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Notes per capita as of 2011 for Canada
6.6 $5 banknote
3.5 $10 banknote
24.5 $20 banknote
5.5 $50 banknote
9.0 $100 banknote
Canada is circulating roughly 50 banknotes per capita right now, adding up to slightly over $1700 per capita. Many Canadians do not use the $100 banknote, and are shocked that the government is circulating $900 per capita in those notes. As most people Canada is instituting a number of efforts to improve their currency.
(1) The best known effort is switching from paper to polymer banknotes.
(2) The next effort is eliminating the penny.
(3) A third effort is to make it possible to conduct electronic transactions that are untraceable (more like exchanging banknotes and coins then paying for things by credit card). This last effort is usually promoted as a way to eliminate small cash transactions and the accompanying difficulty in making change, and helping to minimize the motivation for burglary and theft and all the accompanying risk to people and expenses associated with guarding cash drawers.
But, as we know there is that once you figure out how to easily pay for a candy bar or a bag of groceries electronically leaving no permanent record, you can probably figure out how to move large amounts of cash electronically with no record. Canada could get into the business that USA has been in since WWII, creating large amounts of cash for people around the world to use discreetly and anonymously for whatever purpose they choose (honest or dishonest).
Such a move means that transporting money becomes much easier if it does't involve physically moving banknotes. It is easier for honest and dishonest purposes alike, But it is also very profitable for the United States as it involves exporting something without all the cost of manufacturing something. While currency is technically a liability, if no one ever collects on the liability, it behaves more like profit.
While most of these questions could ostensibly be asked about the US dollar, any major move in that direction would have a larger impact on the world finance system. I think the question is more appropriate concerning the Canadian or Australian dollar which would be a significant change in the use of currency, but not a global changing paradigm.
I think the recent bitcoin fascination would inspire some people who are in charge of national currencies.
Which if anything do you think Canada should do with their money?
(A) Eliminate the $100 banknote and increase the number of $50's in circulation
(B) Eliminate the $100 banknote and fail to increase the number of $50's in circulation. Just tell people to find alternative means of payment (to decrease the options for illegal use of currency)::
(C) Begin eliminating small banknotes to benefit small business which finds it safer to deal in electronic transactions.
(D) Go the other way, and work on the way to increase ANONYMOUS electronic transactions. There are many advantages to small transactions. There is less concern about being robbed and guarding the cash register and having enough cash for change. For large amounts of cash their is less reason for burglary, but at the same time it may be harder to trace illegal money laundering.
(E) Decrease the $20 banknotes in circulation in favor of the $50 (like they do in Australia). This change means there are less bills to print.
(F) Become like America who has roughly 30 $100 banknotes in circulation per capita (the vast majority circulate overseas). While this is profitable for the nation, it means you are financing "god knows what" kind of transactions overseas. Everything from a poor shopkeeper who is worried about the value of his home currency to the drug dealer and/or warlord. Of course, the demand would have to develop for Canadian dollars.
(G) Go back to the paper currency
(H) The system is OK right now. No major changes should be made.
There are some new methods like mobile payments, Google Wallet etc that allow you to pay by tapping your phone to a device near a cash register for example. Those methods still have an audit trail that has a risk of your information being compromised.
An electronic system that works like cash and leaves no trail may have the benefit of your info not being available to compromise but the lack of trail can hurt you. If your funds go missing for example there is no way to know where it ended up..
Another thought I have is this. Assume we say we should not move away from cash to an electronic method because it could allow for illegal transactions. Illegal transactions are going to occur one way or another no matter what systems or tenders are used/available. If moving to all electronic (with or without a trail) would allow dramatic cost savings then why not pursue it.
I really think this is all about timing. There are generations alive today that used cash or paper checks most of their lives and are sometimes reluctant to want things to change. Every year the percentage of transactions that are cash drop. Cash Dying As Credit Card Payments Predicted To Grow In Volume: Report
If that continues that at some point the actual cash transactions will grow so small it will become easier to argue that it could be removed entirely.
