We all have money woes, but here’s a twist you may not have considered: For the U.S. government, the money itself is part of the problem.
CNN reported yesterday that the cost to the U.S. government of producing one banknote has risen from a little over six cents to almost 10 cents over the past two years. The culprit: surging cotton prices. Dollar bills are composed of 75 percent cotton (the other 25 percent is linen), the price for which has spiked 160 percent in the last year alone. At 6.4 billion currency notes produced in 2010, that means hundreds of millions of dollars in extra costs each year.
The news comes at an opportune time for the Government Accountability Office, which last week released a report urging Congress to enable the replacement of low-denomination bills with coins, which are far more durable than banknotes; on average, notes fall out of circulation after just 40 months. Coins, on the other hand, generally last at least 30 years. GAO estimates such a move would save the government $5.5 billion over 30 years. That’s a lot of greenbacks – or, dollar coins, if Congress decides to make the switch.
Of course, when the government has introduced dollar coins in the past, they failed to catch on. This time around, GAO is suggesting eliminating $1 notes entirely.
The report notes that other countries that have replaced low-denomination bills with coins include Australia, Canada, the United Kingdom, Japan, Norway, Russia and New Zealand. The lowest denomination note in European currency is the 5 euro note, worth about $7 at current exchange rates.