Sep 28, 2009 | BEP, coins, currency, US Mint
Over the last ten years, US coinage has seen many changes. Starting in 1999, the 50 State Quarters® Program and the DC and US Territories Coin Program has taught us about our country and entertained us with “interesting” designs. The Westward Journey Nickels, Presidential Dollars, and this year’s Lincoln Bicentennial One Cent Redesign have kept us examining our pocket change looking for something new.
US paper currency has also changed. But the changes are not what could be considered earth shattering. Rather than undergo a good design change, I had previously commented that the “[new] currency designs look like the Bureau of Engraving and Printing is dabbling in currency design after being mired using the same basic designs for over sixty years.” With little to no restriction on currency design, the BEP designs have gone from old to bland with no redesign planned for the one dollar bill that was designed in the 1920s!
An article that appeared in The Atlantic found a “image design consultant” who also thinks that the design of the dollar and its paper equivalents need to be upgraded.
Richard Smith, founder of the Dollar ReDe$ign Project thinks that as part of improving the US image, redesign its currency. Noting that a redesign may be looking backwards, Smith noted in an interview that “you need to go backwards to go forward.” (see video below) Without explaining this statement, Smith had to have been referring to the currency of the late 18th and early 19th century that produced phenomenal design.
Smith is approaching this issue from an image perspective. As a numismatist and a collector of Israeli paper currency, I am looking at the issue from a design perspective for making interesting collectibles.
Other countries seem to be able to handle change to their currency. In fact, the emergence of the Euro forced changes throughout Europe. Euro banknotes are printed in a variety of colors and representative designs that are accepted through out the European Union.
Also, the European Union and most other industrial countries does not issue their unit currency in paper. The United States continues to print the one-dollar note which I have written costs the government more to maintain.
Maybe if the numismatic angle is not working with the BEP, maybe the we could try the angle from the image consultant. Anything that could update the US staid currency design.
Jul 25, 2009 | coins, currency, history, video
Regular readers know I have an affection for television shows that are a cross between reality and history. This is why I like to watch The History Channel. On of my favorite shows on The History Channel is Modern Marvels, a show that shows the “secrets”s behind things we find in modern life. From ultimate gadgets to looking at the technology of our past, I find the show fascinating.
Thanks to a posting on the Collectors Society Forums, I found that Modern Marvels was doing a show about money. For fans of the show, The History Channel posted three of the segments on their website.
The first segment, titled “Centralization of Money” give a brief history of money in the United States from the chaos of every bank issuing currency through the basics of how the Federal Reserve interacts with the Bureau of Engraving and Printing and the US Mint.
In the second posted segment titled “Currency” traces its history from the Civil War to how the paper is made. Cameras follow the process through the creation of the cotton from blue jeans by Crane & Company. I like the animation as to how the intaglio printing works.
Finally, “Coin Production” also has a great animation that shows how master dies are used to make striking dies. Then the camera moves to the Mint’s production floor to show how the coins are made.
The History Channel does not allow us to embed their images on our websites. But if you go to the first segment, you can watch the three segments in sequence. I love this stuff!
Jul 5, 2009 | currency, economy, policy, scripophily
While the study of coins can be a lesson in history, the study of paper currency can present a lesson in economics that may be relevant today. With the state of California printing and distributing IOUs to meet its financial obligations, I am reminded of how the colonies used similar arrangements to finance the fighting of the Revolutionary War.
During the colonization of the New World, charters were granted to companies to set up businesses and trade the natural resources they found back to England and the rest of the known world. We may be more familiar with the East India Company from popular movies, the first settlement at Jamestown was colonized by the Virginia Company of London. These and other companies were originally chartered by King James I to set up trading centers on the shores of the new world to make it easy to goods back to Europe.
As the companies became successful, the English government became more interested in expanding its empire. The Royal Navy was sent to the new world to protect shipping lanes. As threats from other countries and Native Americans endangered the colonists, the King began to revoke charters to make the companies Crown colonies. Governors were install with Army garrisons at their ready to expand holdings against other nation’s settlers and to fend off Indian attacks.
