Essay: Dollar Bill
The next time you open your wallet to pay for something with cash, it’s likely you will have a couple of 'ones' in there. They are the lowest denomination that US paper money comes in, and Lake Effect essayist Avi Lank hopes we keep it that way.
Pity the poor one-dollar bill. While all of its relatives – the five-, ten-, twenty-, fifty- and one-hundred dollar bills – have undergone 21st century makeovers complete with holograms, multiple colors and special paper, the lowly one is stuck in the 1960s, with the same basic design it carried in that decade of social change – a dour George Washington, miniature by today’s design standards, surrounded by a sea of green ink and even the name of the Federal Reserve Bank that issued the bill.
It makes one wonder how hard the 20’s Andrew Jackson or even the 50’s Ulysses Grant is chuckling at poor George out there in the presidential great beyond.
The dollar bill is stuck with its retro design thanks to a strange combination of circumstances. The larger notes were redesigned to discourage counterfeiting, something that is not much a problem with the lowly one. But a bigger problem with redesigning the one is that it opens the door to ending it altogether.
Although there is disagreement over the exact number, most observers agree that switching from a paper bill to a dollar coin would save the government millions of dollars a year in production costs, as coins last longer than bills. Senator John McCain, from the metal mining state of Arizona, has long pushed for such a change citing the savings involved. Representatives of the paper making and cotton growing states have rallied behind the one, as dollar bills are printed on a cotton-rich paper.
And then there is the vending machine industry, which is of two minds. It would have little trouble with replacing the dollar bill with a coin, but if that does not happen, it would like the bill to remain as it is. A new bill would require changing vending machines that take dollar bills, while most vending machines already make some accommodation for dollar coins.
Thus Congress has discouraged redesign of the dollar bill, leaving poor George Washington diminished besides his currency peers. So, what about a dollar coin instead? Over the years, there have been numerous efforts to introduce one as a substitute for the dollar bill – remember the Susan B. Anthony coin, the Sacagawea dollar and the set of presidential coins issued in recent years? They all still circulate, but are all rarely seen. The reason is a hoary economic dictum called Gresham’s Law.
Simply stated it says that bad money drives out good. That is, if a government issues two types of money with the same buying power, people will keep the one with the greater intrinsic value and spend the one with less. Thus, people will hoard metal dollar coins while spending paper bills dollar bills. So if there ever were a serious push to make the dollar coin commonly used, the paper dollar would have to be withdrawn. Seen from a global perspective, there is good reason to do so.
Among major currencies, the dollar bill is the least valuable paper. Canada, Britain and the Euro zone all use the 5 as their smallest denomination bill, with values from about $4 to about $8 in U.S. currency. The 1,000 yen note is Japan’s smallest paper currency, and it is worth more than $4. Meanwhile, all these countries have pieces of metal for smaller purchases, 1 or 2 pounds or dollars or euros, and a 500-yen coin.
Travelers to and residents of those nations carry around a lot of change, a downside of getting rid of smaller notes, except for tailors who fix holes in pockets. But I see another problem with replacing the dollar bill with a coin – inflation. Paying for something with a fist full of change makes it seem less expensive than pulling a bill out of a wallet. So here is one vote for keeping the dollar bill, but please redesign it. George Washington deserves that much respect.
Avrum D. Lank was an award-winning reporter and columnist at the Milwaukee Sentinel and Journal Sentinel for more than 35 years. He lives in Whitefish Bay.