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Has there ever been a non-rectangular banknote?

Has there ever been a non-rectangular banknote?

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You all know that every national flag but Nepal's is rectangular. Most coins are roundish. These are some old norms.

What about paper money? The rectangular form is close to universal. After poking around numismatic resources on the web I didn't find a single historical example of a bill that either wasn't rectangular or had a hole (like many coins). Good reasons for this shape include maximizing use of stock and aligned stacking. Nonetheless…

Has there been any banknote that was not a solid rectangle when issued?

Regular banknotes, issued in "normal times" and made from paper are practically all rectangular and without holes. But there were a couple of times when people remembered that anything can be "money", if they just believe in it.

Below are some examples of holes in notes and odd shapes. These examples were chosen to fit the question as originally framed. Some examples still fit the updated question: Zimbabwe's hole was officially re-issued, although not designed that way. Some examples of Notgeld were designed and issued in more or less round form. The last example even being completely irregular from the start as the material used was small and intended to be used for another purpose…

Having a hole like coins?

Hole Punched Notes
In 1997, Zaire's (now the Democratic Republic of the Congo) dictator Josepeh Sese Seko Mobutu was finally overthrown. As his face featured on the country's bank notes, the new government simply punched out Mobutu's face out of their existing currency and continued to use it until new currency could be printed.

Hole Punched Notes, UKcredit, MoneyLife, 2017

If this is not that strict about "not a rectangle but still valid, legal tender", then:

Then the Portuguese did something weird to the edges of the Real:

Portugal's first paper money was introduced in 1797 by the government.5 Denominations issued until 1807 included 1200, 2400, 5000, 6400, 10,000, 12,000 and 20,000 réis. Some of these notes were revalidated for continued use during the War of the Two Brothers (1828 to 1834).5 From the 1820s, several private banks issued paper money. The most extensive issues were by the Banco de Lisboa, whose notes were denominated in both réis and moedas, worth 4800 réis. This bank issued notes for 1200 and 2400 réis, 1, 4, 10, 20, 50 and 100 moedas. The Banco Commercial de Braga, Banco Commercial do Porto, Banco de Guimaraes and Banco Industrial do Porto also issued notes, with bearer cheques issued by a number of other banks between 1833 and 1887.
In 1847, the Banco de Portugal introduced notes for 10,000 and 20,000 réis.6 5000 réis notes were issued from 1883, followed by 50,000 réis in 1886. In 1891, the Casa de Moeda introduced notes for 50 and 100 réis,7 and the Banco de Portugal introduced notes for 200, 500, 1000 and 2500 réis, followed by 100,000 réis notes in 1894.

And early American banknotes are weird as well.

Continental Currency. 1776

$1/6 Plate C Serial Number: 145,707 CC 02/17/76

Signer: Robert Tuckniss (in red ink).

Size: 80 x 60mm (front border design: the vertical dimension is 78mm while the horizontal border is trimmed on our example; back border design: 74 x 55mm).

Comments: Numbered and signed in red ink. The sundial with the "FUGIO" legend and "MIND YOUR BUSINESS" motto appear on the right center of the front. In this fractional denomination, one ornament appears in the upper right corner of the sundial frame; this is keyed to the denomination as each mark equals 1/6th of a dollar. In the right border cut "CURRENCEY" is misspelled. The back shows the thirteen linked rings representing the colonies and the legends "WE ARE ONE" and "AMERICAN CONGRESS". Paper contains blue threads and mica flakes.

Provenance: Purchased through the Robert H. Gore, Jr. Numismatic Endowment from the EANA mail bid auction of 1/13/96, lot 278.

(click to enlarge)

From a Swiss auction of "Banknoten und Notgeld", SINCONA, 2015, note that in that catalogue many more such examples are found. Sometimes the "holes" just look like ones as they are really a look-through window for the watermark. But often in times of crisis or other sudden changes they are really holes and the money retains its, well, 'a' value. :

If you insist on "designed and issued that way" (instead of 'remained in circulation') then I guess only the types of Mobuto and Soviet holes count (they were re-issued in that way), and only the paper-like Notgeld shapes count. Round and oval from the start, sometimes. That would make 1914-1923 pretty much the timeframe where to look for more examples (if we do not go much further back).

But really, anything can be declared money, even if it is inherently worthless. For example cut up playing cards, issued in 1914 in Lopischewo, East Prussia:

"Notgeld: Der schöne Schein", Spiegel, 2008.

And from previous threads here on HS:E:

Although the material is in both cases not even paper, the first was worth and intended to stand in for paper.

Just for entertainment, larger versions of the Notgeld, click to enlarge:

Here are a couple of square banknotes. The first one is also possibly unique in that it is one-sided.

"A small square shaped and rather scarce very good or much better banknote from Argentina. This is the 1st April 1867 one peso banknote issued by the Province of Buenos Ayres in Argentina. The note is of white paper with black printing." Source: picclick.com

Thailand has also issued a square bank note. This one is from 1987.

"A note issued on June 3, 1987, represented a new initiative to honour the King on his 60th birthday. It's 15.9 centimetres square: The "1" represents the first banknote ever created, the "5" is for the fifth birthday cycle, and the "9" stands for King Rama IX." Source: nutmegcollector

The site Numisbids, under the category 'Emergency Money' has several examples of round, octagonal and triangular money in addition to the ones already mentioned by LangLangC. Some of these may qualify as paper money but not, I think, as banknotes. As the OP mentioned both banknotes and paper money in his post, here is an example from Germany.

Source: Numisbids

Of additional interest, in France, monnaie de nécessité (emergency money) was sometimes issued printed on cardboard between 1914 and 1923.

Source: NaturaBuy

It has been pointed out in comments below and elsewhere that a square is a rectangle. Technically, this is true, but (rightly or wrongly) in common usage this is not a hard rule and there is more than one definition for a rectangle. The Cambridge Dictionary (American) defines a rectangle as "a flat shape with four sides and four 90° angles, with opposite sides of equal length and two sides longer than the other two". The Oxford dictionary says (for 'rectangle') "A plane figure with four straight sides and four right angles, especially one with unequal adjacent sides, in contrast to a square." The Collins dictionary (American) says a rectangle is, "1. any four-sided plane figure with four right angles, 2. any such figure or shape that is not a square; oblong".

(all highlighting is mine)

Maybe a little out-of-the-box thinking is called for.

Source: Alexander Klink via Wikimedia Commons, attribution 4.0 license

There was very little specie (i.e. precious metal coinage) in Britain's North American colonies, so throughout most of the Colonial period, tobacco was money in the big tobacco-producing colonies of Maryland, Virginia, and North Carolina. This was not a mere commodity trade -- colonists went so far as to use the "pound of tobacco" (worth about 3s) as the monetary unit. Debts were recorded, taxes and fines were levied, and other goods were recorded in pounds of tobacco.

