Currency, Bitcoin & The US Money Factory
Can anything stop the presses on endless fiat?
Over fifty percent of US paper currency is produced here in my home town, and I don’t live in Washington, D.C. I live in Fort Worth Texas, Where the West Begins. More importantly to the world economy, this is where money begins.
The US Bureau of Engraving and Printing, a function of the US Treasury, sits here in the city, nestled in the suburbs of Saginaw and Keller, in a somewhat unassuming facility between housing developments and a school. It is one of only two facilities in the world that creates the US dollar, and it prints a lot of them every day.
In fact, it produces over 19.4 million notes per day at the Fort Worth facility, in all current denominations. The $100, redesigned in 2013, is crafted here in Texas.
In 2016 1.5 Billion $100 notes were printed between the Fort Worth and Washington, D.C. facilities — $100,500,000,000 in new Benjamins flowing into the economy, with two-thirds of those bills leaving the US for foreign markets.* The recent record for printing $100s was set in 2014 when the bureau printed 4.4 Billion $100 notes, surpassing 2013’s 3.0 Billion.
The Money Factory
Tourists can visit the Fort Worth facility Tuesday through Friday. Following security measures similar to a major airport — then a short guard-driven shuttle ride — visitors can see museum displays of past currency, printing plates and educational displays explaining the mass production process.
The best part of the experience lets visitors follow a recorded tour through a glass hallway overlooking the factory floor. On a single pallet of cash packs sits $64million — and there are many of them. A gift shop at the end lets you buy money souvenirs with more money.
While the central bank complexity of money makes this manufacturing magic all possible, the shear volume of printing production here is just as hard to wrap your head around. In 2016, over 4.6 billion individual notes were printed between the two US facilities.
The scene takes on a grotesque circus of mass production and overconsumption when viewed for what it is — fiat money — with no supporting intrinsic value, backed by faith in the US Government and US rule of law. I couldn’t help but be reminded of the money factory and that queasy feeling when current/disgraced? Treasury Secretary Mnuchin and his wife posed from the factory floor. With pallets of cash packs worth over $64 million or available sheets of $100s, I wondered why they posed with a measly sheet of one’s. A complete, uncut sheet like the one they’re holding can be bought in the gift shop. (Is the guy behind them the lookout?)
Fiat Currency and the Production of Faith
According to the Fed’s “Money Factory” website, there is approximately
$1.62 Trillion of US bank notes in circulation. Pieces of paper representing value. As fiat money it is backed by the promise it’s worth what people say or think it’s worth (or the market says, for Keynesians and Smith “invisible hand” proponents). In the case of US dollars, those people are the US Government and the people worldwide who use or participate in its system.
However, there are 180 fiat currencies worldwide, all created in the same way. Each has been created on faith of a country’s capacity to back it, a country’s rule of law, and adoption of users. When those supporting qualities are diminished, or proven to be corrupt, or faith in value is lost, the currency declines or even collapses.
Money in the US is printed in mass-production facilities because of a complex and co-opted money creation scheme. All money is printed through the creation of debt. It started in 1910 with the famous party on Jekyll Island (a reminder of the two faces of money control: stoic banks and well-meaning government).
While other countries, such as China and Venezuela are also printing unusually large (and potentially damaging) numbers of currency notes, it is the US dollar that is still seen as the preferred “world reserve currency”. Yet threats from China in the form of yuan oil futures is one way that’s being challenged. Cryptocurrency is another — and a direct threat to the US dollar (or any other government fiat) as a world reserve currency.
Bitcoin’s Threat to the System
Working with blockchain and cryptocurrency designers and enthusiasts, I see the money factory in Fort Worth through a different lens. Much is discussed here about the definition of money, the value of human time and attention, and the value of Bitcoin and other cryptocurrencies.
There is hand-wringing about bubbles and vocal shout-downs that digital currency is worthless. And there are glossy-eyed zealots claiming their new protocol will change the world. Somewhere in between lies the truth.
Like the fiat US dollar, Bitcoin and (few) other cryptocurrencies have value because millions in the world believe they have value. Millions have chosen to participate, share, and trade in it.
Digital currencies are solving issues with money that exist in a new cyber-security age. They create the ability to transact peer-to-peer worldwide, without intermediaries. The reason cryptocurrencies weren’t created first by banks or nation states is that they return control to currency holders and threaten the status quo.
Those who believe cryptocurrencies have value participate with others who feel the same. They put their money — call it personal wealth or value credits into a digital currency instead of in one of the 180 world fiat currencies — and particularly the US dollar.
Cryptocurrencies challenge the notion of money and as a result are seen as a threat by banking institutions, governments and industries. Rather than embrace new technologies, industries that will be dramatically impacted are choosing to deny their reality.
Fort Worth’s Economic Legacy
It’s fitting that here, where one US money factory stands, we have a growing cryptocurrency community. Cryptocurrency is merely the next evolution in our city’s economic legacy. Developers and start-ups here are working on new digital currency and blockchain solutions that may one day be as critical to world economics as the US dollar.
Meanwhile, the money factory in Texas will continue to print currency, in three shifts, over 300 days per year, creating visible mountains of debt to the Federal Reserve. It seems the only thing that might slow things down could be the adoption of secure digital currency options.
Unfortunately for central banks and governments, Bitcoin (and many other cryptocurrencies) were not designed for them. They were designed to put control of exchange in the hands of people, without the need for intermediaries. It presented an alternative.
When the US cash money demand from foreign markets declines sharply, as some predict it could in as little as 5 years, the US Bureau of Engraving and Printing might have to rethink production. With advances in mobile payments, cryptocurrency adoption in Asia or the rise of the Chinese Yuan — the mass production of US Treasury promissory notes may have finally seen its heyday.
Pictures courtesy of US Bureau of Engraving and Printing website.
https://www.moneyfactory.gov/presscenter.html
Picture of Treasury Secretary Mnuchin and wife by Jacquelyn Martin / AP
