Will Paper Money Go the Way of the Dinosaur?
Paper money has been around since 7th century China. Today, however, in some parts of the globe paper currency is going the way of typewriters, VCRs and other once-common objects that have become obsolete. This week, the Bank of England, the United Kingdom’s central bank, announced plans to start printing money on polymer, a thin, flexible plastic film, in favor of the paper notes it has been issuing for more than 300 years. Some two dozen other nations, including Australia and Canada, already have made the switch from paper to plastic. Find out what’s behind the move, and learn whether the United States intends to get in on the trend.
The main reasons countries have opted for polymer currency are security and durability. These banknotes are tougher and more expensive to counterfeit than money printed on traditional cotton-based paper, and include security features such as a transparent window. They also stay spiffier longer because they’re more dirt- and moisture-resistant, and are at least 2.5 times more durable than paper currency. Proponents of polymer notes also tout them as eco-friendly and less expensive than paper notes over the long haul because they last for a lengthier amount of time.
The Bank of England, which was founded in 1694 and is the world’s second-oldest central bank, announced that its plastic currency won’t look much different than its existing paper counterparts. Although the new stuff will be about 15 percent smaller, it will continue to include a portrait of the British monarch on the front and an image of a historical figure on the back. The Bank of England’s inaugural polymer bill, a 5 pound note, will debut in 2016 and sport the face of former Prime Minister Winston Churchill. The following year, a 10 pound note featuring 19th-century novelist Jane Austen will be rolled out. So far, Great Britain is the world’s biggest economy to announce a switch to polymer notes.
The pioneer in polymer banknotes was Australia. Starting in the 1960s, researchers in the Land Down Under began developing new technologies to combat counterfeiting, which was on the rise thanks to the advent of color photocopiers and other scanning devices. In 1988, the nation’s first polymer note was issued, and by 1996, Australia had moved entirely to polymer currency. Canada unveiled its first polymer banknote in 2011 and by November 2013 had a full set of polymer bills in circulation. The Bank of Canada reported that 2012 counterfeiting rates have plummeted by 92 percent in comparison with peak levels in 2004. To date, approximately two dozen other countries have introduced polymer currency, including New Zealand, Mexico, Singapore, Fiji, Mauritius and Morocco.
One country that doesn’t look like it’ll be abandoning paper for plastic anytime soon is America, where paper currency was first issued by Massachusetts Bay colonists in 1690, partly due to a scarcity of coins, which were then the main form of money. Although officials at the Bureau of Engraving and Printing havereportedly investigated polymer banknotes, it appears that for now paper money is here to stay. In fact, just this past October, the Federal Reserve launched a new $100 bill, the second most-common bill in circulation after the $1 bill. The redesigned $100 note includes such counterfeit-fighting features as a 3-D security ribbon and color-shifting ink.
8 Things You May Not Know About Money
They say “money makes the world go round,” and long before the invention of money as we know it, people were using goods such as salt, cattle and even weapons as forms of currency. From China’s “flying money” to Siberian “soft gold,” here are eight things you may not know about the history of money.
China created the world’s first paper money.
Nearly 700 years before Sweden issued the first European banknotes in 1661, China released the first generally circulating currency. In fact, usage of paper notes dates backs even earlier, to the 7th century Tang Dynasty. For centuries copper coins had been China’s primary currency. In order to carry large amounts of cash, people hefted around an ever-increasing number of these coins–not the easiest, or safest, thing to do over long distances. In an attempt to lighten their load, merchants began to deposit these coins with each other and were issued paper certificates for the coin’s value. The paper was certainly lighter. So light, in fact, that it is believed to have earned the nickname “flying money,” for its tendency to blow away in a stiff wind. The use of paper money remained in place for the next 200 years, until a copper shortage and inflation from overproduction of the bills forced merchants and Song Dynasty government officials alike to issue and accept paper notes backed by gold reserves—the first legal tender in the world.
The Inca built a great empire—without the use of money at all.
Unlike the neighboring Aztecs or Mayas, who used goods such as beans and textiles to buy and sell products, there was no concept of “money” among the Inca. So, how did they manage to create the largest—and wealthiest—empire in South America? Through a highly regimented system known as the “Mit’a.” From the age of 15, Incan males were required to provide physical labor to the state for a set number of days, sometimes as much as two-thirds of the year. They built public buildings and palaces, as well as an extensive system of roads (14,000 miles in all), which linked the empire together and allowed for its ongoing expansion. In return, the government provided all the basic necessities of life; food, clothing, tools, housing, etc. No money changed hands. Indeed, even if there had been money, there was simply nowhere for an Incan to spend it—no shops, no markets, no malls. That’s not to say that Incan society didn’t value the massive piles of gold and silver sitting beneath their lands. In fact, the Inca used these precious metals as part of their religious worship, considering gold the “sweat of the sun,” and silver the “tears of the moon.”
Medieval merchants developed an early version of the credit card.