This is something called "commodity money" (as I explained in an old Worldbuilding SE answer), but I thought it might fit here, because the use of commodity money in the Colonies evolved directly into paper money:

  • The tobacco is a stand-in for specie, just as paper money is.
  • Payments could be in thousands of pounds of tobacco, which could be difficult to carry around, so payments and debts were often just ledger enties or warehouse receipts.
  • Tobacco prices back in England could vary widely, and so did the prices of imported goods.
  • The receipts were typically for fixed amounts and couldn't be "broken" the way a piece of eight could.

So, individual colonies began issuing paper money.

Admittedly the above is (roughly) rectangular and tied to British currency. But during the Revolutionary War, they had to go back to tobacco, because Continental money was essentially worthless:

(Source:smokersforum.in; i've no idea where they got it from)

One candidate seems to be some 1945 Finnish banknotes seem to have been near-squares. From what I can see they are still rectangular though, if an unusual ratio. Unfortunately I cannot find dimensions to be certain.

Treasurer of the United States

The Treasurer of the United States is an official in the United States Department of the Treasury who was originally charged with the receipt and custody of government funds, though many of these functions have been taken over by different bureaus of the Department. The Treasurer remains the depositary officer of the United States with regard to deposits of gold, Special Drawing Rights, and financial gifts to the Library of Congress. [1] [2] As such, the office has nominal oversight of the United States Bullion Depository. The Treasurer's signature appears together with that of the Secretary of the Treasury on all Federal Reserve Notes.

Responsibility for oversight of the Bureau of Engraving and Printing, the United States Mint, and the United States Savings Bonds Division (now the Savings Bond Marketing Office within the Bureau of the Public Debt) was assigned to the Treasurer in 1981. In 2002 the Office of the Treasurer underwent a major reorganization that removed these formal oversight duties. The Treasurer now advises the Director of the Mint, the Director of the Bureau of Engraving and Printing, the Secretary, and the Deputy Secretary of the Treasury on matters relating to coinage, currency and the production of other instruments by the United States. [3]

President Harry S. Truman appointed Georgia Neese Clark as the first female Treasurer in 1949. Since then, every subsequent Treasurer has been a woman, and seven of the past eleven Treasurers have also been Hispanic.

The requirement of Senate confirmation for the appointment was dropped in August 2012. [4]

In the last 60 years, the length of time the office has been vacant totals more than 4,000 days or eleven years. While in the 172 years prior to that, the length of time the office had been vacant totaled less than a year.

Historical British figures on banknotes

Since the issue of a £20-pound note featuring William Shakespeare in 1970, Bank of England sterling banknotes have included a variety of famous Britons on the reverse of the note.

Have you ever wondered how the Bank of England decides who should appear on our money?

We begin this chapter by looking at the criteria they use and then look back to see which historical figures have been chosen in the past and are used in the present.

As well as describing the banknotes themselves, we look at the people behind the notes – what have they offered to Britain and the world – to make them deserving of such a honour. To end, we look at the next 2 famous people who will be seen on our banknotes from 2017.

As the Governor of the Bank of England, Mark Carney so rightly said, “Money was memory for a country and its people.”

How does the Bank of England decide who features on banknotes?

The main criteria that the Bank of England uses to judge whether someone should be on a banknote is that they should have been people who shaped British society through innovation, leadership and/or values.

Attempts are made to include people from different backgrounds and fields of endeavour. They also take into account who has already appeared on notes so that the choice reflects the diversity of British society and different disciplines.

The historical personage should be widely admired and should have made an important contribution to society and/or culture. There should also be a suitable portrait of them which can be used on the reverse of the note and this picture should be recognisable.

Finally, people who are still living can’t be featured on sterling banknotes and fictional characters are avoided.

Changes in the selection procedure

Since 2014, there have been changes in the selection procedure. Firstly, a Banknote Character Advisory Committee meets to select a field and asks the public to nominate people in this chosen field. In 2014 when they were inviting nominations for the new £20-note, the category given was the visual arts.

The Bank of England subsequently received 29,000 nominations of 590 different people working in this field including painters, sculptors, architects, fashion designers, photographers and film-makers. At this stage of the selection procedure, specialists in the visual arts joined the Committee and created a long-list.

To make a final short-list, the Bank ran focus groups to identify which historical characters would resonate strongly with Britons and whether there were any causes for concern about them. The Committee then created a short-list as a result of the feedback they’d received from the focus groups as well as in-depth historical research about all the nominees.

To make a final short-list, the Bank ran focus groups to identify which historical characters would resonate strongly with Britons.

The short-list, representing a diverse range of characters from different historical periods, was then given to the Governor of the Bank of England to make the final decision. As a result of this procedure, the artist JMW Turner was chosen to feature on the new polymer £20 note from 2020.

Who has featured on Bank of England banknotes?

16 different historical figures appeared on sterling banknotes in the period 1970-2017 7 scientists/engineers, 3 statesmen/public servants, 2 people concerned with social reform, 2 authors, 1 economist and 1 musician.

One of the difficulties of tracing the banknotes in chronological order is that many overlap in terms of dates of issue or when they were legal tender. Therefore, let’s look at them according to the denominations of the banknotes starting with the £1 note.

The one-pound note

Colour: Green
Dates of Issue: 1978-1984
Legal Tender: Until 1988
Reverse Design: Sir Isaac Newton holding a book and also pictures of a telescope, prism and map of the solar system.

Sir Isaac Newton (1643-1727) is known throughout the world for his work in physics, astronomy as well as mathematical calculus. He is believed to have been the most influential scientist of all time along with Einstein. However, did you know that he was very influential for the pound sterling since he held a post as Warden/Master of the (Royal) Mint? Perhaps it’s fitting that he should have been chosen to appear on the pound sterling seeing as he’d done so much to save the re-coinage of the pound (1696) from becoming a fiasco of mismanagement and fraud. He also went ‘undercover’ on the trail of coin-clippers and counterfeiters.

The five-pound note

Colour: Blue
Dates of Issue: 1971- 1990
Legal Tender: Until 1991
Reverse Design: The 1st Duke of Wellington and a battle scene from the Battle of Salamanca (22nd July, 1812)

Arthur Wellesley, the 1st Duke of Wellington (1769-1852) was a famous Anglo-Irish military leader and statesman. During the Peninsular Wars (1807-14), he led Britain, along with their allies Portugal and Spain, to a decisive victory against the French. He’s perhaps less well-known nowadays as a politician although he served 2 terms in office as Prime Minister. Nicknamed by contemporaries the ‘Iron Duke’, he was politically conservative. Despite this, he was instrumental in defending Catholic emancipation and even fought a duel to defend his views.

Colour: Predominantly turquoise-blue
Dates of Issue: 1990-2002
Legal Tender: Until 2003
Reverse Design: George Stephenson accompanied by an engraving of the steam engine, ‘Rocket’ and the Skerne Bridge (on the Stockton to Darlington Railway).

