Comment The neglected benefit of lost value (Score 1) 729
You seem to believe that money should not cost more than its value. Currency has value in and of itself, but only if it has the trust of the community. This trust is historically undermined by policy, but the biggest extra-governmental threat is counterfeiting.
Even though there are examples of counterfeiting operations run specifically to undermine a given currency, it is a usually run as a business. As such, a very effective tool against counterfeiting is when the money costs more than its face value.
There will always be some cost threshold where it becomes unreasonable to continue issuing a given note or coin, but the loss incurred should be weighed against the cost of an untrusted currency.
This is the primary reason $1 bills have not been undergoing anti-counterfeiting redesign over the past decade. Like these coins, they cost more than their value too.
Conversely, the article discusses the opposite problem - where the value of the materials used is so high as to offer an incentive for non-government entities to dismantle the currency already in circulation. This undermines the currency in a very unusual way but due to the limited scope (only the lowest denominations being affected) I believe the effect would be much less dramatic than the effect of an untrusted currency. Basically, I think it is better to have currency cost more than its value instead of the other way around.
There are other issues that should also be addressed when reflecting on macro-economic aspects of currency, such as the consequences of removing a denomination versus using other materials, but that a note or coin simply costs more than its marked value is not as bad as you state.
As for the GP, I agree with you. Rounding up to the nearest dollar is only reasonable to those who constantly manage transactions in excess of $1000, which is to say very few people.
Even though there are examples of counterfeiting operations run specifically to undermine a given currency, it is a usually run as a business. As such, a very effective tool against counterfeiting is when the money costs more than its face value.
There will always be some cost threshold where it becomes unreasonable to continue issuing a given note or coin, but the loss incurred should be weighed against the cost of an untrusted currency.
This is the primary reason $1 bills have not been undergoing anti-counterfeiting redesign over the past decade. Like these coins, they cost more than their value too.
Conversely, the article discusses the opposite problem - where the value of the materials used is so high as to offer an incentive for non-government entities to dismantle the currency already in circulation. This undermines the currency in a very unusual way but due to the limited scope (only the lowest denominations being affected) I believe the effect would be much less dramatic than the effect of an untrusted currency. Basically, I think it is better to have currency cost more than its value instead of the other way around.
There are other issues that should also be addressed when reflecting on macro-economic aspects of currency, such as the consequences of removing a denomination versus using other materials, but that a note or coin simply costs more than its marked value is not as bad as you state.
As for the GP, I agree with you. Rounding up to the nearest dollar is only reasonable to those who constantly manage transactions in excess of $1000, which is to say very few people.
