If people round the world want to be paid cash, in foreign currency notes that they trust, dollars are by far the most popular. However, euro notes are very slowly making inroads into this market. This damages the US economy, which has a major export industry in dollar bills which are never repatriated.
There are some obvious reasons for the change. Clearly, countries round the EU have more access to euros than dollars - their people live, work and holiday in the EU. Also, if you’re doing a drugs deal or buying a champion camel, you need a smaller bag for €500 notes instead of $100 bills.
However, I have heard it suggested that the euro is becoming more trusted than the dollar, because a forgery is more easily detected. There is no doubt that euro notes are forged in large numbers, like any major currency. However, the suggestion is that euro forgeries are more obvious, because euro notes have more anti-forgery protections than dollars.
I don’t know about euros being more trusted, but it makes sense as euro notes do have more anti-forgery measures than dollar bills - although the newer series of dollar bills seem to be catching up in this regard. Older US banknotes always struck me as very easy to forge - I presume that as long as older bills are still circulating, forgers would concentrate on them.
Here in the UK, the largest circulating banknote is £50 (about $82 at current rates) and they are very difficult to spend - lots of shops won’t take them at all, and if they do they are very carefully scrutinised. I’m sure a €500 note (~$700!) would be even more carefully checked.
Anecdotally, I’ve found that in many countries where US dollars are accepted either as the official currency or in parallel (e.g Cambodia), people are very picky about not accepting torn or otherwise “imperfect” dollar bills.
This is true. When I was living in Russia I always had to make sure that I had clean bills. My first stint over there came just as the US was changing the design of the $100 bill. And it was harder than you think to get those at the time. But slowly, currency exchanges were demanding the new one so I had no choice but to go to different branches, inspect every bill that they gave me and unfortunately send them back for more if they weren’t good enough.
I guess my question is really targeted at the policies of the US authorities.
Why would they have produced bills that are easily forged, and whose international acceptability is limited? Obviously, US people have no choice, and must use whatever the authorities produce. However, the more reliable the currency is, the more acceptable it will be to third parties.
The more the currency is accepted, the more foreigners will buy it, and keep it as a long term store of wealth - instead of sending it back to the US. That implies greater exports of notes, and more income to the USA.
The EU authorities seem to have made the opposite choice, and deliberately produced highly trustworthy notes.
Is there a policy issue that I am not focusing on?
Without getting into GD territory too much, it strikes me that parts of the American population are rather, shall we say, resistant to change, particularly when it comes to things that are perceived to be part of the fabric of their country. The currency, obviously, is one of those things. Witness the fate of various attempts to bring in dollar coins, and the whinging about “colourful Monopoly money” that accompanied the latest series of notes.
My guess is, they could totally redesign the banknotes and make them high-tech and fancy, but it wouldn’t be a popular move and they know it.
I also remember asking my bank for dollar notes in good condition, when going to Russia years ago. Everything had a rouble price and a dollar price, but dollar notes had to be in good shape. So far as I can see, the only change now is that there’s a euro price tag too.
I suppose there must be a balancing point where the cost of preventing forgery meets the economic cost of forgeries. Each country makes that decision based on perceived risk.
The EU authorities had to introduce a totally new currency to a large number of countries, many of which had strong currencies of their own. The success of the introduction may indicate that they were right - new countries join the euro area every couple of years.
The guys doing the Euro were doing it from scratch – the U.S. had a lot of sunk costs in both the bills and the printing infrastructure. Also, the U.S. bills were regarded as pretty solid and hard to fake for many years (intaglio and the right rag paper being hard to come by), so I would not characterize U.S. bills as “easily forgeable” even before the recent enhancements. What did change was the ready availability in the mid-'90s of super high quality laser and inkjet printers. Twenty or thirty years ago, forgers might have to actually engrave a fake plate – no small task. Slapping paper on a Xerox – that began to pose some problems, which the Euro guys could see coming from the beginning.
From what I’ve scrutinized of the latest U.S. currency – if someone were to look pretty closely for things like the watermark, microprinting – it’d be very hard to pass off a fake*
*I’ve not read whether the much-rumored N. Korean counterfeiting operation has the capability to reproduce the new security features, although supposedly they did somehow manage to get a hold of the same type of intaglio press the Treasury uses.
No, that’s not it. New printing equipment is cheap compared to the total costs of printing currency notes. In Australia, they converted from paper to plastic currency notes almost overnight, partly to make them much harder to forge. The big problem in the U.S. is the conservatism of a large section of the population, that will not allow changes that are brought in with very little opposition in other advanced industrial economies.
I distinctly remember that the most popular (not best, but most popular) arguments against Britain joining the European monetary Union were along the lines of, “we’re not giving up our pounds,” or “I’m not sharing a currency with no fucking frogs”, from Sun readers.
In any case, I’m not sure there’s any actual benefit to the US from international acceptance of its currency (except in terms of other countries/foreign corporations buying up U.S. debt, which of course is not done in paper notes).
There is a benefit: the holders of U.S. currency are making in effect an interest-free loan to the U.S. government, and the loan is not repaid in some cases (e.g., if the currency is lost or destroyed).
On the one hand, a twenty-dollar bill from, say, 1990 is still valid money and legal tender. But on the other hand, it’ll look out-of-place enough that any cashier is going to at least give it a good look, and possible call over the manager to double-check. And no matter how good a forgery is, I can’t imagine any forger wants their work closely examined if they can avoid it. You’d probably have a better chance passing off a Xeroxed modern $20, and hope that the cashier just doesn’t check for the watermark, than you would with an older design without the watermark.
How is it an interest-free loan? The US government gets foreign exchange; the holder gets US currency. The US government loses the ability to spend said currency, though.
Dollar coins would catch on if they would just quit making dollar bills. Dollar coins wear out fast but they continue to make them anyway.
The dollar bill was not changed and from what I recall there are no plans to change it.
The U.S. Government (via the Department of the Treasury) sells coins and notes to banks, etc., and they in turn sell them to the public. Later, it buys worn and used coins and notes back from banks, etc., at the same price as it originally sold them.
Yes, money passes in both directions, because coins and notes are not the only kind of money: money includes bank deposits, and that’s what banks use to pay for coins and notes.
It’s convenient for me to have $100 in coins and notes in my wallet, but I pay for that choice: I could have that $100 in a bank account, or an money-market account, where I’d get some interest on it. And if I have $100 in coins and notes in my wallet, the U.S. Government has $100 that some bank gave it for that money, which it can use in just the same way as it uses $100 on a Treasury bond – but without paying any interest.
Not quite from scratch: a lot of the technology was already being used by the first countries in the Eurozone, countries which weren’t willing to change to less-safe systems.
IIRC about 30% or so of all US currency outside the US is fake (no cite, heard it on a TV documentary years ago). Understandably, the US doesn’t really care about that as long as it doesn’t find its way “back”. By raising the amount of dollars in circulation world-wide, it might even help keep the dollar the de facto global currency.
ETA: the largest euro bill is 500 euros. Many ordinary shops won’t accept any denominations larger than 50 or 100.
) still common?