On Aug. 29, 1862, the Bureau of Engraving and Printing was formed.
Originally its purpose was to print paper money in the form of IOUs from the U.S. government, since there was a lack of funds to pay for the Civil War in coin. The first notes were hand-signed by clerks at the Treasury Department.
The ability to print paper money is a powerful tool of governments.
In recent years, Zimbabwe had a runaway currency, with printed bills reaching 100 trillion dollars. The record is a Hungarian bill of 1 sextillion pengo’s (1 followed by 21 zeros), printed but not issued in 1946.
Hyperinflation leads to some strange results. People in hyperinflation countries have used bills as heating fuel, and as wallpaper. While amusing, this is the result of a massive failure of government.
Economist Milton Friedman once “stopped the press”, while discussing the problem of printing too much currency:
High inflation causes people to invest poorly and destroys the savings of hard-working people. Today, one of the primary tasks of the Federal Reserve in the United States is to manage inflation, with a target of stable inflation around 2%.
There are a number of inflation calculators on the internet. One is:
- Using this or another inflation calculator, imagine you were offered a job at $1 an hour in 1900. Would that be a good wage? Or would you turn it down?
- Today, alternatives to printed currencies are common. Do you mostly use printed money? Coins? A Debit Card?
- PayPal was originally created to compete with the Federal Reserve. Do you think we should be able to choose which currency to use in the U.S.?
- Have you ever used Bitcoin? Do you know what it is? How might things like Bitcoin affect the government’s ability to print money to use for IOUs like it did in 1862?
22nd, August 2018, Piles of money [Digital image]. Retrieved from <google.com>.