Lack of cash at the bank

[Sand&Salt]

Originally Posted by ukiyo-e

"EDWARDS: That is generally done through an agreement between the local authorities and the Federal Reserve. So the dollars are shipped in. And they are put into ATMs and into banks. And then people have a period of time when they can exchange at a given ratio their local currency, sucres, for dollars.

GARCIA: Yeah, but there is another important question here, which is doesn't Ecuador have to pay for those new dollars? The answer is yes.

EDWARDS: When you don't have a currency of your own and you use the dollar, you cannot print dollars if you're Ecuador. So in order to get more dollars, you need to sell to the U.S. more bananas or more chocolate. Ecuador has a wonderful chocolate industry that - it's being developed now. Or you have to sell more oil than what you import. So you have to run a surplus in your international trade in order to get in more dollars than what you're paying out so that the economy can expand and have more dollar liquidity."

https://www.npr.org/transcripts/663121186

So there's an "agreement" between the Federal Reserve and the authorities here. And the dollars are "shipped in" but then there has to be enough trade goods to warrant that money.

This is making it sound like the trade goods are being paid for in actual cash, which we know isn't the case.

Interesting transcript, thanks---I read it all. But I don't know any more than I did before. Guess there's a reason I never mastered math!

[mojo101]

I am sure somone knows,as it is not the only country,it could have a bank account with the Fed.

[JONOV]

Originally Posted by Sand&Salt

So there's an "agreement" between the Federal Reserve and the authorities here. And the dollars are "shipped in" but then there has to be enough trade goods to warrant that money.

This is making it sound like the trade goods are being paid for in actual cash, which we know isn't the case.

Interesting transcript, thanks---I read it all. But I don't know any more than I did before. Guess there's a reason I never mastered math!

If the dollars are shipped in, then that's your answer. 20x the transportation cost for singles, given that they take 20x more space for the same dollar amount.

[PacoMartin]

Originally Posted by JONOV

If the dollars are shipped in, then that's your answer. 20x the transportation cost for singles, given that they take 20x more space for the same dollar amount.

If you are replacing a currency with four banknotes worth $2, 80 cents, 40 cents, and 20 cents and two coins worth 4 cents and 2 cents and you want to replace them with USD, then what you badly need is something worth $1. The US Mint finally found somebody who wants all the $1 Sacagawea coins they have in their vaults.

But keep in mind that a Sacagewa coin weighs 8X as much as a banknote, and shipping primarily depends on weight. However the real cost savings is that coins don't wear out.

=======================
In an earlier post I said that Ecuador is a natural for digital currency, as they have the problem of buying currency at face value, and the incidental cost of shipping banknotes from the United States to Ecuador where they probably wear out in a few years.

Much to my surprise, It turns out that Dinero Electrónico was tried and cancelled in Ecuador already.

Dinero Electrónico: The rise and fall of Ecuador's central bank digital currency

[NORTY FLATZ]

Coin "life" is approx. 18 years. This is for common denominations.

Unusual denominations, it's much longer.

There are still "IKE" dollars floating around...

Not much silver, tho....

[Sand&Salt]

Originally Posted by NORTY FLATZ

Coin "life" is approx. 18 years. This is for common denominations.

Unusual denominations, it's much longer.

There are still "IKE" dollars floating around...

Not much silver, tho....

"Coin" life? Don't you mean dollar bill life? Coins seem to last forever---still finding Roman coins, for example. Whereas bills wear out quickly. They do prefer the Sacagawea coin---we have plenty here. Errr....I mean, somebody has them. Not enough to spread around.

Europe also uses dollar and 2-dollar coins.

[Sand&Salt]

Originally Posted by JONOV

If the dollars are shipped in, then that's your answer. 20x the transportation cost for singles, given that they take 20x more space for the same dollar amount.

I guess that could be true; seems kind of simplistic. I do know the 5s and 10s are worn out whereas sometimes we'll get a newish 20. No one likes the dollar bill here; prefer the coin.

I wonder if other small countries using the U.S. dollar have this issue?

The answer I've been given in the past is: "Well, they have to BUY the bills from the U.S....." but so what.

[JONOV]

Originally Posted by Sand&Salt

"Coin" life? Don't you mean dollar bill life? Coins seem to last forever---still finding Roman coins, for example. Whereas bills wear out quickly. They do prefer the Sacagawea coin---we have plenty here. Errr....I mean, somebody has them. Not enough to spread around.

Europe also uses dollar and 2-dollar coins.

Yes and no. Average life before they become too worn and are taken out of circuation is 30 years. But they CAN last forever.

[PacoMartin]

Originally Posted by Sand&Salt

I wonder if other small countries using the U.S. dollar have this issue?
The answer I've been given in the past is: "Well, they have to BUY the bills from the U.S....." but so what.

Look at Turks and Caicos, a British Overseas Territory and part of the Bahama island chain with a population of fewer than 50,000 with 33,000 on one island. Using the British pound is not convenient since most of the tourists are from the US, so they use the USD. Given the small size of the population and the number of cruise ships that regularly dock, they probably get enough banknotes from tourists to prevent the need to buy them in bulk from the US treasury.

The Bahamas gained independence on 10 July 1973 and currently have a population of almost 400,000. Like Turks and Caicos they also have an economy primarily dependent on American tourists, but they printed their own currency with a fixed 1:1 ratio to the USD. The value of the currency is secured by investing in US treasury bonds in an amount equal to the banknotes in circulation.

As of December 2019 the Central Bank of Bahamas was circulating $458 million at the end of 2019. US banknotes can legally be used as currency throughout the islands as well, although you can't legally require that your change will be in US banknotes.

Bahamaian Denomination - number of notes at end of 2019
$1/2, $3 (today these denominations are novelty, but in 1973 the British pound was worth $3 ) - 2.45 million banknotes in circulation
$1, $5 (Low Value) - 27.66 million banknotes in circulation
$10, $20 (Transactional) - 4.66 million banknotes in circulation
$50, $100 (Value Storage) - 5.03 million banknotes in circulation


The problem, of course, is that the $1 note accounted for 63.0% of the banknotes in circulation. It is, naturally, very expensive for the central bank to keep these banknotes in reasonable physical condition. Also many of the islands are inhabited, and some are very small so physical banks are scarce. The solution was to create a central bank digital currency (CBDC), called the "sand dollar". This way anyone with a phone could do low level banking, pay bills digitally, and so that small businesses don't have to worry about security or gaurding a box notes and coins to make change.

A Tier I sand dollar account
$500 eWallet holding limit, with a $1,500 monthly transaction limit.
Government-issued identification is not an enrolment requirement.
Cannot link to a bank account.

A Tier II sand dollar account
$8,000 eWallet holding limit, with a $10,000 monthly transaction limit.
Government-issued identification is required for enrolment.
Can be linked to a bank account.

In the future the Bahamian central bank may simply elect not to produce banknotes, or they could only produce large value banknotes, as the people who absolutely want to use banknotes can always use USD notes. But most people will simply use normal credit cards or "sand dollars".