George Stephenson (1781-1848) was an English civil and mechanical engineer. Born the son of a miner, he learnt to read and write in his spare time. He’s accredited with inventing a miners’ safety lamp independently of Sir Humphrey Davy. Called the ‘Geordie’, this lamp is believed to be where people of the North-East derived their nickname. Stephenson is called the ‘Father of the Railways’ for his work on the steam-powered railway system. In a 1829 competition organised by rival railway companies watched by thousands, his engine ‘Rocket’ achieved a record speed of 36mph.

When the original notes featuring Stephenson were released, millions had to be destroyed since the date of his death was wrong.

Colour: Green
Dates of Issue: 2002-2016
Legal Tender: Until 2017
Reverse Design: Elizabeth Fry and a picture showing her reading to prisoners in Newgate prison.

Elizabeth Fry (1780-1845) was an English prison reformer, social reformer and philanthropist. Many of her ideas were underpinned by her beliefs as a Quaker. Known as the ‘Angel of Prisons’, Fry even spent a night in prison to truly understand what the experience was like. In 1818 she became the first woman to give evidence in Parliament. Because of her work, new legislation was passed to treat prisoners more humanely. Her legacy lived on after her death despite contemporary calls for her to return to the home, her example is said to have been an inspiration for the suffragettes.

Colour: Green-Blue
Dates of Issue: 2016-present day
Legal Tender: Yes
Type of Note: Polymer (the first ever)
Reverse Design: A portrait of Winston Churchill with pictures of Westminster and Big Ben, a background image of the Nobel Prize medal and a quotation from one of Churchill’s speeches: “I have nothing to offer but blood, toil, tears and sweat.”

Sir Winston Churchill (1874-1965) was an English politician, statesman, writer and (non-academic) historian. Despite a military career and serving terms in Parliament, Churchill is best-known for his role in keeping up the morale of the British during the 2nd World War as the leader of the Coalition government. Did you know that while reporting on the Boer War, he was taken prisoner but escaped by travelling 300 miles to the Portuguese-held territory of Mozambique? He is also one of only eight people who have been made honorary citizens of the USA (1963).

Ten-pound note

Colour: Predominantly brown
Dates of Issue: 1975-1992
Legal Tender: Until 1994
Reverse Design: Florence Nightingale’s portrait along with her tending the wounded at Scutari in the Crimean War

Florence Nightingale (1820-1910) was an English social reformer and the founder of modern nursing. Sent to the Crimean as a result of the outcry about the treatment of the wounded, Nightingale’s work was crucial in reducing fatalities by two-thirds. Commonly known as the ‘Lady of the Lamp’ or the ‘Angel of the Crimea’, Nightingale established both St. Thomas Hospital and the Nightingale Training School. However, did you know that she was also the first woman to join the Royal Statistical Society? In order to present statistical data to various committees, she made use of modern graphs and is accredited with inventing the polar area diagram.

Colour: Predominantly orange-brown
Dates of Issue: 1992-2000
Legal Tender: Until 2003
Reverse Design: A portrait of Charles Dickens with a scene from his novel ‘Pickwick Papers’.

Charles Dickens (1812-1870) was a prolific English author whose most famous novels include: ‘Oliver Twist’, ‘A Tale of Two Cities’, ‘A Christmas Carol’ and ‘Great Expectations’. Many written for weekly or monthly serialisations, his chapters often end on a cliff-hanger. The fact that Dickens was forced to work in a factory at the age of 12 meant that he was interested in socio-economic conditions and their effects on the working class. Even today calling something ‘Dickensian’ is a reference to his descriptions. His books continue to be filmed (and sometimes put in a modern setting) showing the universal appeal of his plots and characters.

Colour: Predominantly orange-brown
Dates of Issue: 2000-2016
Legal Tender: Until 2018? (Not been announced yet)
Reverse Design: A portrait of Charles Darwin accompanied by pictures of HMS Beagle, hummingbirds and flowers seen under a magnifying glass.

There were complaints when the ten-pound note was printed with a picture of hummingbirds since Charles Darwin developed his theory by studying finches and mockingbirds.

Charles Darwin (1809-1882) was a naturalist, geologist and biologist who was selected to appear on a banknote because of his contribution to science. Originally intended to be a doctor like his father, he became interested in the natural sciences at university. His big chance came when he went on a 5-year voyage around the world on the HMS Beagle and was given the opportunity to study the flora, fauna and geology of different countries/islands. His book ‘On the Origin of Species by Natural Selection’ was over 20 years in the making he was pushed into publication because Wallace had come up with the same idea independently.

Twenty-pound note

Colour: Predominantly purple
Dates of Issue: 1970-1991
Legal Tender: Until 1993
Reverse Design: Portrait of William Shakespeare with a picture of the balcony scene from his play ‘Romeo and Juliet’

It’s fitting that Shakespeare should have been the subject of the first banknote in the historical personages series because he’s regarded as the greatest writer in the English language and the best-selling fiction author of all time (an estimated 4 billion copies of his works have been sold). He wrote more than 30 plays, which are loosely grouped in the categories of historical plays, comedies, tragedies and romances and he also penned over 150 sonnets. Did you know that Shakespeare was also responsible for inventing hundreds of new words/expressions which we still use today including courtship, bloodsucking, zany, schoolboy and bated breath?

Colour: Predominantly purple-mauve
Dates of Issue: 1991-2000
Legal Tender: Until 2001
Reverse Design: A portrait of Michael Faraday with a picture of him presenting a lecture at the Royal Institute using the magneto-electric spark apparatus.

Michael Faraday (1791-1867) was an English chemist and physicist who contributed to the study of electro-magnetism and electrochemistry. His discoveries and formulated principles underlie later scientific developments such as the invention of electric motors, transformers and generators. An incredible achievement given that he was self-taught. He invented the words electrode, cathode and ion and the word ‘farad’ was given as a measure of electrical capacitance in his honour. He was interested in a range of other topics such as environmental science as well as the teaching of science in schools.

Colour: Predominantly purple-mauve
Dates of Issue: 1999-2007
Legal tender: Until 2010
Reverse Design: A portrait of Sir Edward Elgar with a picture of Worcester Cathedral.

Sir Edward Elgar (1857-1934) was the most influential English composer of international stature since Purchell. As part of the Late Romanticism movement, his works led to a renaissance in English music and was achieved by a man whose father had a music shop and who taught himself to play instruments. He’s most famous for his Enigma Variations (1898-99), his concertos for violin and his choral work like the ‘Dream of Gerontius’ (which was heavily influenced by his Catholicism). His ‘Pomp & Circumstance Marches’ (1901) became the tune to ‘Land of Hope & Glory’, England’s unofficial National Anthem and always sung at the Last Night of the Proms.

Colour: predominantly purple-mauve
Dates of Issue: 2007-Present day
Legal Tender: Yes
Reverse Design: A portrait of Adam Smith with a picture of a pin factory and a quotation from Smith’s book “…and the great increase in the quantity of work that results.”

