NYT: “Treasury Slows Its Presses”

Appelbaum, Binyamin. “As Plastic Reigns, the Treasury Slows its Printing Presses.” New York Times. 6 July 2011.

The number of dollar bills rolling off the great government presses in Washington and in Fort Worth fell to a modern low in the last fiscal year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills.

In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation’s economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.

These numbers are not necessarily the whole truth, however: production of paper currency is also declining because technological advancements have allowed for notes to last much longer in circulation. Average circulation was around 18 months some 20 years ago, and now it’s more like 40 months.

The Fed replaces damaged notes, and its equipment used to be unable to distinguish between actual tears and creases. Now that it can tell the difference, it’s replacing fewer and fewer bills – in 1989, it was replacing 46% of notes it received, now that stat is 21%.

Demand also remains high for the $100 bill, which is used globally as a stable currency. The Treasury now prints more $100s than $1s. There’s more than 7 billion Benjamins in circulation, and the Fed says approximately 2/3rds of them are held outside of the US. This is profitable for the US because of (you guessed it!) seigniorage.

So the moral of the story is that things aren’t so bad, actually? Thanks for the fluff piece, NYT! For a more in-depth discussion of these topics, see my posts on The End of Money

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