Following the French and Indian War, the British government was in considerable debt. When they added the cost of keeping a regular army in the colonies, the extra expense was more than King George III wanted to endure. Beginning with the Stamp Act of 1765, Parliament tried many ways to have the colonies pay the debt and for their protection. With no representation in Parliament, the colonies began the road to independence proclaiming “No Taxation Without Representation!”
In order to maintain their control over the colonies, the King and Parliament only allowed minor, non-precious metal coins to be used for commerce in the New World. Colonist adopted by accepting silver coins from other countries as legal tender. The most common coins was the Spanish 8 Reales or Pillar Dollar. But the Pillar Dollar was not enough to fight against the powerful British Army, who was attempting to keep order.
The first currency issued in the New World was issued by the Massachusetts Bay Colony in the 1690s. Later in the eighteenth century, other colonies began to issue currency, many times surreptitiously without the knowledge of the colonial governor, to raise money. When colonial assemblies issued currency, they were issued as indented bills of credit with a plan to repay the loans.
Colonial assemblies issued two types of currency. One type of issue were indented bills of credit which were not considered legal tender but could be used to pay fees or taxes. These notes contained one or more receipts or payment slips that were redeemed at specific intervals for hard currency. Legal tender currency were allowed to circulate for commerce. Both types of notes usually were printed with a denomination, value basis for the denomination, the interest rate of return, and when the note can be redeemed for hard currency. The value basis for the denomination was usually expressed as “Bill of Exchange in London for Gold and Silver” and a rate of exchange. However, that exchange rate was different from colony to colony which made inter-colony transaction difficult. Value was also based on the trustworthiness of the colony to repay these notes.
As the Revolutionary War continued, colonial assemblies found themselves without the ability to raise enough money to pay off their currency. One way around the problem was to issue enough currency to cover the last issue plus a little more to cover current expenses. Not only did this create a big debt for the colonies, but that debt made the paper worth less than is printed value which made it difficult for the colonies to purchase supplies.
After the war, both the Continental Congress and the new states were competing with each other generate revenues and to pay off their debts. This continued until the US Constitution was ratified in 1789 and the federal government took over the minting and issuing of money. Because this demonetized the currency from each state, a compromise was made to trade the currency at the rate of 100 state dollars for one dollar of the new United States currency—which at that time was being paid in Spanish Milled Dollars.
Even though the states lost the rights to print and distribute money, they continued to have the right to issue non-legal tender bills of credit in order to raise money. These bills of credit were issued in the form of bonds that were either redeemable on the date of maturity or had a periodic payment option. Bonds are usually issued to pay for capital improvement projects. They are associated with a source of revenue that would be used to reimburse the bond holders, such as a tax. This practice continues today with every states’ debt being backed by many bond issues. And with technology, most bond issues are not printed. Rather, they electronic records noting ownership of the bonds.
The paper issued by the colonies, the Continental Congress, and the United States under the Articles of Confederation are very collectible. Aside from being a lesson in history, it is a lesson in the state of the art of printing in the colonial times and a lesson in colonial economics. Finding colonial currency is not easy, a nice collection can be awe inspiring. One such collection is in the Colonial Currency Collection at the University of Notre Dame’s Department of Special Collections.
The State of California is in serious economic trouble. Their fiscal year began on July 1 without a budget and a significant deficit between the government’s income and their legal obligations to provide services to the citizens of California. Governor Arnold Schwarzenegger declared a fiscal emergency and order the printing of IOUs to pay state debt obligations. Initially, 28,750 IOUs worth $53.3 million will be issued mainly for personal income tax refunds. The IOUs will carry a 3.75-percent interest rate redeemable by October 2 or earlier if a budget agreement is reached.
The financial term for the IOUs are “registered warrants.” For the citizens receiving these IOUs, most of California’s in-state and nationally-owned banks said that they will accept the IOUs as deposits for a limited time.
California last issued IOUs in 1992 during a similar budget crisis.
