When I came to Europe for my studying I decided to collect monies of different countries both in Europe and of outside of Europe from my classmates with different nationalities.
Yesterday when I was looking at them and comparing them, I understood that there is huge difference in the size of these monies.This seems something usual and maybe we don't think that much about consequences of these differences but keep this in your mind and then think about two things.
1-Cost of printing bank notes will increase as you print a bigger one.This cost can emerge either from special print ink which has a security benefits or from special paper which again has some security materials inside.
2-As you have a bigger bank notes in your hand or wallet then the life cicle of them will decrease faster.
In my collection I found out that the size of bank notes in Uzbekistan, Iran and Ghana are enormous compare to many European countries and also China.
The reason that i bring these names as examples is that all of these countries have a high inflation and they are developing countries.
In Europe only 500 Euro is big in size but it rarely happens that somebody carry it for shopping or etc.In contrast in Iran everyone need 2000 Toman(Rial is the official name) for shopping and daily usage and it rarely happens that you want 100 or 200 Toman.
I heard in the news few months ago that CBI(Central Bank of Iran) have designed 5000 Toman bank notes which are wider and larger 2 or 3 millimeters in size.Now the question is that why we are still printing even a bigger size(not value) of bank notes when every year the officials are announcing a large number as the cost of reprinting new bank notes and destroying the old ones.
The only reason that i can think now is that the technology of printing bank notes is very old in there and the solution is buying new printing press machines.
Another thing that I'm mentioning here and is new(I mean I have not write about it in my own blog) is about electronic money which I got to know about for the first time in Belgium. Electronic money is different from those money which we have in our debit cards and every time we need to have a connection to the server of our bank either to get cash or to pay for shopping. For those who are in Italy and studying in Venice I can bring a perfect example: the keys we use to pay for cofee machines. This means that you don't need any password or Internet connection to use your money. In Belgium I was able to put up to 20 Euro in the chip of my debit card and then use it to pay in some places but why only 20 Euro? As I mentioned before this is an electronic money so it is exactly like money just in electronic form, you can lost it and there is no way to claim that it was yours, there is no password and anyone can use it when they found it. I am seeing one day that no one will cary bank notes and every one will pay with electronic money!!!
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Just another example on electronic money. London transport started off with having the Oyster card: you could put money on your card and then use it for taking the bus and the tube at lower prices. This is actually farily common also in the US.
However, the real innovation came recently. Now the oyster card credit can be kept in your mobile phone for up to £200 and used for small purchases, transport, and phone calls.
Read more:
http://news.bbc.co.uk/2/hi/technology/7117213.stm
Even if I think electronic money will be the future of transactions, I would like to underline that there are two problems connected with electronic money you have not mentioned in your post:
-the first one is that electronic money works with a particolar chip..if the chip get broken the consumer cannot realize the purchase (this, of course, does not happen with the usual bank notes!!). For this reason I think bank notes will never totally disappear and they will be used just a secure reserve of money ;
- the second problem is much a psycological one: old people are not used with this kind of "new generation" staff..only our generation and the new ones can totally adapt to this kind of change.
I have appreciated your post: the part on the size of bank notes is very interesting..especially the connection between the big size of bank notes and the elevate inflation of the countries in which big bank notes are used!!!
Bye
Domenico
I should complete my argument by mentioning that nowadays for big transactions we are using debit cards or credit cards so we only need money(bank notes) for small transactions lets say buying newspaper or cofee so usually you don't put large amount of money in chip.
1-Even bank notes can be lost or teared as much as chips can be lost or broken.
2- Every new things take times to be used to it.just in past 10 years look at how old people are using cell phones, computers or debit cards.
3-Just to be clear: we will not have any macroeconomic problem such as money creation and inflation if we start to use electronic money. If somebody find one please let us know.
Though I agree with you on your 3 points, I do see one problem. Not a macroeconomic one, but one regarding people's approach to money. People sometimes have hard time budgeting. In the USA, where the amount of savings is usually very low and people tend to spend all they earn, high school children take classes on how to budget and take care of a household.
I think that having money on a chip would lead to higher consumption and possibly to more people getting to the end of the month without enough money to pay bills.
It's just an hypothesis and I think if this is a subject in which you are really interested in, it'd be worth trying to test it and check whether it makes a difference in expenditure patterns to have money in cash or on a chip.
There are probably several psychological issues that can be discussed with respect to the form of money.
In whatever society we are, we will maybe have different impression when keeping several coints (or paper money) and when we keep just a card in hand.
Maybe the analogy can be drown from the survival of the books and notebooks in a paper form, or greeting cards, etc.
Furthermore, maybe it would be interesting to thing about the effects of electronic money on the economic syistem. Is the reality getting closer to the ideal of perfectly competitive market? Or there is a limit, i.e. people psychologically can not accept the new, more efficient but invisible, forms of money?
Just to bring another interesting example of technological usage of cellphones in transactions:
In UK or Belgium, I don't remember which one, you can pay for tickets or some other things by giving your cellphone number and then they will deduct the money from your credit of cellphone and it is safe because they get your approve by sending a message. I just bring this to show that using bank notes is being limited eventually and one day we will see that we don't need to keep money in our pockets any more!!! (It is not a sudden change in behavior and life)
Vahid said "... for big transactions we are using debit cards or credit cards so we only need money(bank notes) for small transactions...". I'm not completely agreed with this sentence. In our society, the black economy needs huge amount of bank notes, given their characteristic to be an untraceable payment system. Reasoning about electronic money should take into account this aspect.
Fantastic!!
There is one more reason why it is better to have an electronic money say "to have a clear economy" but i'm that this doesn't help according to functions and definitions of electronic money.
For info on banknote security innovations check out the blog http://www.globalpapersecurity.com for articles and discussions on the latest in banknote technology from Fortress Paper.
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