The Scottish economist, philosopher and author, Adam Smith (1723-1790) was a representative of the Enlightenment Movement. Smith attended university from the age of 14 and developed a close friendship with the philosopher/economist David Hume. One of his most influential books was the ‘Wealth of Nations’ (1776), which is sometimes called the ‘bible’ of capitalism. He was the first to suggest production/commerce (or GDP nowadays) was the true test of a nation’s wealth rather than its gold reserves and extolled the virtues of the division of labour to increase productivity (as represented by the pin factory on his banknote).

The fifty-pound note

Colour: Predominantly green
Dates of Issue: 1981-1994
Legal Tender: 1996
Reverse Design: A portrait of Sir Christopher Wren with a plan of St. Paul’s Cathedral.

Although Sir Christopher Wren (1632-1725) is best-known as the architect of St. Paul’s Cathedral and for overseeing the re-building of 52 of London’s churches after the Great Fire of 1666, he started his academic career as a Professor of Astronomy. In an era when science wasn’t divided into disciplines as it is today, his interests included agriculture, light and refraction, ballistics and microscopes. As a result of his interdisciplinary interests, he became a founding member of the Royal Society in 1662. Apart from churches, he also designed the Royal Observatory, Greenwich and the Sheldonian Theatre, Oxford. Did you know while he was working on St. Paul’s, Parliament withheld half of his salary in the hope he’d go faster?

Colour: Predominantly red
Dates of Issue: 1994-2011
Legal Tender: Until 2014
Reverse Design: A portrait of Sir John Houblon and an image of his home off Threadneedle Street, the premises of the Bank of England.

In honour of the 300th anniversary of the Bank of England, Sir John Houblon (1632-1712) was chosen to feature on the £50-note since he was the first Governor of the Bank of England. As a merchant, Houblon was well-known for his fair business dealings and public spirit and in recognition of the fact was awarded a knighthood in 1689. Five years later, he was instrumental in organising the financing and management structure of the Bank of England. He also served as Lord Mayor of London (1695) and Lord Commissioner of the Admiralty (1698-99).

Colour: Predominantly red
Dates of Issue: 2009-Present day
Legal Tender: Yes
Reverse Design: Portraits of Matthew Boulton and James Watt with a picture of the Whitbread Engine and the Soho Manufactury, Birmingham.

The first appearance of two people on a banknote together is of Matthew Boulton and James Watt.

Matthew Boulton (1728-1809) was an industrialist and entrepreneur while James Watt (1736-1819) was a scientist. This was the first time that two people have appeared on a banknote together and is in recognition of the fact they set up a partnership to develop and sell steam engines (1775). Their contribution was crucial in expanding the use of steam engines from the mining/textile industries to other industries and giving impetus to the Industrial Revolution. Watt coined the term ‘horsepower’ and the metric unit of power is named after him while Boulton’s factory outside Birmingham pioneered the idea of specialisation of labour to increase output.

Why do we no longer use $1,000 bills?

This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small. Ever wondered if recycling is worth it? Or how store brands stack up against name brands?Check out more from the series here.

In the early 1900s, a bottle of Coke cost a nickel, a Ford Model T could fetch $290 and some apartment rents dipped as low as $4 a month.

So it might sound intuitive that now we’d have larger bills to make the purchasing process more convenient, more efficient.

That’s why listener Rabin’ Monroe wrote in with the question, Why aren’t we using $1,000 bills anymore? Seems more appropriate to use them now than back in the early 20th century.”

The highest value of denomination currently in production is the $100 bill, but in decades past, the Federal Reserve has issued $1,000, $5,000, $10,000 and even $100,000 bills.

The $1,000 bill’s history

The first known use of the $1,000 bill coincides with the United States’ beginnings.

The Continental Congress, a body of delegates representing the 13 colonies, began issuing paper money, which included the $1,000 bill, to help finance the Revolutionary War, said Matthew Wittmann, an assistant curator at the American Numismatic Society, an organization that studies coins and currency.

But back then, it was only worth a fraction of that value, he added.

“So this $1,000 note seems incredible, but what it reflects is actually how little paper dollars were valued,” Wittmann said. “It might only have been worth $20 in ‘real’ hard money at the time.”

The U.S. government didn’t officially print $1,000 bills until the start of the Civil War, said Dennis Forgue, a numismatist who works at coin-dealing company Harlan J. Berk Ltd.

Lee Ohanian, an economics professor at the University of California, Los Angeles, said the bill was used to rapidly purchase supplies like ammunitions during the war.

In the decades after, the $1,000 bill and other large-denomination currencies were mostly used in real estate deals or interbank transfers, Ohanian said.

“They facilitated really, really large financial transactions that primarily were being carried out between banks or other financial intermediaries,” Ohanian said. “So it made life a little bit easier.”

Illegal activity

The U.S. stopped printing the $1,000 bill and larger denominations by 1946, but these bills continued circulating until the Federal Reserve decided to recall them in 1969, Forgue said.

Forgue said President Richard Nixon thought these denominations would make it easier for criminals to launder money, which then led to his order for their elimination.

Plus, turns out churning out $1,000 bills just wasn’t very cost efficient. To produce them, you’d have to go through the trouble of engraving new plates for very small production runs, Wittmann said. Running off a lot of $1 notes is more cost efficient than producing comparatively few $1,000 notes, he added.

Future transactions

Is there a chance we could bring the note back? It’s only likely if there are big problems within the economy, Wittmann said. The circulation of large denominations of currency is almost always due to inflation or depreciation, he said.

Take a look at Zimbabwe, which has issued million-, billion- and trillion-dollar notes. One $100 trillion note from the southern African country is worth 40 U.S. cents.

Or take a step back to Germany in the early ‘ 20s, known then as the Weimar Republic, when hyperinflation hit the country. That’s when 4.2 trillion marks were equivalent to a dollar .

Experts also say they think modern technology renders large bills unnecessary. Credit cards, checks, any form of electronic transfer — these all pretty much fulfill large transactional needs more efficiently than a tangible note could, they say.

“If you didn’t have your credit card, you didn’t have your debit card, or there’s a massive meltdown of the world in telecommunication systems and computers … then you can imagine high-denomination bills would be very useful,” Ohanian said. “Assuming the other person wants to accept it.”

Yes, concerns about counterfeiting could be an issue. Even the use of current large denominations — $50 and $100 bills — can raise questions about their authenticity at the cash register.

If you’re lucky enough to come across a $1,000 bill, you could technically take it to the bank for $1,000 in credit, but the bank would then send it to the Federal Reserve, which would prevent it from recirculating, Wittmann said.

Plus, many $1,000 bills are worth far more than the noted amount, Wittmann added.

Current banknotes

There are four denominations (values) of Bank of England notes in circulation: £5, £10, £20 and £50. Click on the images below to find out how to check the features on each of our notes:

Issued on 13 September 2016 and features Sir Winston Churchill.

Issued on 14 September 2017 and features Jane Austen.

Polymer 㿀

Issued on 20 February 2020 and features JMW Turner

Paper 㿀

Issued on 13 March 2007 and features Adam Smith.