Records of the how many of the IOUs were redeemed do not seem to be publicly available and I did not find an auction record for the paper issued in 1992. However, it stands to reason that the paper IOUs will be highly collectible. Opportunists have been using online classified websites to offer to purchase these warrants as souvenirs (see an ad).
Although registered warrants are not legal tender, people may elect to trade and barter these IOUs for goods, services, and even legal tender money. We can only wonder if the paper will become more valuable as a collectibles as the Zimbabwe notes after their government devalued Zimbabwean Dollar because of hyperinflation. That ball is in the court of the California legislature. But they will make interesting collectibles.
May 9, 2009 | currency, fun
In the more than three years I have been writing this blog, I keep finding interesting things to write about. The problem is finding the time to write about what I find or my thoughts. But sometimes, I find something that I thought was going to give me one story but turns into something else. Let me explain…
The other day, I went to my bank’s ATM to withdraw money. As I was counting the notes the machine delivered to me, I noticed one was stamped with something. Since I was in the car, I put the note in my pocket to look at it at home. I was thinking that the last time I saw a stamp on a note, it was for the “Where’s George” website.
Where’s George is a web-based project to track the circulation of US paper money. The project was started by tracking the movement of one dollar notes and expanded to other bills. People are prompted to visit the website when they receive bill stamped with the information. Website visitors are asked to enter some basic information (denomination, serial number, series, and location) to the where your note has been and to register its current location. When I find a well circulated note with the Where’s George, it is interesting to follow the note’s trail. Registered users can track the progress of the notes they enter.
For our friends north of the border, you can visit Where’s Willy. “Willy” is Sir Wilfrid Laurier, the first French Canadian Prime Minister (1896-1911). Sir Laurier’s portrait is on the Canadian $5 bill.
After the ten minute drive home, I looked at the note and found something unexpected. It was a stamp campaigning for Ron Paul for president along with his campaign’s web address. Dr. Paul, a Republican from the 14th District of Texas, unsuccessfully ran for the GOP nomination in 2008.
Dr. Paul is a fascinating person who has a unique approach to governance. While I may not agree with his political philosophy, I respect that he does not make emotional decisions and goes out of his way to educate himself on the issues. Dr. Paul is one of the few members of congress I respect for really trying to govern with integrity.
So if you find this $20 bill in change, follow its path after I spend it sometime this weekend. It has been entered into the database at www.wheresgeorge.com. Who knows, maybe it can find its way to Texas!
Oct 5, 2008 | coins, currency
While the United States continues to be one of the few countries to circulate its unit currency in paper, two countries have recently announced that they are going to replace their lowest denomination notes with coin.
The Czech Republic will begin to circulate their 50-koruna banknote with a coin. While both the coin and banknote will circulate simultaneously, the Ceska Narodni Banka (Czech National Bank) expects to discontinue the circulation of banknotes. No decision has been made as to the design of the new coin.
Earlier this year, the Banco Central de Nicaragua (Central Bank of Nicaragua) announced the new issue of a 10 cordobas coin. These coins will co-circulate with their banknote counterparts until the paper money wears out. The bank will soon begin to circulate a 500 cordoba note.
Central banks across the world are beginning to look into replacing lower denomination currency with coins. In Canada, a friend reports that he was involved with a survey that asked about replacing the Canadian 5-dollar note with a coin.
In the mean time, the paper dollar continues to circulate in the United States even though it would be economically beneficial to replace the paper with coin. Politics will remain in the way of the government doing the right thing.
Jul 22, 2008 | BEP, coins, currency, dollar, policy, US Mint
Since the introduction of the Presidential $1 Coin, many numismatic venues have discussed how to make the program more successful. Reports are being made that Gallup has been calling people asking questions that lead to the impression they are researching the circulation of dollar coins.
When asked about how to increase the circulation of the dollar coin, the dominant suggestion has been to remove the one dollar federal reserve note from circulation. It is thought that the move would force people to use the coin when the paper currency is no longer available.