In an era when currency was often unavailable (and few people were literate), the tally stick, a forerunner of today’s high-tech credit cards, became increasingly popular in Europe. In this early version of financial record keeping, notches were made on a wooden stick to indicate the amount lent—and owed. The sticks were then split down the middle; the creditor kept one half and the debtor the other. When a payment was made, the sticks were paired up, and the payment was marked on the stick. The tally stick system also had another built-in benefit: It was nearly impossible to counterfeit, as the shape, size and grain of the wooden halves had to match up perfectly. Tally sticks were used in much of Europe, but probably nowhere as extensively as in England. For more than 700 years, tally sticks were used to collect taxes from local citizens, until the system was finally abandoned in 1826. Eight years later, when the British parliament finally decided to get rid of the thousands of leftover tally sticks being kept in storage, they decided to burn them in an underground furnace that heated the House of Lords, resulting in a massive fire that destroyed most of the complex—the worst fire to hit London since the Great Fire of 1666.
Czarist Russia created a tax payable only in animal fur.
The arrival of Russian hunters and trappers in what was then the remote wilderness of Siberia in the 1600s kicked off a “fur rush” that many historians have compared to the later California gold rush in its intensity. At the height of the Russian fur trade these pelts had became so valuable that they were called “soft gold” and accepted as hard currency throughout the empire. By some estimates, they accounted for more than 10 percent of Russia’s total revenue. Eager to reap the financial rewards of the trade, Russia’s czarist government began to regulate the price of the pelts. By the early 17th century, in an attempt to keep up with the massive worldwide demand, they went one step further, imposing a new tax on thousands of Siberian peasants. The “yasak” was an annual tribute, payable solely in fur, required of every male over the age of 18.
Paul Revere played a key role in the creation of early American currency.
Revere, famed for his 1775 “midnight ride” to warn American colonists of an impending British invasion, was actually far more famous in his day for his work as an engraver and as one of the colonies’ premiere silversmiths. Just months after his exploits near Concord, it was Revere who was tasked with designing the engraving plates for the first Continental currency, or Continentals, produced by Massachusetts to fund the war. By the end of the American Revolution, these early paper notes had become worthless, and one of the first projects undertaken by the U.S. government following the ratification of the Constitution was the passage of the Coinage Act, establishing the U.S. Mint and regulating coin production. The first regularly circulating coins in American history were delivered in March 1793, consisting of exactly 11,178 one-cent pieces—or $111.78—and made of rolled copper provided, in part, by Paul Revere.
The first gold rush in American history took place in North Carolina, not California.
In 1799, the 12-year old son of a Cabarrus County farmer named John Reed discovered a gold nugget weighing an estimated 17 pounds, so large that his family used it as doorstop. When more gold was discovered in neighboring counties, it kicked off the first prospecting boom in American history, drawing thousands of people to the area, many of them newly arrived immigrants. By the early 19th century, more than 30,000 North Carolinians were mining for gold, making it the second largest profession in the state after agriculture. The prospect of financial reward was so high that professional mining companies soon entered the scene, bringing with them workers and engineers with years of experience extracting precious metals from South American mines. For more than 30 years, all gold used in U.S. coins was mined in North Carolina, and a U.S. Mint was opened in the city of Charlotte in 1837. However, decades of mining eventually depleted the region’s reserves, and by the 1860s, the Carolina Gold Boom had ended.
Counterfeiting was rampant during the American Civil War.
Money tampering has been around nearly as long as money itself has existed. Early coins were shaved around the edges, with the perpetrator pocketing the excess precious metals. Rome, among other ancient civilizations, made counterfeiting a crime punishable by death. The U.S. government struggled with the issue from its inception, going so far as to hire an ex-counterfeiter to design some of its first coins. Despite these efforts, the problem continued, likely reaching its apex during the American Civil War. With dozens of different notes and coins being issued by state, local and federal governments on both sides, it was nearly impossible to detect the real from the fake. It’s been estimated that at least one-third (and possible half) of all money then in circulation was fraudulent. In fact, the U.S. Secret Service was created in 1865—not to protect the president—but to combat counterfeiting. The term “greenback,” a now-common term for money, also traces its origins to the war. The phrase was derived from the intricate green ink designs used on the reverse side of Civil War-era banknotes, which the U.S. Treasury Department hoped would prevent counterfeiting.
West Point Mint was “the Fort Knox of silver” and has a whole lot of gold.
When most people think of vast amounts of precious metals tucked away in secure locations, it’s Fort Knox that comes to mind. Few people know that a tiny facility in New York State once rivaled Knox in the wealth department, and was home to the largest concentration of silver in the United States. Opened in 1937 and originally known as the West Point Bullion Depository, the Mint is located just miles from the U.S. Military Academy at West Point. There are currently more than 54 million ounces of gold in “deep storage” at the facility, with an estimated value of more than $80 billion dollars, making West Point the second largest gold depository after Fort Knox. Though it did not achieve official status as a U.S. Mint until 1988, it had begun striking pennies and gold medallions decades earlier. Today, it issues coins struck with the “W” mint mark in gold, silver and platinum, including the only U.S. coins issued to commemorate the September 11 attacks.
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