Paper 㿞

Issued on 2 November 2011 and features Matthew Boulton and James Watt.

Key security features

Key security features of Bank of England banknotes

Video transcript - Key security features of Bank of England banknotes

The Bank of England banknotes. There are four denominations of banknotes in circulation: £5, £10, £20 and £50. All four denominations of notes are printed on polymer. There are also £20 and £50 notes printed on paper. This film will run through a number of key security features. You should check these features to ensure notes are genuine.

The following security features are found on the polymer notes. There is a large see-through window. A portrait of the Queen is printed on the window with the numerical value of the note and the words 'Bank of England' printed twice around the edge. A metallic image is positioned over the window. The foil is gold on the front of the £5 and £10 notes, gold and blue on the front of the £20 note, and gold and green on the front of the £50 note. The foil is silver on the back of all notes. On the polymer £20 and £50 notes, there is a second, smaller window in the bottom corner of the note.

Below the main see-through window on the front of all the polymer notes, there is a silver foil patch containing a hologram. When you tilt the note from side to side, the words change between the value of the note and 'Pounds'. A 3D image of the coronation crown appears above the main see-through window.

The following security features are found on the paper notes. When you tilt the paper £20 note from side to side, the holographic images on the foil strip change between a '£' symbol and the number '20'. When you tilt the £50 note up and down or side to side, the images on the green motion thread change between a '£' symbol and the number '50'. When paper banknotes are held up to the light, there is a bright denomination at the top of the Queen's portrait in the watermark.

Some security features are common across all current Bank of England banknotes. On the front of any of the notes, you can feel raised print. For example, on the words 'Bank of England' and in the bottom right corner. Under a good quality ultraviolet light, the numerical value appears in bright red and green on the front of the notes, against a duller background.

The Bank of England banknotes

Upcoming notes

We will issue a new £50 note on 23 June 2021. It will be our first £50 note printed on polymer.

It will feature the mathematician Alan Turing, who was chosen using our character selection process.

Social Security

First version of SSN card. No form number and no revision date. The preprinted information on the card face was in blue ink with a Social Security Board seal (in a lighter shade of blue) in the center of card. The SSN was in red ink. The date of issue was typed on the card. Had a &ldquostub&rdquo to type in the mailing address. (The stub was to be put away for safe keeping.) Left edge was perforated. The card had a curved header showing &ldquoSocial Security Act.&rdquo Under the header was &ldquoaccount number.&rdquo Had preprinted legends &ldquodate of issue&rdquo and &ldquoemployee's signature.&rdquo The instructions on the back were in black ink.

Second version of SSN card . Same as the first version of the card. The stub had a centered legend &ldquoFor Office Use Only.&rdquo

Third version of SSN card . The card itself was the same as the prior version but there were some variations in the printings. In some printings the SSN was printed on the stub in others it had to be typed on. In some printings the stub had pre-printed spaces for the NH's name and address.

First version of replacement SSN card . On the back of the card the form number was shown as &ldquoForm OA-702 DUP.&rdquo The card format was the same as the original SSN card except it was light green and had &ldquoDUPLICATE&rdquo printed diagonally across the face in red letters (green letters for those used by RRB). There was a Social Security Board seal in the middle of the card. The left margin was not perforated. The back of the RRB version showed only &ldquoRR&rdquo in large letters. The cards did not have a stub.

Second version of replacement SSN card . The preprinted information was in blue ink. &ldquoDuplicate&rdquo was not printed on the card. On the back of the card was &ldquoForm OA-702.1.&rdquo Date of issue was omitted. All printed information was in black ink. Back of card had: Federal Security Agency, Social Security Board

Fourth version of SSN card . The preprinted &ldquodate of issue&rdquo was eliminated. &ldquoEmployee's signature&rdquo changed to &ldquoworker's signature.&rdquo The stub had the SSN preprinted in red. &ldquoFederal Security Agency&rdquo was printed on the back of the stub. Instructions said to show card to employer.

Third version of replacement SSN card . The card was the same as the prior version. The stub had a box designated &ldquoworker's name and home address.&rdquo

Fourth version of replacement SSN card (12/42 revision). The revision date was printed on the back of the card. The legend &ldquoemployer's name&rdquo was pre-printed on the stub. Preprinted information on the card and stub was in blue ink. Instructions (in black ink) included information about name changes.

Fifth version of SSN card (4/43 revision). The card looked the same as the prior version. Instructions on the back of the card were expanded.

Sixth version of SSN card (7/44 revision). The same as the prior version, except the left edge was straight and the form number (&ldquoForm OA-702&rdquo) and the revision date (7-44) appeared in the lower left corner of the stub and the back of the card.

Fifth version of replacement SSN card (7/44 revision). The card was the same as the prior version. &ldquoEmployer's name&rdquo was no longer preprinted on stub.

Seventh version of SSN card (1/46 revision). The seal was now the Social Security Administration Seal and both the card and the stub bore the legend &ldquoFor Social Security Purposes Not For Identification.&rdquo Back of the card showed: Federal Security Agency, Social Security Administration.

Sixth version of replacement SSN card (1/46 revision). Both card and stub showed &ldquoFor Social Security Purposes--Not For Identification&rdquo across the bottom. Back of card showed: Federal Security Agency, Social Security Administration.

Eighth version of SSN card (6/48 revision). Some cards were the same as the prior version others had a new header, &ldquoSocial Security&rdquo with a small SSA seal in the header between &ldquoSocial&rdquo and &ldquoSecurity.&rdquo There were variations in the printings of this version.

Seventh version of replacement SSN card (3/48 revision). Card had the Social Security Administration seal instead of the Social Security Board seal. Back of card showed: Federal Security Agency, Social Security Administration.

Eighth version of replacement SSN card (10/48 revision). The SSA seal appeared as a slightly stippled design in the same shade of blue as the rest of the format. Instructions on the back of the card and the stub were printed in blue ink.

Ninth version of replacement SSN card (7/49 revision). The card was the same as the prior versions with the &ldquoSocial Security&rdquo header.

Printings of the 6/48 version of the SSN card had a header &ldquoSocial Security&rdquo with a small SSA seal between the two words.

Ninth version o f SSN card (1/52 revision). &ldquoSignature&rdquo instead of &ldquoWorker's signature&rdquo appeared on card and stub.

Tenth version of replacement SSN card (1/52 revision). &ldquoSignature&rdquo rather than &ldquoWorker's signature&rdquo appeared on card and stub.

Tenth version of SSN card (4/53 revision). The card was the same as the prior version. The instructions on the back of the card were revised. Also showed: Department of Heath, Education, and Welfare, Social Security Administration.

Eleventh version of replacement SSN card (4/53 revision). The card was the same as the prior version. Instructions on back of card were changed. Back showed: Department of Health, Education, and Welfare, Social Security Administration.

Eleventh version of SSN card (2/54 version). The seal on the card was changed to a small DHEW seal.

