(Roughly) Daily

Posts Tagged ‘currency

“A nickel ain’t worth a dime anymore”*…

 

money

 

The instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions—products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth. The credit crunch in 2008 triggered a panic when people throughout the financial system wondered whether the numbers on balance sheets meant what they were supposed to mean. As a direct response to the crisis, in October, 2008, Satoshi Nakamoto, whoever he or she or they might be, published the white paper that outlined the idea of Bitcoin, a new form of money based on nothing but the power of cryptography.

The quest for new forms of money hasn’t gone away. In June of this year, Facebook unveiled Libra, global currency that draws on the architecture of Bitcoin. The idea is that the value of the new money is derived not from the imprimatur of any state but from a combination of mathematics, global connectedness, and the trust that resides in the world’s biggest social network. That’s the plan, anyway. How safe is it? How do we know what libras or bitcoins are worth, or whether they’re worth anything? Satoshi Nakamoto’s acolytes would immediately turn those questions around and ask, How do you know what the cash in your pocket is worth?

The present moment in financial invention therefore has some similarities with the period when money in the form we currently understand it—a paper currency backed by state guarantees—was first created. The hero of that origin story is the nation-state. In all good stories, the hero wants something but faces an obstacle. In the case of the nation-state, what it wants to do is wage war, and the obstacle it faces is how to pay for it…

The ever-illuminating John Lanchester explains how, over three centuries, the heresies of two bankers became the basis of our modern economy: “The Invention of Money.”

[Lanchester’s latest novel, The Wall, was just long-listed for the Booker.]

* Yogi Berra

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As we learn from the past, we might recall that it was on this date in 1861 that the U.S. government, in anticipation of the expense of the looming Civil War, levied its first income tax as part of the Revenue Act of 1861.  It assessed 3% of all incomes over $800, but included no enforcement mechanism, and so generated very little revenue.  It was revised in 1862 in a more effective form, then rescinded in 1872.

The first peace-time income tax was established in 1894, but was ruled unconstitutional by the Supreme Court (the 10th amendment forbade any powers not expressed in the US Constitution, and the Constitution provided no power to impose any other than a direct tax by apportionment).  It was in 1913, with the Sixteenth Amendment to the United States Constitution, that income tax became a permanent fixture in the U.S. tax system.

HR54_Revenue_Act source

 

Written by LW

August 5, 2019 at 1:01 am

“It’s All About The Benjamins”*…

 

Hundred-Dollar-Bill

A funny thing happened on the way to a world of cryptocurrencies and mobile payments. Cash became more popular than ever. The main reason? The one hundred dollar bill.

In 2017, for the first time ever, the one hundred dollar bill became the most popular US bill in circulation, beating out the one dollar bill. It is quite the turn of events for Benjamin Franklin-faced banknote. Just 10 years ago, it was less common than both the $20 and the $1.

The share of US dollars in circulation as a share of GDP rose from about 6% in 2010 to 9% in 2018, according to the Federal Reserve. Increased use of $100 bills has been the primary driver…

Why cash is king: “There are now more $100 bills than $1 bills in the world.”

* Puff Daddy

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As we contemplate currency, we might spare a thought for Franco Modigliani; he died on this date in 2003.  An economist, he originated the life-cycle hypothesis, which attempts to explain the level of saving in the economy, suggesting that consumers aim for a stable level of consumption throughout their  lifetime (for example by saving during their working years and then spending during their retirement)– for which he was awarded the Nobel Prize in Economics in 1985.

Among his other accomplishments, he initiated the Monetary/Fiscal Debate when he (and co-author Albert Ando) wrote a scathing critique of an early 1960s paper by Milton Friedman and David Meiselman.  Freidman and Meiselman had argued (in effect) that monetary policy was the only effective tool in managing an economy; Modigliani and Ando pointed out flaws in their analysis and made the case for fiscal measures (effectively, government spending) as equally-effective tools.  The debate– known by the antagonists’ initials as the AM/FM Debate– rages to this day.