There are many emotional arguments on both sides of the issue. Whether one is for or against the printing of the one-dollar note, the US may be the only nation to print its unit currency in paper. Looking beyond the emotional arguments, each side has dominant arguments to support their positions.
Those who want to eliminate the one-dollar note use at the cost of is production as the dominant reason. The Bureau of Engraving and Printing reports that 95-percent of all notes printed are used to replace notes that are taken out of circulation. Using BEP’s 2007 production numbers, 4,147,200,000 one-dollar notes were printed. With 95-percent being replacement notes, 3,939,840,000 notes were printed just to maintain circulation levels. With it costing 4½ cents to produce one note of any denomination, the cost to just replace notes removed from circulation was $177,292,800 in 2007.
Rather than printing paper dollars, if the US Mint strikes coins the cost to replace those 3.9 billion notes would cost 15.9-cents (according to the Mint’s 2007 Annual Report [PDF]) per coin. The total production cost would be $626,434,560.
But do not let the 353-percent increase fool you. The BEP predicts the life of a one-dollar paper note is three years while the US Mint predicts the life of any coin is 30 years. To help with the calculation, let’s assume the price of printing notes will stay constant. In order to keep the $3.9 billion of one dollar notes in circulation for 30 years, it will cost the BEP $1.77 billion dollars. Since the Mint will be striking new coins for circulation and (theoretically) not replacement coins, the US government would save about $1.15 billion over 30 years. The following table illustrates these costs:
| Denomination |
Production Total |
Number of Replacement Notes |
Cost of Production for Replacements |
Cost of Replacements over 30 years |
| Paper Dollar |
4,147,200,000 |
3,939,840,000 |
$177,292,800 |
$1,772,928,000 |
| Coin Dollar |
N/A |
3,939,840,000 |
$626,434,560 |
$626,434,560 |
While this might be a compelling argument to stop printing one dollar notes, such a move has political ramifications for some powerful members of congress. With over 1500 people working in the Eastern Currency Facility in downtown Washington, DC, they are represented by several leaders of both parties. Amongst the protectors of the employees in the facility include House Majority Leader Stenny Hoyer (D-MD), House Campaign Finance Leader Christopher VanHollen (D-MD), Former Chairman of the Government Reform Subcommittee Tom Davis (R-VA), Del. Eleanore Holmes Norton (D-DC), and the well respected Senator John Warner (R-VA). These powerful members of congress will not allow anything that will reduce the production capacity of the Bureau of Engraving and Printing and where constituents could lose jobs.
This does not take into consideration that the President of the United States is from Texas, location of the Western Currency Facility.
Before congress changes the law to stop the printing of the one-dollar note (31 U.S.C. §5115(a)(2)), the BEP will have to supplement production in order to protect jobs. The way this could be done would be to print foreign currency. However, it seems that the BEP is having problems selling their services to foreign governments.
While there are no official statements from the US or foreign governments, the dominant request is for the printing of polymer notes. According to unconfirmed reports, BEP is experimenting with different types of polymer substrate without notable success. If the BEP can adjust their equipment to print on polymer paper, they can solicit business from other countries to produce their currency. Once the BEP builds its portfolio, they are prepared to go to congress to recommend discontinuing production of the one-dollar note. Until then, the BEP will continue to produce one-dollar notes in order to keep workers employed in key congressional districts.
If BEP starts to use polymer notes, it would raise the eyre of Senator Edward M. (Ted) Kennedy, the powerful senior Democrat from Massachusetts. Amongst Sen. Kennedy’s constituents are the employees of Crane & Company from Dalton, Massachusetts. Crane & Comapny has been the exclusive supplier of currency paper to BEP since 1879. Although BEP tried to open the competition for purchasing currency paper used in printing currency (see GAO Report GAO-05-368 [PDF]), the cost of entry into the market has prevented other manufacturers from competing for the business. If BEP would stop printing over 4 million one dollar notes without replacing it with similar paper production, the Massachusetts-based company could lose significant business.