Twelfth version of replacement SSN card (2/54 revision). The seal was changed to a DHEW seal.

Twelfth version of SSN card (7/54 revision). The card was the same as the prior version. There were small changes in the instructions on the back of the card.

Thirteenth version of replacement SSN card (7/54 revision). Card and stub were the same as the prior version. Instructions on the back of the card and stub used the term &ldquofield office&rdquo rather than &ldquodistrict office.&rdquo

Fourteenth version of replacement SSN card (3/56 revision). The card and stub were the same as the prior version. Instructions included information for the NH to get in touch with SSA if totally disabled.

Thirteenth version of SSN card (4/56 revision). The card was the same as the prior version. Instructions on the back of the card said to get in touch with SSA if a worker became totally disabled.

Fifteenth version of replacement SSN card (4/56 revision). The card and stub were the same as the prior version. Some cards may have been printed with 4/56 revision date (rather than 3/56).

Sixteenth version of replacement SSN card (10/58 revision). The card and stub were the same as the prior version. Instructions included information that a woman should contact SSA when she reached age 62.

Fourteenth version of SSN card (5/59 revision). The card and the stub were the same as the prior version. Instructions added information that a woman should contact SSA when she reached age 62. The instructions on the back were in black ink.

Fifteenth version of SSN card (9/61 revision). The card and stub revised to read &ldquoFor Social Security and Tax Purposes -- Not For Identification.&rdquo

Seventeenth version of replacement SSN card (11/61 version). The card and stub revised to read &ldquoFor Social Security and Tax Purposes -- Not For Identification.&rdquo

Seventeenth version of SSN card

Eighteenth version of SSN card (1/72 revision). Legend &ldquoNot For Identification&rdquo was no longer on card (shown from 1946 to 1972). A large DHEW seal was in the middle of the card. The format of the stub was changed to envelope size (the card was a small two-sided tear-off of the stub). The instructions were expanded on the back of the card and stub and were in black ink.

Eighteen version of replacement SSN card . This was the last version of the replacement SSN card. Thereafter, original and replacement cards looked the same.

Nineteenth version of SSN card (4/76 revision). The card is the same as the prior version. The stub size is smaller. The instructions are less and are printed in blue ink.

Twentieth version of the SSN card (5/80 revision). The seal is changed to a DHHS seal.

Twenty-first version of the SSN card (4/81 revision). The card is the same as the prior version.

On May 17, 1982, SSA began annotating SSN cards issued to aliens assigned nonwork SSNs &ldquoNOT VALID FOR EMPLOYMENT.&rdquo

Twenty-second version of SSN card (6/82 revision). The card is the same as the prior version. The SSN was removed from the card stub. Instructions add information about legend on non-work SSN cards.

Twenty-third version of SSN card (9/82 version). The card is the same as the prior version.

Twenty-fourth version of SSN card (10/83 revision). SSA begins issuing counterfeit resistant SSN card (on blue banknote paper with randomly placed colored planchettes on the back).

Twenty-fifth version of SSN card (4/84 revision). The card is the same as the prior version with the instructions reformatted.

Twenty-sixth version of SSN card (1/87 revision). Same as prior version with slightly darker shade of blue ink on back of card and stub.

Twenty-seventh version of SSN card (1/88 revision). Anti-copy VOID pattern added as security feature for card.

On September 14, 1992, SSA began showing the legend &ldquo VALID FOR WORK ONLY WITH INS AUTHORIZATION &rdquo for aliens with temporary work authorization.

Twenty-eighth version of SSN card ( January 1994). Language on the card tells NHs to &ldquoKeep card in a safe place to prevent loss or theft.&rdquo

Twenty-ninth version of SSN card ( April 1995), has SSA's new seal on the card.

Thirtieth version of the SSN card (06/99). Corrected SSA address to which cards should be returned.

Thirty-first version of the SSN card (12/2002). Instructions updated for clarity, to ask that the NH report changes in name, U.S. citizenship or alien status to SSA and not allow others to use SSN. The instruction &ldquodo not carry it with you&rdquo added to the back of the card.

Thirty-second version of the SSN card (03/2004). The language, &ldquoDO NOT CARRY IT WITH YOU&rdquo is added to the face of the card and the anti-copy VOID pattern is removed. In April 2004 the restrictive legend, VALID FOR WORK WITH INS AUTHORIZATION is changed to show INS change to DHS.

Thirty-third version of the SSN card (11-2006). Left side of SSN card carrier includes an explanation of the date printed under signature line on SSN card. Right side of carrier provides instructions for signing card. Beginning 04/07, the date the card is issued is printed under the signature line. Beginning 9/08/07, the number holder&rsquos name will always be printed on two lines, with the last name printed directly below the first and middle names.

Thirty-fourth version of the SSN card (10-2007). The 10-2007 version of the SSN card includes additional security features. Some of the more recognizable features are:

A unique non-repeating spiral design, replacing the existing marbleized pattern. The new pattern will be the same or a very similar color to the current background and will continue to be erasable.

Color shifting inks added to the face of the card very recognizable since it is used in currency.

A latent image on the face of the card, visible only when the document is viewed at specific angles.

20 Facts About the Dollar Bill That Every American Should Know


The $1 bill is one of the most familiar objects in the U.S., with George Washington's stern face gracing the front and the pyramid and eagle design on the back. But while we've carried this currency in our pockets since we started receiving an allowance, there are still many dollar bill facts you probably don't know. From its design quirks to its largely forgotten history, the dollar bill is actually full of surprises.

Read on to get a deeper understanding of an item you use every day and maybe even find out the answers to some questions you've always had. Here are 20 things you may not have known about the George Washingtons in your wallet. And for more fun facts, check out 100 Fascinating Facts You'll Want to Share with Everyone You Know.


The $5, $10, $20, and $50 bills have all been redesigned in the last decade or so, with the Federal Reserve adding color and watermarks to outsmart counterfeiters. But the dollar bill has remained unchanged since 1963. The reason why it's not been updated, according to the U.S. Treasury Department, is that this denomination "is infrequently counterfeited."

But another possible reason to take into account is likely the lobbying done by the vending-machine industry, which would have to redesign its machines to accommodate new bills should the current design get an overhaul.


The last change made to the dollar bill was the addition of the line, "In God We Trust," which was added in 1963. This phrase started to be included on all U.S. currency following a law passed by President Dwight Eisenhower in 1956, making it the country's official motto. And for more info to help you ace your next trivia night, check out 55 Facts So Interesting You'll Kick Yourself for Not Knowing Them.


While we associate our nation's first president with the $1 bill, his was not actually the first face to appear on the currency. That honor went to Salmon P. Chase, whose face was on the country's first $1 note, which was issued in 1862, during the Civil War.

As Secretary of the Treasury at the time, Chase also happened to be the man who was designing the country's first bank notes. His vanity project lasted until 1869, the year George Washington took his place.


