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2010-04-22 Economy
Government goes high-tech to redesign $100 bills
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Posted by tu3031 2010-04-22 00:00|| E-Mail|| Front Page|| [6481 views ]  Top

#1 No problem. Just print the words "Kim Jong Ill is a butthead" on the front and his ego will prevent them from being counterfeited. Problem solved.
Posted by gorb 2010-04-22 02:20||   2010-04-22 02:20|| Front Page Top

#2 Oh, great. Just as they've laid the foundation for hyper inflation they create a log jam in bill printing that the Norks could have assisted with in the old style. /sarc off
Posted by Procopius2k 2010-04-22 07:11||   2010-04-22 07:11|| Front Page Top

#3 The logistics of printed money are weird. The US has only two printing offices, at Ft. Worth and D.C., and they run 24/7 just to produce mostly $1 bills. Only 7% of the production is $100 bills.

This leads to what could become a bizarre scenario.

The government literally cannot print more bills, but it also cannot print higher denomination bills, for the simple reason that almost nobody could make change for them. You would need 50 $20 bills just to make change for a $1000 bill.

However, virtual money is just numbers on a computer. So it can be instantly hyperinflated, which the twits in D.C. are planning to do, with periodic redenominations.

But unless the retail market decides to play along, and they won't, they can legally refuse virtual money, and demand payment in paper money. This is because paper money is "legal tender", and virtual money is not.

So as virtual money hyperinflates, paper money actually deflates, becoming far more valuable, and in a hurry, since if there is a "currency split", between virtual and paper money, paper money is already deflated by 95%, just because there isn't enough of it. It is rare.

Importantly, the international and speculative markets are totally virtual. This is why the Iranian and Nork efforts at counterfeiting US currency are laughable. It is like counterfeiting pennies.

But nationally, in the US, paper money and coins are equal to virtual money (right now), in our daily retail market.

So the bottom line is much like the old silver certificates, that could be exchanged for silver. If you knew they were going to inflate, you would immediately swap them out for silver, which would retain its value.

But in this case, paper money may be worth any amount of virtual money, if no one accepts virtual money for payment anymore.
Posted by  Anonymoose 2010-04-22 10:18||   2010-04-22 10:18|| Front Page Top

#4 But unless the retail market decides to play along, and they won't, they can legally refuse virtual money. Moose

Moose....For the slow among us, please provide more definition on the term "virtual money."
Posted by Besoeker 2010-04-22 10:23||   2010-04-22 10:23|| Front Page Top

#5 By virtual money I believe he means money in bank accounts or another step removed potential money, i.e. credit cards.

Money is the medium of exchange. Specie, gold or silver coinage is replaced by fiat money, paper currency, which is replaced by virtual money, records in accounts.

Gresham's law is that bad money drives out good.
Posted by Nimble Spemble 2010-04-22 11:16||   2010-04-22 11:16|| Front Page Top

#6 Thanks NS. I totally agree. I've always thought bank electronic transfers would be the first thing to crash when this giant ponzi scheme goes to t*ts up. Problem is, Kroger, gas stations, and pensions all operate via electronic money. Looks like it's back to the Mason Jars.
Posted by Besoeker 2010-04-22 11:48||   2010-04-22 11:48|| Front Page Top

#7 The difference between virtual money and "real" money is that paper money and coinage are limited to their physical existence, but virtual money, checks, credit, bank accounts, investments, etc., are dynamic.

This gets downright bizarre when virtual money is used in leveraged transactions. This was first seen in earnest before the great crash of 1929, with "margin" purchases of stock.

For 10 cents, a person could buy a dollars worth of stock, which in effect, created 90 cents out of thin air, not backed by anything. They could then sell that dollars worth of stock for 10 shares, *without* first paying that other 90 cents, effectively creating $9.90 with a single dime.

And as long as stock prices stayed high and continued to grow, there were no "margin calls" demanding payment, demanding that the imaginary money be paid for with real money.

At the same time, like today, there was a profound shortage of physical real money. So when the stock market crashed, and efforts were made to convert the virtual money to real money, there was no money to be had. So the vast amounts of virtual money just disappeared in bankruptcies.

And the rare dollars and coins severely deflated. This led to the saying, "You could buy a pound of hamburger for a nickel, but nobody had any nickels."

And even with the Dust Bowl, food was in overabundance, so it was worthless, at the same time that nobody had any real money to buy it, and starved.

Today, we are worse off. Our virtual money has entered the realm of multi-leveraged "imaginary money", which is almost playground nonsensical. Think of three small boys, one of which has a stick of gum that the other two want. So one boy offers a dollar, which is countered by the other boy offering ten dollars.

Soon they are bargaining in "million-billion" dollars and "trillions" of dollars. Then one of the boys can't think of a bigger number, so says, "you win". So the boy with the gum finally says, "give me the trillion dollars", which the other boy doesn't have. So he says, "I'll owe you."

Ironically, this is the scale we are dealing with. One, essentially high stakes gambling market alone, called Derivatives, is in hock by over $150T. Which is three times larger than the annual world GDP.

