Article that gives $200, $500 and $1,000 FRNs new hope

Okay, well heres why I believe this can cause major deflation of the US dollar if they print larger denomination bills:

The government isn't going to go out of its way to slow down printing lower denomination bills when they start printing larger bills. Thus increasing the amount of US dollars in the world. This is the first step of deflation. And it's been happening since 2009, when the government started printing dollars specifically to pays its debts. We've seen minor deflation since this. So in easier to understand words; imagine what would happen to the gold market if suddenly one day aliens came down to earth with an infinite supply of gold and handed it over to us. Gold would drop down to nothing overnight. It's the scarcity of the precious metal that keeps its value up. Just as when you see the dollar start to drop, you usually (if your intelligent) keep any precious metals you may have, because those go up during any currency deflation. The reason is because everybody stops trading precious metals so sudden, thus decreasing the amount of gold on the market. This makes it go up even more, because gold starts becoming harder to aquire, because evrybodies keep their gold! Unfortunatetly, just as any currency in the world, the dollar obeys similar rules. You have/make more of something, it devaluizes. So, if making larger denomination bills "just for the convience" is going to put any more dollars in the world, I'd do and say what ever I could to try and put a stop to that.

 

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There should be 2 lines at a store checkout. One for cash and one for debit cards.
That way, the ones who pay with cash can be on their way and not standing there waiting for the ones that use debit cards who seem to take forever.
What's even worse and more time consuming, is standing behind someone who's transaction doesn't go through, leaving the teller to deal with the bag of stuff left behind.

 

No need to get all upset. Some people reply to a message they see without even checking the rest of the thread...

 

Everything you say here makes sense, except for your use of the word "deflation". I believe you mean "inflation".

Exactly. You've just given an excellent analogy for INflation.

Inflation, which you are describing, is the RISE in prices, due to the FALL of the purchasing power of the currency, which can certainly result from the introduction of excess money.

The result of inflation is, typically, the need to print larger and larger currency notes. See : Zimbabwe $100,000,000,000,000 note.

Deflation, which is the word you're using incorrectly, is a fall in prices due to the INCREASED value of the currency.

I believe you're absolutely correct here.

[/quote]
So, if making larger denomination bills "just for the convience" is going to put any more dollars in the world, I'd do and say what ever I could to try and put a stop to that.[/QUOTE]

Your premise is again flawed, for three reasons this time.

1) Inflation is not inherently bad. Excess inflation is, but inflation in and of itself is not evil.

2) You presume the introduction of a $200 bill increases the money supply. While that's POSSIBLE, it's not a given. The government COULD simply print fewer $100's to compensate. Thus, to "do and say what ever [you] could" to stop it would be hasty and over-reactionary until you understood the overall money supply.

3) You're ascribing to the fixed pie description of money and economics...which simply isn't right.

Your analogy to gold breaks down (as does a gold standard, for the same reason) at this point. There is, as you rightfully assert, a fixed amount of gold available at any given time. If large quantities were added or reduced, the price of gold would move sharply, since the total amount of available gold had changed.

Money, however, is a store of value. There is no "fixed" amount of value in the world. Value can be...and is...created whenever a good is produced, for example.

This is, indeed, the single biggest argument AGAINST a return to the gold standard.

I know, I know, my Libertarian brothers will hate me for saying that. *lol*

 

So, if making larger denomination bills "just for the convenience" is going to put any more dollars in the world, I'd do and say what ever I could to try and put a stop to that.[/QUOTE]

Your premise is again flawed, for three reasons this time.

1) Inflation is not inherently bad. Excess inflation is, but inflation in and of itself is not evil.

2) You presume the introduction of a $200 bill increases the money supply. While that's POSSIBLE, it's not a given. The government COULD simply print fewer $100's to compensate. Thus, to "do and say what ever [you] could" to stop it would be hasty and over-reactionary until you understood the overall money supply.

3) You're ascribing to the fixed pie description of money and economics...which simply isn't right.

Your analogy to gold breaks down (as does a gold standard, for the same reason) at this point. There is, as you rightfully assert, a fixed amount of gold available at any given time. If large quantities were added or reduced, the price of gold would move sharply, since the total amount of available gold had changed.

Money, however, is a store of value. There is no "fixed" amount of value in the world. Value can be...and is...created whenever a good is produced, for example.

This is, indeed, the single biggest argument AGAINST a return to the gold standard.