I do think it is not yet time to start down that path
If that continues that at some point the actual cash transactions will grow so small it will become easier to argue that it could be removed entirely.
I do think it is not yet time to start down that path
Oh, the Big Six oligopoly would love that, for all the transactions to be going through them. Terrible idea though, I will protest hard if (when) governments finally get to trying to eliminate cash.
Another thought I have is this. Assume we say we should not move away from cash to an electronic method because it could allow for illegal transactions. Illegal transactions are going to occur one way or another no matter what systems or tenders are used/available. If moving to all electronic (with or without a trail) would allow dramatic cost savings then why not pursue it.
The issue is that legitimate business and illegitimate business all want the same thing in currency. They want it to be easy and painless to use, they don't always want it traceable and they want to transport value with them wherever they go. Hence there is always an inherent battle.
The government could stop printing $50 and $100 banknotes arguing that they are primarily used by criminals and tax-dodgers. Clearly criminals and tax-dodgers would not vanish, but they would have a more difficult time. But so would legitimate businessmen, especially people who deal in commodities like used cars.
We've all seen TV police dramas where the suspect uses his credit card at a gasoline station, and the cops say "we have a hit on his Visa Card", and they all rush out to apprehend the suspect.
So the governments elect a balance between the ease of transactions to keep the economy of their country going and allowing too much anonymous activity conducted with the ease the money provides. Smuggling diamonds as part of money laundering is obviously more difficult since you need an expert to appraise and fence the goods.
Canada and the USA have different ideas about what is fair. Canada is trying to encourage anonymous electronic money officially, while the USA has so far shown an official indifference. I think there would be some interest in using Canadian money overseas. Partly because it is almost the same value as the US dollar, but many people believe it is more stable. Iceland is struggling with adopting someone else's currency after their bank meltdown. The candidates are the Danish krona (which is what they used to use), the Euro, the US dollar, and the Canadian dollar. The CAD is the popular choice.
Incidentally, you don't really need permission from the home country if you want to use their currency. El Salvador and Ecuador adopted US dollars without any official permission. The major advantage is that you are using a more widely circulated currency that can be procured at lower interest rates. The major disadvantage is that you must essentially buy the banknotes at face value while the home country simply prints them. For most countries the disadvantages overwhelm the advantages.
Iceland could conceivably replace their currency with an electronic version of their own currency. Once they have eliminated their own banknotes, it would be much easier to switch to another currency (like the CAD).
Britain is very conservative about currency (probably because of the counterfeiting scares by the Nazis). They have banned the 500 Euro note from being bought and sold inside the UK, and they circulate between 3.2 to 3.5 fifty pound banknotes per capita (worth about $80 apiece). In comparison Canada circulates 9 CAD$100 banknotes per capita.
Last edited by PacoMartin; 04-13-2013 at 01:00 PM..
I'm unsure what your point is, but I will add some comments.
Quote:
Originally Posted by PacoMartin
Canada and the USA have different ideas about what is fair. Canada is trying to encourage anonymous electronic money officially, while the USA has so far shown an official indifference. I think there would be some interest in using Canadian money overseas. Partly because it is almost the same value as the US dollar, but many people believe it is more stable. Iceland is struggling with adopting someone else's currency after their bank meltdown. The candidates are the Danish krona (which is what they used to use), the Euro, the US dollar, and the Canadian dollar. The CAD is the popular choice.
The Canadian Interac system (aka point-of-sale electronic-funds-transfer; or to our US friends, a "debit card") is widely popular. But still, Canadians use Interac or cash--unlike Americans, whom I understand will put a $2 coffee on a credit card (and pay it at the end of the month), where Canadians will just use Interac (and pay it immediately).
As far as cash goes, I've noticed that merchants are much more happy to accept Canadian large-denomination bills if they are the new plastic ones. I can use a plastic Canadian hundred at the local corner store, where I could not before.
