What Does Currency Cost to Produce?
When looking at the world markets and currency exchanges, cost is always a factor. As a commodity, markets and exchanges estimate a currency cost, which signals to each trader what it would cost for the exchange, but while this happens without the complete exchange, what is the physical currency cost? Each and every year we look at the value of currency fluctuate, but what is the actual cost of the governments around the world to print or create the currency that is used in the everyday barter and exchange of goods? Where times of old one would simply trade like goods for like goods, for example cow for silk, but what addition to the deal is the cost of the physical currency and what is the loss to the economy when money runs out of circulation or is destroyed. What are the currency costs, behind the currency value?
Currency Costs of Production
Each and every year, the Federal Reserve Bank in America has to reprint and add money into circulation, as do every major government around the world. The budget for this year’s production of money for the United State Government is $747 million! Now while the initial thought must be that this is the amount of currency to be produced, however this currency cost figure is for the production of the currency.
Currently, each note is costing the government 7.7 cents per hundred dollar note, 9.2 cents for the fifty and twenty dollar notes, 8.5 cents for the five and ten dollar notes and two’s and one’s costing the Federal Reserve Bank 5.2 cents to produce. Often these figures can be inflated should special commemorative notes be produced in certain countries and these can change the costs for the respective government. While the Americas, with one of the most stable economies and currencies in the world, the value of the currency can offset the cost, in many countries around the world, such as Zimbabwe and other struggling currencies, these costs can actually be higher than the actual value of the currency! In Zimbabwe, they have officially switched over the American Dollar, another show of how currency production costs have sunk an entire currency.
Its not just about taking notes
Coins again are another cost which can reach high proportions and are consistently abandoned after the increases of inflation affects the prices of goods on the market. Many countries actually phase out lower denominations; however the costs to the economy can be recovered with the recycling of coins, unlike that which can be done with the notes. The costs incurred are the materials; those being the copper and other metals for coins and the cotton and synthetic textiles used for notes, the printing and ink costs for the notes as well as machinery upkeep and the metal molding presses and the technology used for smelting.
Next time you look at currency cost and exchange, bear a second thought for the true value of the note, which is its value vs its production cost and you can begin to unravel the construct of currency worth on a completely new level.