There is no possible way those debts can be met, any more than the USG $14T debt, or its promises of well over a hundred trillion dollars in the future.

Unless they try to hyperinflate their way out of it. Which is what is being planned. Then, when it takes $1M to buy a loaf of bread, they redenominate the currency, lop off six zeroes, and begin to hyperinflate again.

But the trouble with their brilliant scheme is that they cannot do this with real paper money and coin. If they try to do this with their virtual, imaginary money, then retailers just refuse to accept it, and demand paper money and coins.

And what happens is what happened before. All the debts and promises disappear in bankruptcies, even of the US government, while the paper currency deflates horribly.

So save up those nickels. At home. In a safe place.
Posted by  Anonymoose 2010-04-22 11:51||   2010-04-22 11:51|| Front Page Top

#8 ALL the representations of people time exchange (Money) are Fiat.

Gold etc is just harder to inflate/deflate it's value away. However technology is solving that one.
Posted by Bright Pebbles 2010-04-22 11:59||   2010-04-22 11:59|| Front Page Top

#9 All the debts and promises disappear in bankruptcies, even of the US government, Moose

This is when it REALLY hits the fan.
Posted by Besoeker 2010-04-22 12:00||   2010-04-22 12:00|| Front Page Top

#10 Cash on hand vs electrons in a spreadsheet. IMO the first 'money' would be tradable commodities - my bag of grain for your 2 chickens. As civilization progressed there was a need to standardize trade values, enter money and sizes and weights. Gold, silver, precious jewels etc were not only pretty but rare which made them extremely difficult to counterfeit. For example a piece of gold was representative of five bushels of grain or really any number of things. For this system to work the person giving up the very real grain for a shiny inedible thing had to be assured that the shiny thing could then be tranformed into whatever that person needed, such as a new wagon or beast of burdon. Honoring this cooperation money concept incresed everybody's potential.

The age we are in now is the beneficiary of that on-hand culture. We put that same value into a piece of paper which has become a promise and/or potential value of work and effort. In reality, that piece of paper is only as valuable as the trust people put into it. Paper money is still subject to the laws of production, the more difficult it is to reproduce (both on manufacturing and the officials who order more to be printed) the more value it has.

Virtual money can be created (or destroyed) by simply moving around a decimal point depending on the whims of officials and hackers. It has no physical value. It may work so-so as long as a generation or two until people forget what that piece of paper turned digital meant, and could bring everything full circle back to the barter system...instead of dropping some quarters (in a pure virutal money system quarters in all intents and purposes will be nonexistant other than neat trinkets of a paast age) into that guitar player's case people may place hard physical goods like a bag of chips instead.

My take on it at least.
Posted by swksvolFF 2010-04-22 12:22||   2010-04-22 12:22|| Front Page Top

#11 The major problem concerns The OSHA issues of money launderers/drug pushers. There is a spate of bad backs amongst these folks from having to lug around suitcase loads of $100 bills. The Europeans are more sensitive to their needs, they print E200 and E500 to lessen the burden.
My go to man on all things finance is William F Hummel. This is his explanation of seigniorage, the subject matter of this post.
Posted by tipper 2010-04-22 18:00||   2010-04-22 18:00|| Front Page Top

#12 Greshems Law: Good Money Drives FIAT out, wants a BOF SUV and good mileage.

Also: Hitler, Federal Reserve, Rockefeller

Posted by Shipman 2010-04-22 18:52||   2010-04-22 18:52|| Front Page Top

#13 I'm just a simple person - definitely not a financial genius.

I hope what y'all are talking about doesn't mean I have to stop paying my bills online (except for the ones I need to write a check for). The money's in my bank account - I'm just transferring it to Comcast, or whomever, for services rendered. And it surely is convenient.
Posted by Barbara Skolaut 2010-04-22 20:14||   2010-04-22 20:14|| Front Page Top

#14 Don't worry, Barb. If there's ever a real problem with money, you'll still be able to buy food for ammo.
Posted by Nimble Spemble 2010-04-22 20:51||   2010-04-22 20:51|| Front Page Top

#15 Now, ammo I've got, NS.

Thanks for reminding me - I need to pick up another box when I go out to get gas tomorrow. :-D
Posted by Barbara Skolaut 2010-04-22 21:11||   2010-04-22 21:11|| Front Page Top

23:59 gorb
23:57 Skidmark
23:53 Skidmark
23:39 bigjim-CA
23:38 phil_b
23:03 Steve White
23:02 ed
23:00 Anguper Hupomosing9418
22:58  abu do you love
22:57 Barbara Skolaut
22:50 Rex Mundi
22:41 phil_b
22:34 remoteman
22:31 logi_cal
22:27 ex-lib
22:22 Frank G
22:10 gorb
22:08 gorb
21:54 49 Pan
21:18 Alaska Paul
21:11 Barbara Skolaut
21:06 lotp
21:06 Alaska Paul
21:00 Besoeker
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