Regardless of the measures taken by the US Mint to increase the circulation of the one-dollar coin, public perception is that the one-dollar paper note is easier to use than the coin. Unless key congressional leaders agree that ending the printing of the one-dollar note is in the best interests of everyone, including their political careers, the political reality is that printing of the one-dollar note is here to stay until a significant event causes a change in policy.
Jul 19, 2008 | BEP, currency, video
I went to see my orthopedist on Friday for a post-operative check up. While the visit went well, the office building where he is located is a very long walk from the front door to the elevator. Rather than make this my Friday to get my new iPhone 3G (I still want one) I have been recovering from that shlep.
While surfing the Internets, I was looking for interesting video. Other than the usually list of follies, viral videos, and cuts of previous on air performances (“needs more cowbell!”), I found something numismatic I wanted to share.
The Bureau of Engraving and Printing calls this B-Roll video of the printing of the new $5 notes. “B-Roll” is a television term for background video that is interspersed with another story. It received its name from the days of editing video segments on film where the primary story with the reporter talking was on the “A” or primary roll of film while the background information was on the B-Roll. The term has survived through the video and now digital era. Eventually, it is placed in the archive and later called “stock footage.”
If you are interested, you can find the B-Roll information in the Media Center on the BEP New Money website.
May 30, 2008 | BEP, currency
A few weeks ago, I wrote about not finding new coins or the new $5 note in circulation. Since that posting, I found a few additional Oklahoma state quarters and New Mexico quarters. Added to the hunt for new money was a Series 2006 $5 Federal Reserve Note handed to me in change.
This is the first time that I have a note in hand. Like the other note designs, it has a hint of color that makes it look like the addition of color was a mistake. As an artistic composition, it is as ugly as the other “new” notes while individual elements, such as the portraits, show remarkable artwork.
New currency designs look like the Bureau of Engraving and Printing is dabbling in currency design after being mired using the same basic designs for over sixty years. I do not know why BEP never changed the designs for so long since they are not regulated in the same manner as the US Mint. BEP does not have to consult with the Committee of Fine Arts on the designs.
Prior to the 1920’s, BEP created some fascinating currency designs that currency collectors desire. In the book 100 Greatest American Currency Notes by Q. David Bowers and David M. Sundman, they list phenomenal notes and designs that included designs created by the BEP. Bowers and Sundman called the $1,000 “Grand Watermelon” Note as the greatest note produced in the United States. Named because the zeroes on the reverse look like watermelons, with only seven known notes that have survived, the Grand Watermelon is consider the penultimate prize for currency collectors. In December, 2006, Heritage Auction Galleries sold one for $2,225,000.
Currency used to be topical, modern, and represented a theme of the time. The Series 1901, $10 Legal Tender “Buffalo Note” is ranked sixth by Bowers and Sundman. With portraits of Merriwether Lewis and William Clark surrounding an American Bison, the note was issued to celebrate the American west and the trail blazed by Lewis and Clark. This is my favorite note.
For some reason, the BEP stopped creating classics. When given the opportunity to create new classics, the BEP went for plain and bland. When I wrote about the new polymer 20 New Israeli Shekelim notes. Aside from the polymer material, this colorful note whose dominant green color honor’s Moshe Sharrett, Israel’s first ambassador to the United Nation. The reverse features Jewish Brigade volunteers and parts of his first speech to the UN.
The 20 NIS note is beautiful, colorful, and very patriotic for Israel. With the potential that BEP has to change US currency to accommodate the visually impaired, why not take the opportunity to issue modern classic designs?
Images courtesy of Heritage Auction Galleries and the Bank of Israel.
May 7, 2008 | BEP, cents, coin design, coins, currency, gold, Israel, legislative, US Mint
It has been a week since my last post and I thought an update was in order. I will follow up with a post for some of these at another time. This will give me something to do while proctoring the final exam in an information security course I am teaching this semester.