The first First Lady, Martha Washington, was one of the faces of the $1 silver certificate. First printed in 1886, the certificates were backed by the U.S. government's silver deposits and featured an engraving of Martha based on her portrait by Charles Francois Jalabert. The silver certificates had a long run but were discontinued in 1957, though the last printing featuring Martha (this time with her husband) ran in 1896. To date, Martha Washington and Pocahontas are the only two women to have ever appeared on American paper currency.


We may call it "paper money," but the currency is actually composed of 75 percent cotton and 25 percent linen. According to the Treasury's Bureau of Engraving and Printing, that material is delivered (with the exception of what's used for $100 bills) in loads of 20,000 sheets that are each painstakingly tracked. The various colors of ink used are mixed specially by the Bureau for reasons of security.


Not a bad return on investment: The Federal Reserve spends about 5.5 cents to produce every $1 bill (a much better deal than the 2.06 cents it costs to produce a penny). While the $2 bill carries the same price tag, the bills get costlier from there. The $5 bill costs 11.4 cents, the $10 costs 11.1 cents, and the $20 bill costs 11.5 cents to produce. And for more facts about coins and bills, check out Why Quarters Have Ridges—And Other Amazing Money Facts.


According to the Federal Reserve, a dollar falls out of circulation on average about every 5.8 years. That's more frequent than the average $20 bill (7.9 years), $50 bill (8.5 years), and $100 bill (15 years)—but less frequent than the $5 bill (5.5 years) and $10 bill (4.5 years). And for some mood-boosting trivia, check out 50 Feel-Good Facts to Cure Quarantine Boredom


Because of the cost and need to frequently reprint the heavily circulated $1 bills, it has acquired some powerful enemies. In 2013, a group of five senators, including Arizona's John McCain and Iowa's Tom Harkin, united behind an effort to switch to a $1 coin, as reported by USA Today. According to the senators and consumer advocates supporting them, such a shift would save the government $13.8 billion over three decades. But for various reasons (the vending-machine lobby prominent among them), the effort went nowhere.


You can see where your dollar has been and where it's going by using the site Where's George. Just enter the serial number of the dollar in your wallet, and you can find out what zip codes it's passed through to get to you and keep an eye on where it heads after you spend it.


The pyramid on the back of the bill represents the young United States, with 13 steps representing the original 13 colonies, and an unfinished top reflecting the growing and expanding the country still had to do. The "Eye of Providence" at the top represents an all-seeing god—but not, as some conspiracy theorists would tell you, the Illuminati. And for more fascinating facts, check out 100 Totally Useless Facts That Are Too Entertaining for Words.


The eagle on the back of the dollar bill is meant to convey both war and peace, with arrows held in its left talon and an olive branch in its right talon.


We already mentioned the 13 steps on the pyramid, but look further and you'll see that the number 13 pops up in a few other places on the currency. There are 13 arrows in the eagle's talon as well as 13 stripes and 13 stars on the Great Seal.


Decades ago, the Federal Reserve Board printed currency in denominations of $500, $1,000, $5,000, and $10,000. These were primarily used for bank transfer payments, which became unnecessary after more advanced (and secure) ways of transferring money were introduced. Production ceased on these big bills during World War II, and in 1969, the Secretary of the Treasury announced that the department would stop distributing the currency.

They are still legal tender, but you might want to hold on to them if you come into possession of them—there are just a few hundred $5,000 and $10,000 bills in existence.


The largest denomination of official U.S. currency ever printed was the $100,000 Series 1934 Gold Certificate. Featuring a portrait of President Woodrow Wilson, these notes were printed from Dec. 1934 to Jan. 1935 and were mainly used for official transactions between Federal Reserve Banks—so it was unlikely that a member of the general public would get their hands on one. (Despite rumors to the contrary, the Treasury Department never produced a $1 million currency note.)


According to the Federal Reserve's latest calculations from 2019, there are a total of 43.4 billion bills circulating in the United States. That breaks down roughly as the following:

  • 12.4 billion $1 bills
  • 1.3 billion $2 bills
  • 3.1 billion $5 bills
  • 2.0 billion $10 bills
  • 9.4 billion $20 bills
  • 1.8 billion $50 bills
  • 13.4 billion $100 bills


According to CNBC, you would have to fold a bill back-and-forth about 4,000 times before it actually tears. While that may sound like a lot, for dollar bills, that threshold is reached within about 22 months, the Federal Reserve reports.


But if you do happen to tear a bill, it's still OK to use it. As long as three-quarters of a bill is intact, it can be exchanged for a whole bill. If it's torn in half, as long as the serial number matches on both sides, it can be used. If it's badly mutilated, you can actually send the bill to the Mutilated Currency Division of the Bureau of Engraving and Printing, where it is reviewed and often replaced (the group deals with about 30,000 claims a year).


A "star" on a bill means it's a replacement for one with an error. When an imperfection is detected on a bill after a serial number has already been overprinted, the Bureau of Engraving and Printing replaces it with a "star note" before it goes into circulation. A star note is a note with the same serial number with an asterisk added to the end of it. These bills are more scarce than notes with traditional serial numbers, but carry the exact same value as any other dollar.


If you look closely at the frame surrounding the numeral "1" at the top right corner of the dollar bill, you may spot what appears to be a small bird or owl peeking out from the top left. Some have guessed that it represents Minerva, the Roman goddess of wisdom, whose sacred bird was the owl and who is a common figure in Illuminati conspiracy theories. Others argue that it is actually a small spider, partly because of the webbed design that surrounds it. This has also inspired wide-ranging conspiracy theories.

None of these guesses have ever been confirmed, however. In reality, the unidentified design is likely just a quirk of the pattern.


Changing so many hands, it's probably no surprise that dollar bills are not the cleanest objects. A 2017 study published by PLOS One found 100 different strains of bacteria on the dollar bills tested, in addition to viruses, pet DNA, and other materials. No wonder people are being cautious about handling cash during the coronavirus pandemic.

Who was first in the U.S.?

In the U.S., paper money has been issued by both governmental and private entities and has circulated in the country since 1690, including during the Civil War period, when the Confederacy printed its own currency.

While Tubman’s selection for depiction on the $20 bill is historic, she is not the first woman – either mythical or actual – to appear on paper money in the United States.

Martha Washington, the first First Lady, was the last woman to adorn an American note.

Pocahontas was the first nonmythical woman to earn that distinction on U.S. paper money, having been depicted on the back of the $20 bill from 1865 to 1869 and on the $20 bill in 1875.

Martha Washington was the only other woman to appear on U.S. federal paper money. She was on the front of the $1 Silver Certificate of 1886 and 1891 and (alongside that of her husband) on the back of the $1 Silver Certificate of 1896. Other women such as first ladies Rachel Jackson and Dolley Madison have been depicted on private banknotes.