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“Many people take no care of their money till they come nearly to the end of it”*…

 

(Roughly) Daily has taken a look at the obscure corner of the U.S. Treasury once devoted (literally) to laundering money (“Cleanliness is Next to Godliness“); today we visit that operation’s forensic cousin…

The colorfully named Mutilated Currency Division at the Bureau of Engraving and Printing is a small office of crack forensics that spend their days poring over all manner of defaced dollars. Provided for free as a public service, the Mutilated Currency employees labor to identify bits and fragments of identifiable denominations that can be redeemed at face value.

Established by Congress in 1866—less than five years after the government started issuing paper money—the Mutilated Currency Division handles about 30,000 cases a year, returning currency valued at over $30 million. As long as more than half of the note remains, or the Treasury can be satisfied that the missing portions have been destroyed, the Mutilated Currency Division will redeem the amount of money that has been damaged by fire, water, chemicals, and acts of god…

Cash in your burnt, moldy, or soiled greenbacks at “The Mutilated Currency Division.”

* Johann Wolfgang von Goethe

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As we take it to the bank, we might recall that it was on this date in 1928, after more than 130 years of trading, that the New York Stock Exchange finally had its first day on which more than 5 million shares trade hands, as total daily volume hit 5,252,425 shares.  Just over a year later, on Black Tuesday, volume spiked to over 16 million shares…  as traders dumped their holdings and the Wall Street Crash of 1929 began (presaging the Great Depression).

Average daily volume (over the last three months) on the NYSE today is 880,564,865 shares.

Trading floor of the New York Stock Exchange, 1929

source

 

“Cleanliness is next to godliness”*…

 

One woman feeds bills into the washing machine as another collects the clean bills

Long before the term “money laundering” entered the popular lexicon, the U.S. Treasury Department had an actual laundry shop for grimy greenbacks. The mostly female “redemptive division” worked out of the basement and cleaned up to 80,000 soiled bills a day using mechanical scrubbers…

Come clean at: “Treasury Department Laundry.”

And for an insightful look at the dirty business that money laundering has become, see “The Russian Laundromat Exposed.”

* A colloquial expression (used by Francis Bacon, e.g., but popularized by John Wesley), rooted in an interpretation of Acts 9:32-10:23

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As we love the lave, we might recall that it was on this date in 1939 that The Viking Press published John Steinbeck’s The Grapes of Wrath.  The story of the Joads, a poor family of tenant farmers driven from their Oklahoma home by economic hardship– drought, agricultural industry changes, and bank foreclosures forcing tenant farmers out of work– it won the National Book Award and Pulitzer Prize for fiction, and was cited prominently when Steinbeck was awarded the Nobel Prize for Literature in 1962.

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Written by LW

April 14, 2017 at 1:01 am

“The best way to destroy the capitalist system is to debauch the currency”*…

 

In a world full of smartphone payments and cryptocurrency, 85% of all transactions are still done in cash. Australia actually sees cash demand rising at a steady 6% to 7% per year with no decline on the horizon.

As printers and scanners become more sophisticated, the government has moved to ensure that its currency is safe. “What we noticed in recent years, with the availability of technology—particularly around reproduction technology like scanners and printers—counterfeiting in Australia had started to increase. We’re in the fortunate position where it’s still pretty low but it is rising,” says James Holloway, deputy head of note issue at Reserve Bank of Australia. “We thought we just don’t want it to keep rising in a sustained fashion, so the time had come around upgrading security”…

How Australia means to frustrate counterfeiters: “The Painstaking, Secretive Process Of Designing New Money.”

* Vladimir Lenin

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As we bite our coins, we might recall that it was on this date in 1789 that President George Washington named Alexander Hamilton as the first U.S. Secretary of the Treasury.  A founding Father, Hamilton created the Federalist Party, the world’s first voter-based political party, the the United States Coast Guard, and the The New York Post newspaper.  As Treasury Secretary Hamilton stabilized the nation’s economy and paid back the mountainous debt resulting from the Revolutionary War.  He established the first national bank and created the U.S. Mint in (the precursor of) the form in which we know it today.

