Is the US ready for plastic money?
Canada is the latest nation to switch to polymer banknotes. The case for change seems compelling, but . . .
This post comes from Lynn Mucken at MSN Money.
Canada plans to begin printing $100 plastic -- specifically polymer biaxially oriented polypropylene -- bills this fall, joining 32 nations that have abandoned paper money, which actually is cotton and linen.
By all accounts, this is a no-brainer: The new bills, while more expensive to manufacture, last a lot longer than paper money and thus cost less in the long haul; they are much more difficult to counterfeit; and they don't carry disease-creating microbes because there are fewer wrinkles to hide those nasty germs. They're even recyclable.
So why is the United States still using paper nearly 20 years after Australia successfully switched over?
There are no clear-cut answers. The U.S. is quite secretive when it comes to currency, worrying that it will lose a step in the never-ending technology battle with counterfeiters.
But here are a few guesses:
- There are some downsides to polymer money. In 2000, Brazil went to polymer to issue a commemorative 10-real note, then did an exhaustive study over the next few years. Generally, all reports were good, except for one thing: Those who handled money the most -- clerks, bank tellers, cab drivers -- said the bills were too slippery and so thin they stuck together. That remains Brazil's only polymer issue.
- The cost-to-savings ratio is not good enough. According to the Federal Reserve Board, the U.S. will print 6.8 billion banknotes in 2011, at a cost of $650 million, about 9½ cents each. Going to polymer would at least double that cost. However, about 45% of the U.S. currency issued every year is in $1 bills. The $5 bill makes up another 6%. These bills are almost never counterfeited -- like the rest of us, counterfeiters prefer to make a lot of money as quickly as possible -- so the anti-counterfeiting case has less merit.
- The "clean money" argument? Just wash your hands before handling food. And don't suck your thumb.
- Pure politics. If polymer bills last longer than paper money, and they obviously do -- the Brazil study showed that after 42 months, only 0.18% of its 10-real notes ($6.35 U.S.) were unusable; the average life of a $5 bill is 24 months -- the companies that provide the material for American money would take a hard hit. Crane & Co., of Dalton, Mass., has provided all of the paper for U.S. money and passports since 1879. Think their lobbyists and the members of Congress from that state wouldn't go to the mat over a proposed change to plastic?
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