The problem is: how much money do you have in the system? You want enough so it serves as an efficient proxy for the actual value of the goods and services. If you deviate from that amount, you're in trouble.

The problem is complicated by two things: 1) the amount of goods and services which money must proxy for is constantly increasing; 2) money must proxy not just actual goods and services, but enforceable promises to provide goods and services (ie: debt).

(2) is the most complicated issue to deal with, because it's highly dynamic. As society becomes more stable and secure people are willing to commit to obligations that are further in the future. There must be enough money to serve as an accurate proxy for those commitments.

The fractional reserve system is actually a fairly elegant solution to this problem: money is dynamically created when loans are made, and destroyed when loans are repaid.

What bothers me personally about the system is that it is not fair. When I am forced to participate in a system, it should at least be objectively fair.

One point of unfairness is that certain entities, and therefore people, are guaranteed a profit. This is not fair. I can't take loans from the central bank at 0%, why?

Saving is also no longer an option. That, I feel, is unfair. We have already taken risks to create the wealth and now we have to take even more risks just to keep the value of the money. Of course, The Bernank and his successors don't have to worry, they just increase their own salaries and retirements.

I actually like fiat money because it decouples resources from wealth. In an economy that increasingly depends on ideas, that is good.

It's the implementation which needs an overhaul before it destroys the entire world. I'm still connecting the dots in my head.

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