Today, the Federal Reserve will start circulating the new $100 Federal Reserve Note.
While this development isn't quite the currency competition we here at freebanking.org promote, it does provide a timely excuse to bring up some of our issues. Because the US currency notes are an internationally-recognized and commonly used currency, it illustrates, in a sense, F. A. Hayek's ideas in his Denationalization of Money concept. As the New York Times explains, "The $100 bill is an especially hot item on the global stage: The Federal Reserve estimates that one-half to two-thirds of $100 notes in circulation are abroad at any given time, making them one of the nation’s largest exports." US notes circulate freely as money around the world in competition with the currency of the domestic ones.
The NYTs article explains how the new bills were due to debut last February, but the government monopoly mint on note production ran into problems. The Treasury's Inspector General report is here (PDF). Since the reason for the redesign of the currency note is deterring counterfeiting, one would think that the incentives would dictate a faster response for serious violations of a federal law. I would argue that under a competitive note issue regime, the evolution of more counterfeit-resistant notes would proceed faster: think of the different phone carriers reacting swiftly to innovate new features, and for the their competitors to copy and adapt with market developments. There is no shortage of private sector analogies we could make here–which is my point.
It's good to remember that the Federal Reserve doesn't actually print the currency notes, the Bureau of Engraving and Printing does. In fact, the BEP used to print not only Federal Reserve Notes but also National Bank notes issued by private commercial banks that circulated
as legal tender before the introduction of FRNs [EDIT: as George Selgin remarks, "National Bank Notes were never legal tender. Federal reserve notes were first made legal tender in 1933."]. No reason they couldn't start doing so again.
The BEP site "www.moneyfactory.gov" (cool name, as government bureaus go) not only explains the new Benjamins but also features a creepy EyeNote mobile app "to identify denominations of Federal Reserve Notes (U.S. currency) as an aid for the blind or visually impaired."
The new Benjamins include not just a colorful new design but added security features explained in a fancy interactive presentation here. These include a new bell in the inkwell that changes colors depending on the vantage point and a 3D security ribbon. The Washington Post has an article going into the new security features even more.
No word on whether the new 3D security ribbon includes the features necessary for the carry tax idea I spoke about at the Mises Institute and have written about. (I wrote several "Dear Colleague" letters for Rep. Ron Paul about the carry carry tax, but one of my floppy disks(!) got corrupted, and I think those were on that one. Though Ron Paul's opening statement on a money production hearing is archived and includes him mentioning his bill against the carry tax.) I'll save my thoughts on this for an upcoming post, but I will say that the incentives do matter. Look at the increase in bank reserves since the Fed policy change to pay interest on them. This concept could literally usher in a monetary surveillance scheme worthy of the creepy EyeNote icon. Should the concern switch to increasing the velocity of money, a carry tax idea could rear its ugly head once again.
Of course, we use the term "Benjamins" for the $100 note because it features a likeness of Benjamin Franklin on it. Last night's Genealogy Roadshow on PBS went to San Francisco where they did a fun biography of Franklin as well as a good short and informative history of the San Francisco Mint's building (and how it survived the earthquake) but also how the mint worked, its importance in our economic history, etc. Incidentally, one of the hosts Josh Taylor used a Benjamin as a prop in one of his stories with one of the guests. He shows how integral money is in our society–and why, I think, it's too important to be a government monopoly.