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Written by LW

September 11, 2016 at 1:01 am

“Money doesn’t talk, it swears”*…

 

In 1858, the United States was an industrializing nation with a banking system stuck in frontier times… Heated battles over ‘the money question’ came to dominate the country’s politics, but no matter how unsatisfied the people, any solution that tended toward centralization was, due to the prevailing prejudice, off the table.

America was a monetary Babel with thousands of currencies; each state regulated its own banks and they collectively provided the country’s money. Officially, America was on a hard-money basis, but the amount of gold in circulation was insignificant…

And therein hangs a terrific tale, “Printing Money,” an excerpt from America’s Bank: The Epic Struggle to Create the Federal Reserve in the always worthy Delancey Street; read it here.

* Bob Dylan

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As we bite our coins, we might recall that it was on this date in 1982 that money market deposit accounts were first offered by banks and S&Ls across the U.S.  Pioneered in the early 70s by brokerage houses, the accounts were a way around the Regulation Q prohibition on interest payments n demand accounts.

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Written by LW

December 14, 2015 at 1:01 am

“Nobody knows what a dollar is, what the word means, what holds the thing up, what it stands in for… what the hell are they? What do they do? How do they do it?”*…

From this website QuiltBank, a “subsidiary” of master quilter Nina Paley’s Pale Gray Labs, money– a $1000 “bill”– that one can actually use

Each individually numbered bill is lovingly stitched by our robot Behemoth, which labors for over eight continuous hours at up to 1500 stitches per minute. Slowed down by the many twists and turns of the design, along with thread breaks, bobbin changes, and mysterious mishaps, each bill takes about two days to stitch. Nonetheless we achieve a pattern far more complex than any commercially available quilt.

BindingThe individual bills are painstakingly bound by Nina Paley, using a hundred-year-old foot-powered treadle sewing machine. This soft and tactile bill contains over 360,000 stitches through 100% cotton fabric, lofted with quality polyester batting – the best type for this purpose, though cotton or wool can be used on request. QuiltMoney can be machine washed like any other quilt; this is known as money laundering. 

The design is based on a 1934-series $1000 bill featuring the portrait of Grover Cleveland, the only US president to serve two non-consecutive terms…Each $1000 bill is 40 inches high by 90 inches wide (3’4″ x 7’6″, or 1m x 2.3m) with bound edges. A rare uncut sheet of two is 92″ square, suitable for use on a queen or king size bed. 

More at QuiltMoney.

* Boggs, (“money artist,” quoted in Lawrence Weschler’s wonderful Boggs: A Comedy of Values)

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As we cozy up with our currency, we might send rebellious birthday greetings to Mikhail Alexandrovich Bakunin; he was born on this date in 1814 (as recorded, O.S., in Russia; it is also rendered, N.S., May 30).  A student of philosophy who immersed himself in Hegel, Bakunin moved to Paris, where he became first a friend, then an antagonist of Marx.  While Bakunin shared Marx’s dedication to justice for peasants and workers, he disagreed that acting through the State was the remedy.  Rather, Bakunin, an anarcho-socialist, argued for the replacement of the state with federations of self-governing workplaces and communes.  Their rivalry came to a climax at the 1872 Hague Congress, at which Marx and his supporters expelled Bakunin and his from the International Workingmen’s Association (IWA).  Bakunin then held a rival conference, and recruited a larger faction of IWA members than Marx.  In the end, of course, while Bakunin was right to predict that Marxist regimes would be one-party dictatorships over the proletariat, not of the proletariat, it was Marx’s approach that enthralled Lenin.

Bakunin argued that, post-collectivization, money should be replaced by labor notes, recompense for work democratically-determined according to time spent and difficulty; still, he would surely have approved of Paley’s hand-crafted currency.

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Written by LW

May 18, 2014 at 1:01 am

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