As for using Canadian dollars overseas--I never had a problem. People overseas know what are solid currencies, and what are not, and I never ran into a situation where Canadian dollars were refused in favour of, say, US dollars or GB pounds. (Except in the US or UK, respectively, naturally.) But I have used Canadian dollar bills for transactions in such places as Spain, Greece, Morocco, and Australia. The Canadian dollar is a solid currency, trades on the world markets, and seems to be recognized by world citizens as one that is perfectly acceptable in commercial transactions.
Perhaps I can add some more...
The American production of notes and coins is possibly one of the most grotesquely inefficient operations of the federal government. We produce pennies by the thousands of dump truck loads, which are worth less than dirt. Nickels are not cost effective. The 50 cent piece and the dollar coin sit in warehouses because the public doesn't want them. The only really popular coin is the quarter.
Dollar bills are a well known idiocy. No modern economy has anything so completely wasteful (not even Mexico which is considerably poorer). The $2 and the $50 banknote are almost never used. The plan to update the $100 banknote so that it is color and more secure against counterfeiting has been an utter disaster that has been struggling now for years. We have extra mints and extra Bureau of Engraving factories which raises costs considerably. There is no efforts to foster an "autonomous electronic money" like there is in Canada.
Of course, this inefficiency is largely tolerated because the production of $100 banknotes is one of the bigger moneymakers in the USA federal government. These banknotes are produced for cents, and are sold at face value to a world hungry for a hedge against crashing value and the desire for safe autonomous transfers to anyone in the world (much of it illegitimate). The euro was supposed to get some of this business, but so far has made not taken an appreciable percentage of the business from the US dollar.
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In comparison, Canadian banknotes and coins have been developed to sidestep most of these disasters. All denominations are put to good use. They have eliminated the penny and the dollar bill. The brief problem they had with counterfeiting about 10 years ago has all but been eliminated, and will probably vanish nearly completely with the new polymer notes. As you noticed the new polymer notes are widely accepted.
The Interac system is very cost effective and I think Americans should demand that our government support something similar. Instead we have a very cumbersome and expensive credit card system that people are using to purchase movie tickets and coffee.
Quote:
Originally Posted by ChevySpoons
As for using Canadian dollars overseas--I never had a problem. People overseas know what are solid currencies, and what are not, and I never ran into a situation where Canadian dollars were refused in favour of, say, US dollars or GB pounds. (Except in the US or UK, respectively, naturally.) But I have used Canadian dollar bills for transactions in such places as Spain, Greece, Morocco, and Australia. The Canadian dollar is a solid currency, trades on the world markets, and seems to be recognized by world citizens as one that is perfectly acceptable in commercial transactions.
See, I think that there is the potential for Canadians to mimic the American system of printing large numbers of $100 banknotes for circulation overseas. People overseas are not adverse to using CAD. But Canada is circulating a mere 310 million $100 banknotes. It's a tiny amount compared to the 8-9 billion American $100 banknotes in circulation. I am talking numbers of banknotes, not dollar value. Most of the Canadian banknotes are circulating in Canada among their citizens, while about 75%-80% of the American $100 banknotes are overseas.
In my original post I listed a number of possible options that Canadians could do with their currency (including not doing anything). Some of them are diametric opposites, because everything you change can be perceived as a benefit or a detriment to different people.
You may have read that Sweden has some vocal proponents of eliminating cash entirely and going to an all electronic system. The primary motivations are vastly reducing the motivation for robbery and making it very difficult for the underground economy. Frankly, I don't think they will do it anytime soon. The only two currencies that I see going to all electronic are Iceland and Aruba. Iceland because the currency crashed so badly that they want to adopt the currency of another country. If they have an electronic currency, they could adopt another country's currency without the massive cost of purchasing banknotes. Aruba might because it is already a famous tax haven. Having Americans use their electronic currency and collecting fees would be very profitable for them.
I could imagine that many Canadians never use a banknote higher than $20 and use Interac for everything else. They might be open to the idea of the Canadian central bank stopping production of the larger notes. Other people would be horrified at the prospect.