I know, I know, my Libertarian brothers will hate me for saying that. *lol*[/QUOTE]

Why isn't it right? You have more of something. It is worth less. Sorry, thats just it. That is the sad cold reality. You are speaking of all maybes. Maybe, the government will print less $100's to make up for the extra amount of larger denominations. But the true fact is, they won't. They, right now, are printing large sums of cash, to pay off their debts. That is quite an unintelligent way of paying off your debts. My point being; if they don't care enough to find a better way to pay their debts besides making more, do you think they are going to go out of their way to control the amount of dollars being produced? I think not. There are all these possibilities and speculations of which could go wrong, and you are even partly admitting to it it be possible, yet you still want them to produce larger bills "just for your convenience". Is the possibility of major US dollar inflation (yeah you got me, I've been mis-pronouncing it) worth some peoples "convenience" as you put it? I don't think so. Why fix something that isn't broken that could come with severe consequences and penalties?

 

Spoken like a numismatist. *heh*

So, for each new truck Ford makes, they need to charge less, since there's now more of them?

That's the entire point. There is no fixed pie of money, since money is a store of value. Since value can be created where none existed before, money must also be able to be created where none existed before.

Otherwise, increased production results in rampant DEflation....either prices of the newly produced goods must go down simply by virtue of more existing, or the value of the unit of money must go up. Either of those is detrimental to a large economy, both is lethal.

You can't assert that they "will" or "won't" balance the overall money supply any more than I can. If they continue to print money at a hyper-inflationary rate, the denominations we're talking about here won't buy a stick of gum, and won't really matter. Again, see Zimbabwe.

If they reduce or slow the creation of new money, then they quite easily could balance 2 bills for 1, or 5, etc.

Point being, monetary policy and politics will dictate the money supply, not the denomination of particular notes. Once again, they are a RESULT of the money supply, not the cause.

Seems a darn intelligent way if you ask me. Inflate the currency so the dollar is worth less than before, but still able to pay off your debt with old dollars. Bazinga!

Debtors LOVE inflation for this very reason.

You are, however, quite incorrect. The US government isn't "paying off" debt with new dollars. It's creating MORE debt.

In general, we agree. The current culture and political landscape does not suggest, even for a moment, that this country or its leadership will find responsible ways of paying down debt and managing money any time soon...if ever.

Sure, why not? Larger bills don't CAUSE any of these things, they are either A) Inconsequential to them or B) caused BY them.

Let us presume, everything else aside, that the government decides to create $1,000,000 tomorrow.

Will it really matter if it's 5,000 $200 bills, 2,000 $500 bills, 1,000 $1000 bills, or 1,000,000 $1 bills? If they decide to do it, they're going to do it.

The government doesn't decide to print 100 of "something", and then pick the denomination. They create some given amount of money supply, and then print currency or mint coins as needed to cover the tangible fraction of that money supply.

The size of the bills simply doesn't matter. It's an ancillary RESULT, not cause, at most.

Certainly not. Were it the cause an effect relationship you assert it is, I'd agree with you.

 

If I may expand on the fixed pie vs store of value idea a bit...

Consider three men. X, Y, and Z.

X produces apples. Y produces milk. Z builds houses.

These men can engage in free, unrestricted trade in one of 3 ways.

1) They can barter. If X has 5 apples he does not need, and Y has a gallon of milk he does not need, they can make an exchange.

This works great so long as X wants milk, and Y wants apples. However, Y isn't terribly fond of apples, and X is lactose intolerant.

This does nothing for Z either. Z very much would like apples for life, and would happily build X a house for such a trade. Yet X can not guarantee to have a fixed number of apples available each month or year, agriculture being the variable industry it is.

Barter's great, as long as everyone has enough for everyone else, and everyone involved wants and needs what the other has.

Since that's almost never true, we came up with the idea of "storing" the value represented by an apple, milk, or house. We called it "money".

2) So X, Y, and Z invent a unit of exchange. The Dollar. They agree that gold, as a precious metal, will be their monetary standard, and that one ounce of gold shall be worth $20. (Sound vaguely familiar?) they further agree that all in the land will accept "dollars" as a fixed unit of value, and exchange them as such.

Awesome! Now, X can sell apples for dollars, to anyone who wants them. He's not forced to trade for milk he can't drink, since he can go elsewhere and exchange his dollars for beer instead.

Y now has a source for apples where he did not before, since he can exchange milk for dollars at the local market, and then give dollars to X.

AND, X can now offer payment to Z for his house, since he feels comfortable that in times of plenty, he can SAVE some of the dollars he's earned, something he couldn't do before with perishable apples. This will allow him, in lean years, to honor his commitment to Z by paying him an agreed upon amount of dollars.

This is working great, right?

And it will, for a long time...until we run out of gold. Gold, you see, is a fixed pie. If I take a slice of pie, there's less pie for everyone else.

But value doesn't work like that. X can grow more apples, Y can rais emore cows and produce more milk, and Z can build more houses.

To say nothing of the fact that human beings being the social animals they are tend to increase in population over time.

So now we have a REAL problem.

Previously, X's apples sold for $1 each. 20 apples = 1 oz of gold. Fine.