I recently received four polymer 20 New Israeli Shekelim notes from a dealer in Israel. These notes are the first that Israel is producing on polymer “paper” that was developed by the The Reserve Bank of Australia. Israel is another in the growing list of countries to start using the polymer material. The notes include the same security features as rag-based notes and include a new clear window with a watermark that is said to be extremely difficult to counterfeit. While the polymer substrate costs little more and the production is only marginally more expensive, the benefit will come from the reduction in counterfeiting and the durability of the note. Polymer will last three-to-six times longer than rag-based paper.
According to unconfirmed reports, the Bureau of Engraving and Printing is experimenting with different types of polymer paper for both US and foreign production. If the BEP can adjust their equipment to print on polymer paper, they can solicit business from other countries to produce their currency. Once the BEP builds its portfolio, they are prepared to go to congress to recommend discontinuing production of the one-dollar note. Until then, the BEP will continue to produce one-dollar notes in order to keep workers in key congressional districs in the Washington, DC and Fort Worth, TX areas employed. Remember, 95-percent of the BEP’s production are for one-dollar federal reserve notes.
The spot price of gold continues to drop as the dollar gains against the Euro and the Pound. Prices are returning to pre-2008 levels. However, buyers of gold collectors coins from the US Mint has not seen their prices reduced. While the Mint repriced gold and platinum coins in February and March, the Mint has not lowered their prices with the market. The one-ounce American Gold Eagle proof coin is still $1,199.95, the new price given in February. With gold closing at $876.88 today, the $327.07 premium is 36.8-percent higher than the spot price. This will cause problems for those who buy at thiese prices when reselling these coins.
While we are talking about gold, the Original Saint-Gaudens Double Eagle Ultra-High Relief Bullion Coin Act was simultaneously introduced in both the House (H.R. 5614) and Senate (S. 2924). These identical bills will allow the Mint to strike high-relief $20 gold pieces using the Augustus Saint-Gaudens original 1907 design. The date will be in roman numerals and the motto “In God We Trust” will be added over the rising sun as it appeared in 1908. The coin will be on a double-thick, 24-karat gold planchet (sometimes called a piefort) 27 millimeters in diameter.
The US Mint finally posted its online product schedule for the rest of the year. The only thing that jumps out at me is that the 2008 American Buffalo 24-karat gold proof coin is not listed.
On Tuesday, the House of Representatives began to debate H.R. 5512, the Coin Modernization and Taxpayer Savings Act of 2008. The primary provisions of the bill will allow the US Mint to determine the size and composition of US coins without having to ask congress for permission. It also specifies that following 2009, the one-cent coin would be “be produced primarily of steel and treated to impart a copper color to its appearance similar to one-cent coins produced of a copper-zinc alloy.” Debate was cut off on procedural grounds by Republican lawmakers who oppose the bill.
It was just another uneventful week!
Apr 30, 2008 | counterfeit, currency
Local Washington, DC television news reported that counterfeit $20 and $100 bills have been found in circulation in Stafford County, Virginia, a suburb of Washington, DC. The Stafford County Sheriff’s office reports that the bogus notes have been passed at fast food restaurants and convenience stores. There are no suspects at this time.
Counterfeiters are using $5 notes, bleaching them, and printing higher denominations over the paper. The notes may appear as washed out or very well used but has the security characteristic of the original $5 bill. The image to the right shows the watermark of a counterfeit note. Apparently, that is enough to prevent these notes from being accepted.
The sheriff recommends that the notes not be returned to the person who passed it, try to delay the person’s departure, ensure you can provide a physical description of the person and any companion, and call the sheriff’s office.
With all of the measures being added to notes by the Bureau of Engraving and Printing, and the publicity of those changes, especially here in the DC Metro area, it is unbelievable that counterfeiters can still get away with their crime. Apparently, the BEP must increase their education efforts in order to make this more effective.
One of BEP’s countermeasures against this type of counterfeiting are the new $5 bills. However, few have reported seeing these notes in circulation, even after the BEP and Federal Reserve said that only the new notes would be sent to the banks the first two weeks of release. I have yet to see one in circulation.
Image courtesy of the Stafford County Sheriff’s Office
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