This is all very interesting. How much does demand play into how many notes are produced? If people from overseas wanted to use our 100$ bank notes, what's stopping them from doing so now? If they all started leaving, couldn't the government just ramp up production then? It's not like they can stimulate demand, they can't be taking out ads in other countries promoting 100$ bills or anything like that.
When you say other people would be horrified at the prospect of eliminating large bills, what people do you mean? The rich usually use cards for big purchases as well, in my experience.
When you say other people would be horrified at the prospect of eliminating large bills, what people do you mean? The rich usually use cards for big purchases as well, in my experience.
No it is not the rich that normally care about large banknotes. Many rich people never touch them. A legitimate businessman that would be horrified would be someone who regularly buys and sells items in the $1000 to $3000 range (classic is a used car salesman). They often find it easy to conduct business in cash. But many people would feel as if they had taken away a fundamental right to easily conduct private business in secret. Now if true "anonymous electronic money" exists, then the demand for large banknotes would lessen. But that brings another entire issue into play. Gold is in the $50 / gram range and a single banknote is about 1 gram. So generally the American and Canadian $100 banknotes are worth twice the weight in gold. A million in banknotes weighs 10 kg (22 lbs) which requires at the very least a secure briefcase that can be detected. European currency is worth far more. The 1000 Swiss franc note is worth well over $1000. There are a lot of those notes circulating given the samall population of Switzerland (roughly 3 per capita), but there are millions of 500 Euro banknotes circulating.
A friend of my mother's had her husband murdered because he was in the habit of turning his paycheck into cash every two weeks. He was lower middle class, but someone figured out his habits and murdered him for a few hundred dollars.
The belief that it would reduce the risk of burglary to go to electronic cash might be mistaken. If it is "anonymous" then you could be tortured for the pass code. I take it as a given that no government would create a way to move arbitrarily large amounts of "anonymous" electronic currency. People to carry a million dollars on a plane. The IRS defines $10,000 as the amount that you can carry on an airplane without having to fill out a form. It is also the largest cash transaction you can do legally without any paperwork. In Washington DC a number of car dealerships were busted for selling sports cars for $50,000 apiece and they were accepting bags of cash.
Quote:
Originally Posted by BIMBAM
This is all very interesting. How much does demand play into how many notes are produced? If people from overseas wanted to use our 100$ bank notes, what's stopping them from doing so now? If they all started leaving, couldn't the government just ramp up production then? It's not like they can stimulate demand, they can't be taking out ads in other countries promoting 100$ bills or anything like that.
First of all when I say "compete" with the American dollar, I don't mean to imply that Canada could replace it. The supply of American $100 banknotes increases every year by about $60 billion. Canada only circulates roughly $60 billion in all denominations.
But if Canada only circulates 310 million $100 banknotes (9 per capita) then I assume that the majority of them are circulating domestically. There is some demand from the tourist who sells them overseas for the local currency, or exchanges them for some goods and services. But the US government recognizes that their currency is circulating around the world. They make sure that there are enough $100 banknotes in Russia (for instance) if there is a change in currency (like the big heads). Old currency retains it's face value forever, but normal people won't take old currency because of the fear of counterfeits. If you are overseas it is difficult to find a way to "anonymously" change old notes for new notes unless the government helps.
Canada wouldn't take out advertisements, but they could print enough notes and establish locations where local currency could be easily exchanged for Canadian banknotes without ruinous fees.
When Ecuador switched to the US dollar, the US federal government made the logistics of getting tons of brand new bills to the country. They loaded a ship to Ecuador. The Ecuador government was still buying the notes at face value, but the US government was helping with logistics.
Ecuador switched because hyper inflation after the El Nino currents destroyed the local fishing industry. El Salvador switched to the US dollar because the primary source of income was money being sent home by men who worked in the USA. It was literally more expensive to keep their own currency and deal with all the exchanging from one currency to another than to simply adopt US currency. But unlike .Ecuador they had a stable currency.
