RS 9 Where the Dollar Bill Comes From

This blog post is my take on the podcast “Where the Dollar Bill Comes From” by Planet Money. This podcast was released May 5, 2012.

I found this article very fascinating as well as educational in the field of economics. It was interesting to find out where the materials for bills are made and that it comes from a not very large family mill in Massachusetts. The material for the all bills sounds like materials of a particular T-shirt, 75% cotton and 25% linen. This factory undergoes critical tests to see if it fits the two biggest factors for currency; which are must be durable and hard to counterfeit. The factory tests the durability by a folding test seeing how much folding the individual bill can withstand. Also to make the money hard to counterfeit they must put many secretive messages and plastic strips on the materials. This company does an outstanding job because due to a study at the University of Chicago, only .01% of money is counterfeited.

One of the most educational topics of this podcast was learning the benefit of competition. The mill is owned by the Crane family that goes generations back until President Rutherford Hayes. The US Treasury needed to make a deal to find out from whom they were going to buy the material from, so they began a bidding process with many different companies. At first the price was .75 a pound and was bid all the way down to about.61 a pound. Through this process the US government saved a lot of money in buying this material at the lowest bid, instead of going with the first deal they saw. It is remarkable that this mill has been doing business with the government since about 1877 and maintained fair prices.

Since this mill is the only “game in town” the owner Doug Crane says, there is much responsibility they must maintain by providing quality products and service to hold this deal, and they must be audited intensely to make sure that the deal is fair since they have a monopoly on this market.

Another major point made that I have also seen in my daily life is the use of cash. I know that even from the way I pay for things, such as gasoline or big purchases, I don’t use cash and neither do a lot of people. A major issue for this company is that they are in charge of one major distribution and that is making material for bills. However, the use of bills is thought that it will not always be around. Unlike Doug Crane believed, in the future I think that bills will be used less and less with all the alternative ways of paying for products today. As we see on NPR’s blog, the use of cash has decreased nearly 9% in the last ten years and is predicted to go even lower for future years to come.

I know that Doug Crane does not want to believe that his business will eventually take a drastic loss, but many people are putting their money into stocks and different accounts so they get some sort of return; as well as use alternative payment methods instead of keeping the physical cash “under the pillow.”