Tuesday, 10 September 2013

U.S. Buck Still Your Best Bang

Though looted by deliberate inflation until it's worth just pennies of its former glory (1), it's still the best paper money out there.  Like democracy, it's the worst store of value, except for all the alternatives. A full load of fresh greenbacks used to fly from the US to Moscow every week.  In Jamaica, Peru and Cuba you can shop all you want with $20 US bills, as I've seen for myself. In Panama, Ecuador and the Turks & Caicos Islands, it's the official currency.  Is there a shop owner from BC to Newfoundland that won't take American money to buy Canadian goods?  We all have heard gripes from Canadian tourists whose money was rejected by American shopkeepers. At least in Canada, our own money is preferred.  Who didn't feel a guilty thrill getting a US quarter in change at the cash register a few years back when the exchange rate was high?

There are about 1.2 trillion dollars of American cash in circulation and over half of that isn't in the United States. The US dollar accounts for 2/3 of all currency on earth. (2) The amount of actual cash out there abroad has doubled in recent years with special popularity for the $100 bill.  [Although 65% is commonly cited as the overseas cash percentage, a sober counter-point suggests more like 37%.]

Laughing all the way from the bank: The US government has a $100 bill printed for about six cents and then gets credited for ten thousand cents as it passes on to users here and abroad. What's not to like? Predatory profits in your pocket and almost no one the wiser.  This is called "seigneurage". It was a sticky point in past informal discussions about Canada and the US having a common currency, the amero.

Teaser:  Whose face was on the 240 tons of cash that Russia flew to Syria in 2012?

(1) Just pennies of its former glory.  (first graph)
(2) From Wikipedia: 2/3 of all the world's currency:  (second graph)

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