There seems to be a bunch of controversy surrounding whether defacing currency is illegal (internet consensus: It depends), but I’d like to know why it’s illegal.
Apparently there’s a phrase in the US laws (and similar ones here in Canada and elsewhere) that reads something like
I can’t figure out:
[ul]
[li]It’s my property, so why I do with it as I like?[/li][li]why does the government care anyway? If I inherit Scrooge McDuck sized moolah and melt down dimes to remake the Bluenose Schooner with 100$ bills for sails, I just gave the gov’t free money, no?[/li][li]Is the “intent” important? Maybe I dropped them in the campfire. Maybe I “intend” to make pretty wallpaper, or chads for a wedding, or something else.[/li][/ul]
One of the very few ways that governments have to manage economies is to control the amount of money in circulation. It requires a pretty deft hand to keep inflation under control while allowing for growth. If there was a mass movement to destroy currency to make some kind of political point, it could do real damage to the economy.
And in the end, the government would be on the hook to reprint the currency that was destroyed- which is not a particularly cheap task. It costs something like ten cents to print a bill. If everyone in the US decided to burn a dollar bill, that’s thirty million dollars in printing costs alone just to replace the bills.
[LIST]
[li]It’s my property, so why I do with it as I like?[/li][/quote]
Currency is not your property. It represents value that belongs to you, but a bill is not your property in the same way that a toaster is.
[quote]
[li]why does the government care anyway? If I inherit Scrooge McDuck sized moolah and melt down dimes to remake the Bluenose Schooner with 100$ bills for sails, I just gave the gov’t free money, no?[/li][/quote]
In order for fiscal policy to work, the government has to be able to control the circulation of currency in the market. If people are randomly destroying it, then it causes problems.
Most money is of the electronic variety. And if the government spends a nickel to create a dollar bill and a millionaire burns it, then Ca-ching! That’s a gain for the government.
What would happen if the law was repealed? Presumably businesses would be excited to place all manner of advertisements on the currency. Mischief makers might pull stunts, which is ok provided it doesn’t “…renders bills unfit to be re-issued,” which is what is illegal. If you deface a dollar and put it back into circulation, that’s a problem, as it increases the Bureau of the Mint’s printing costs.
I don’t think that logic holds up. Instead of destroying it, you could just put it in a safety deposit box or bury it in a mason jar in your yard. You’d get the same result of reducing the money in circulation.
And anyway, rather than being distressed at currency being destroyed, governments would be quite happy to print replacements. If it costs 10c to print a bill, they can make a 900-90000% profit on every bill printed. They can take those newly minted dollars and go buy stuff with them, and not have to worry about causing runaway inflation because some political movement has helpfully balanced out the money supply. Way more efficient and politically agreeable than raising taxes.
The treasury makes no profit aka “seniorage” when someone turns in a defaced note. They have to print another to replace it. So yes, it’s in their interest to declare intentionally defacing money a crime.
If it’s burned to the point where it can’t be returned to the central bank for replacement, then they make their seniorage profit. So they don’t care about that.
This is the main point. Suppose some bozo went to the bank everyday, got stacks of $1 bills and spent all day “wearing them out”. Running them thru the washer, crumpling them, etc. Takes them back to the back and gets new bills. Lather, rinse, repeat.
The bank returns the worn out bills to the Fed, the Fed has to spend money printing replacements, etc.
It is in the government’s best interest to have coins and bills last as long as possible. People tearing them, writing on them, mangling them on purpose causes financial harm.
In general, keep in mind: What if it’s not you just doing it once, what if it’s a million people doing it everyday? That’s the government’s point of view.
I don’t know that this directly relates to the legal ban on defacing, but in India, merchants will not accept excessively worn bills.
When the U.S. started redesigning bills, the rule was that any old-style bills in circulation would remain valid, but in India, people who dealt in American currency immediately stopped accepting the old-style bills.
I think there is at least some measure of superstition that plays a part here.
(I recall an episode of the sitcom MASH in which there was a changeover from “blue scrip” to “red scrip” or something like that, when the old bills immediately lost their value. I wonder if there’s some residual belief from that kind of thing.)
Answer:
This is a somewhat anachronistic law from the early days [actually, not that long ago] of the US when banks were issuing their own notes, and these notes were then exchanged between individuals for trade purposes.
Eg., Party A goes to the BANK and deposits $10, the bank gives him a demand note [payable to any party upon presentation of said note to the BANK]. He gives the note to Party B in exchange for goods and/or services. Party B scribbles/doodles on the note, then demands payment from the BANK. The BANK has a tough time making out the denomination of the note–and may in fact pay Party B the incorrect amount. When this happens enough, the BANK calls their Senator and insist that a law be passed prohibiting the defacing of demand notes. And so a law is passed.
IIRC from freshman Econ, Federal Reserve Notes represent a debt that the government has incurred. You would think that they would love people burning them. It would be similar to going to the courthouse and burning my mortgage.
But I think others have touched on it. We design a monetary system with $X of bills in circulation. We can estimate that they wear out after so much time. If you have people intentionally destroying the money, it messes up the scheme. But since money is an asset to people, you would wonder why you need a law to prevent people from doing something that would be a detriment anyways. Maybe next we need a law making it illegal to pluck your own eyeball out.
I think counterfeiting also plays a role in the intent of the law.
People have been altering one dollar bills to look like a higher denomination.
And before optical scanners were used in vending machines, the coins were accepted or rejected by weight. Altering a nickel or a penny to dime-size is a very small scam, but it adds up.
~VOW
If defacing currency were not illegal, dollar bills would become an instant billboard for everyone with a policial ax to grind–Death to Bankers, Ron Paul for President, Stop Abortion Now. We don’t want that. We don’t want that so much it hurts.
But it’s apparently legal to turn dollar bills into instant billboards, so long as you don’t turn them into instant billboards with the intent to make them unfit to be used.
When JFK ran for President, there was quite a group who felt threatened by his Catholicism. They took all the quarters they could get their hands on, and used red nail polish to paint a red cap on George Washington, to represent the control they felt the Pope would have over the United States Government.
I remember seeing all those quarters when I was a kid, but it wasn’t until decades later I found out what the intention was.
~VOW
There’s no law in France forbiding to deface or destroy bank notes, and quite surprinsigly, typically people don’t deface or destroy their banknotes, nor use them for advertisment, despite the lack of punishment. I’m yet to see an euro note with merely something scribbled on it, for instance (I’ve seen once a 500 Francs [roughly $ 100] note being burnt live on TV by a celebrity to make a point, though)
So, I guess this law indeed serves no real purpose, at least nowadays.