I would think that creating demand for the Canadian dollar would be as easy as increasing access.
But some Canadians may object to promoting their currency on moral grounds that it may promote illegal activity.
One wrinkle in this equation is that there is some disagreement about how many US $100 banknotes circulating inside Canada. Some estimates say there are as many US Benjamins as Canadian $100 bills inside Canada
Last edited by PacoMartin; 04-14-2013 at 01:25 PM..
You seem to know alot about this! I never knew how any of this sort of thing worked, thank you for sharing your knowledge. Perhaps you should e-mail the office of the minister of finance, Jim Flaherty, and encourage him to make Canadian notes more widely available abroad. It's possible he simply hadn't thought much about it.
Jim Flaherty, ... he simply hadn't thought much about it.
Early in £1= 240 pence = US$4.86, but it was pegged to £1 = $4.03 by the end of the year. On 19 September 1949 the government devalued the pound by to $2.80. Combined with the counterfeiting scare causing Britain to withdraw all banknotes higher than $5 mean that the pound had pretty much ceased to be the preeminent international currency. The three larger denomination were introduced in 1964 (£10), 1970 (£20) and 1981 (£50).
While Britain has just introduced it's third £50 note, circulation of the larger note is still relatively low. There are fewer than 3.5 in circulation per capita. Similar to US and Canada the £20 note reigns supreme in the UK, but as it is worth 50% more, they have only slightly less cash per person circulating as Canada. The country remains conservative about banknotes to today, and outside of London the £50 banknote is frequently refused for payment, and you are eyed with suspicion for trying to use them.
USA banknotes have been used widely around the world since they were introduced in 1928, but the process was greatly accelerated in WWII. The amount has been increasing steadily, but the introduction of the big headed Benjamins in 1996 shifted production into a massive exports until they surpassed Wide Body Jets as our most profitable export.
CAD has always been an important currency, and you can see the signs in Guadalajara Mexico saying that the currency sellers are looking for CAD$100 notes to purchase as well as US$100 notes. So people were clearly covering themselves by buying both US and Canadian money for the long haul.
In President Bush's famous 2002 "State of the Union" address he called North Korea part of the "axis of evil. Less widely notice in 2006 he publicly used the "State of the Union" address to admonish North Korea for counterfeiting our money. One effect is that it is very difficult to spend a US$100 banknote overseas with a date on it from the 2003 series or earlier. It is next to impossible to spend a small headed Benjamin.
The complete FUBAR in the last 7 years to produce a next generation Benjamin is still ongoing. In 1996 the BEP said that a new color note would be available in 10 years to stay ahead of counterfeit operations. The new notes are still a minimum of one year away, and more likely over 3 years. The BEP has stopped releasing any intermediate data on the efforts two years ago. Only the most determined can get any information using Freedom of Information Act requests.
If there is a counterfeiting scare, I don't expect it to have any discernable impact domestically. But the majority of the $100 banknotes are overseas. If there is a mass movement to replace many of the 5 billion Benjamins overseas, they will naturally be looking for the best banknotes. Euro banknote's may not always be the first choice.
It is possible that Jim Flaherty is not thinking that he has a brand new popular polymer note that is virtually free of any counterfeiting scares. There are no news articles about a Canadian polymer "superdollar".
It's my guess that with over $500 billion in US Benjamins circulating overseas, there are a lot of people that want to diversify.
But currency can be an ugly business. Currency doesn't necessarily imply criminal activity, but they very often show up together. Pile of Mexican Drug Money
If it isn't obvious, I think it was selfish of the EU to create the 500 Euro note. The argument is that the 1000 Deutsche Mark was worth just as much, and they were simply replacing the largest banknote of the dominant European currency. But in my humble opinion, they should have taken that opportunity to reform the currency, and not print anything more valuable than the 100 or the 200 euro banknote.
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Notes per capita as of 2011 for Canada
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