But he's planted more trees, and thus now makes more apples. He now has 40 apples. 2 oz of gold, right?

But that leaves less gold for everyone else! Which...what...makes it more valuable, right?

But now, gold being worth, say, $40 an ounce, X has now made $2 per apple, and everyone else is now hoarding their money because its value is increasing.

MEANWHILE, X was supposed to pay Z $20 for the house payment...which used to be an ounce of gold...but now it's only half an ounce! Suddenly, Z is getting less gold, prompting him to hoard even more! Either that, or their deal was in ounces of gold, in which case, X must give what is now a $40 oz of gold to Z. Someone's shortchanged here.

To say nothing of the fact that X, Y, and Z have all had kids now, who've entered the workforce. Given that there's no 6 people to pay, not 3, out of the same fixed pile of gold, everyone...INCLUDING existing workers, now gets to take a pay cut.

The other option to all of this is that X must cut the price of his apples in half, meaning he still only gets $20 for his trip to market. This keeps the amount of gold money in balance, but now offers no incentive for increased production.

This is rampant deflation. Producers are DISCOURAGED from increasing production, workers are PUNISHED for remaining in the workforce longer, and nobody is spending any money...bringing the economy to a grinding halt.

3) The reality of the situation is that new VALUE can be created. X can, indeed, learn to grow more apples.

Since there is now more VALUE in the world, whatever unit we use to store it...the dollar...must also be increased. Eventually, being the fixed pile it is, gold doesn't allow us to do this.

Enter the dollar as we know it now.

===============

There is NOTHING inherently evil about an increase in the amount of money in the world. Value can increase...as a store of it, money must do so as well.

Creating new MONEY doesn't get us in trouble...it's when we will it into existence WITHOUT VALUE FOR IT TO STORE that we have problems.

If an apple is worth $1, and there is $1 in the world...we're good.
If 2 apples are grown, and $2 created...we're still good. Increasing the money supply didn't hurt at all.

Were we go straight to you know where in a hand basket is when we have 2 apples and $1...or 2 apples and $5.

 

I am kind of late to this discussion, so perhaps my comments will be really out of place. I work in a place that deals with the public, and I have noticed that most people don't seems to have hardly any "cash" on them at all. When they do it is like $20 or $10.

I think the move to more cash transactions and minimum payments with debit and card transactions would be a good thing.

Regarding creating higher denomination bills, I know that it is safe to pay for almost any purchase with a $50 bill and below, without causing the clerk to get suspicious.

Large grocery stores do accept $100 bills, but how often does one get $100 bills anyways. I think once we get to the point most stores accept $100 bills with no questions, then higher denomination bills can be made.

If I could be far out there, I would suggest the following cash coin and bill denominations that would faciliate better business in my humble opinion. Coins: 5 cent, 10 cent, 50 cent, $1, $5. Bills $10, $50, $100, $500.

Ok so I am late to the discussion and perhaps off topic, but these are my thoughts.

Later money people.

 

That's all great, but the the United States is the only country in the world who does not have regulations set to make it so we have to export as much as we import. We can import as much as we want, and never export anything, and we're good.

So I'd like you, since you seem to have an answer for everything, explain why the dollar is dropping right now? Why is that back in 1998, the dollar exchange rate between Canada and US was .75 to 1.00. Today, it is 1.02CAD to 1.00USD. Clarify it for me. Theres one major difference I've since then and now; the increase in production of US dollars.

 

Very few people I know use cash these days. Times are different. We have debt cards, credit cards, PayPal, etc... Why cash? Something that can easily get lost or stolen. You lose your debt card, all you have to do it call a toll free # and have the card stopped. You can't call the Federal Reserve and tell them to cancel your cash. No dice. I'd sure hate myself for loosing my wallet with a ridiculous $1,000 bill in it, thats for sure. I think that people want difference, people I guess are bored of the current denominations we have. We want to fix something thats not broken. The unnecessary fix will come with consequences, take my word for it.

 

Afraid I don't have an "answer or for everything", since right now I don't have a clue what you're asking of me???

You've carried on at some length about how the US dollar is inflating, and it's doing so due to to creation of more money than is needed...and I've agreed with you at every turn.

We've discussed, at some length, that inflation means the dollar loses value...and I've agreed with that at every turn as well.

Now, all of the sudden, you want to know why the dollar's losing value when we're printing more than we need?

:scratch:

 

Yugoslavia is a good example of how larger size denomniation bills come with regrets and problems.

 

:dead-horse:

 

Way to go and add some humor to a dull convo!

 

As a contractor ill gladly reduce my labor 50 dollars and more if i can be paid in cash.Hard to trace that money when taxs comes around.

 

Yugoslavia's economic problems were the result of numerous costly and bloody civil wars, international economic sanctions, lack of resources, and eventual demise of the country known as Yugoslavia.