Lucy Pickens was the first woman portrayed on paper currency in what is now the U.S. National Numismatic Collection, National Museum of American History, CC BY-SA

However, the first nonmythical, historical woman to appear on any paper currency within our current borders was not on a U.S. bill but rather on Confederate money: “Queen of the Confederacy” Lucy Holcombe Pickens (and South Carolina’s first lady) was portrayed on Confederate $1 bills of 1862 and 1863 and the $100 bill of 1862 through 1864.

In other words, contrary to news reports, Pickens was actually the first woman to be depicted on paper money issued in the U.S., and not Pocahontas or Martha Washington.

Negative interest rates: absolutely everything you need to know

Since the great recession, a large number of advanced economies have been stuck with low growth and low levels of investment and inflation. Attempting to regain growth, central banks have taken increasingly forceful monetary measures. Of these, perhaps the most controversial and least understood is negative interest rates.

The central bank of Denmark was the first to go below zero, in 2012. To the surprise of many, it did not result in stress in the financial system. In 2014, several of Europe’s central banks followed suit. Two years later, so did the Bank of Japan.

Setting interest rates to below zero is often viewed as an unconventional policy, but it can actually be seen as a continuation of the perfectly normal monetary policy practice of moving the short-term interest rate in response to fluctuations in the economy. There is a limit to how low interest rates can go, but it turns out that this limit is not zero and we have not reached it yet.

Interest rate cuts below zero largely work as they do in normal times with positive interest rates, though there are some differences: the effects on banks, for instance, and the psychological impact of interest rates plunging into negative territory (more on this below).

Throughout history, it was widely believed that central banks could not move short-term interest rates below zero. After all, why would anyone pay to deposit money in a bank or pay to lend someone money, when they could just keep their cash at home for free? Cash always has a zero interest rate.

It was widely believed that if interest rates did dip below zero, even if by a very small amount, everyone with savings would run to the bank to change them for ready money. The zero interest rate on cash was seen as the lowest point an interest rate could dip to, the point at which central banks would be out of ammunition.

Economists have come up with different ingenious proposals to circumvent the zero point and regain central banks’ firepower. In the 19th century, Silvio Gesell proposed a tax on holding cash. In 2009, Greg Mankiw suggested a lottery scheme for randomly picking serial numbers on bank notes and declaring them void, making it risky to hold on to cash. In 2014, Kenneth Rogoff explained that if we could just phase out cash altogether, there would be no alternative to paying a negative rate on bank deposits and bonds. And there are other proposals, too.

When central banks started dropping interest rates to below zero without adopting any measures to make cash costly to hold, it changed the prevailing worldview. Zero was no longer the lower bound on interest rates. It turned out that many were actually willing to pay for the convenience of not having to hold their savings in cash.

The example of Switzerland suggests that interest rates can go at least as low as -0.75% without triggering a large demand for cash. Views have been voiced on where the effective lower bound might be and what it depends on. But in the end, we still do not know no country has reached this point, and it remains unknown just how much further interest rates can be cut before we see a broad shift into cash.

How do interest rate cuts below zero work?

Central banks hold money for commercial banks. If the interest rate is cut below zero, it means that they, the central banks, can charge the commercial banks interest on that money. The commercial banks, meanwhile, can cut the interest rate that they charge their customers by the same amount and make their money back although there are some crucial exceptions for some bank deposits, which we discuss later.

Imagine a pension fund is holding a deposit with a commercial bank. If the interest rate drops, the fund might seek to buy financial assets with a higher return, such as bonds (which are like long-term loans). This increases demand for, and therefore the price of, these assets, which is how the rate cut is transmitted to the broader financial market. To compete with cheaper capital-market financing, banks might also reduce the interest rates they charge on loans.

Ultimately, the aim of the central bank is to increase economic activity and spur inflation from the low or even deflationary levels that some countries are currently in danger of. There are at least four ways this can happen:

1) Banks can lend more to households and companies, rather than holding on to cash, which has now become costly.

2) Businesses can invest more, as funding investment is now cheaper.

3) Households could save less, or borrow to spend more.

4) Demand for the currency could fall. This might lead to a depreciation of the currency, an increase in the price of imported goods and growing demand for the country’s now cheaper exports.

Some have argued that in countries with ageing populations, incentives to spend will fall on deaf ears. Faced with negative interest rates, savers and retired people who live off their pensions could be more likely to reduce their spending, because they either have fixed savings targets or because they live off the interest from their capital.

There is no evidence that savers as a whole suddenly react in this new way to interest rate cuts into negative territory, however. The fact is that for every saver in an economy, there is someone on the other side borrowing this money. Think of new house owners with high mortgages and car loans, start-up companies – or even the government. The increased purchasing power of borrowers due to negative interest rates might easily make up for the supposed frugality of retirees and other savers, as explained here.

‘Real’ versus ‘nominal’ interest rates

The kind of interest rate we’re all familiar with is called a no minal interest rate. It measures the amount of money we earn in a year on a saving of $100. A real interest rate, on the other hand, measures how much the $100 is worth in terms of what you can buy with it a year later.

If you want to buy bananas, for example, and bananas cost $1 now but will increase to $1.03 in a year because of 3% inflation, and your $100 in the bank pays no nominal interest rate, then after a year you’ll only be able to buy 97 bananas your real interest rate is -3%. Inflation in this case amounts to a negative real interest rate.

Conversely, if the price of bananas falls to 97 cents after a year (3% deflation), then your $100 will buy you about 103 bananas and your real interest rate is a positive 3%, even if you don’t receive any nominal interest on the savings.

So the real interest rate, which really matters for the value of your savings, depends on the nominal interest rate, but also on inflation.

In countries where the inflation rate is higher than nominal interest rates, real interest rates are negative, and your savings fall in value according to what you can buy for them. In countries where inflation is lower than the nominal interest rate, on the other hand, the real value of your savings increases.

Switzerland, the US and the ‘money illusion’

In the United States today, short-term real interest rates are negative, as US inflation is positive but interest rates are still close to zero. If you have a bank deposit or a bond denominated in dollars at a close-to-zero nominal interest rate, your savings are losing value in terms of what you will be able to buy for them in the US over time.

In Switzerland, on the other hand, inflation is currently negative, but so are nominal interest rates, and the two largely cancel each other out for shorter horizons. In Switzerland, your savings (invested in bonds with a negative nominal interest rate, for example) are losing less value in terms of the goods you can buy for them over time than in the US.

And yet – some feel that their savings are taxed by negative nominal interest rates in Switzerland, while few feel “taxed” by the negative real interest rates in the US. The reason that negative nominal rates seem so controversial is because of so-called money illusion. The public generally doesn’t distinguish between nominal and real interest rates, and tends to perceive only negative nominal interest rates as relevant for the value of their savings.

Money illusion could, in fact, make negative interest rates a much more powerful way of inducing people to spend and invest, rather than save, since they perceive that they will be taxed on their savings otherwise.

However, the perception of negative interest rates as an unfair tax risks inciting a public backlash against the central bank – which central banks are acutely aware of. These risks raise the question of whether central banks and other authorities have a responsibility to communicate better and educate the public when using this tool.

So do negative interest rates work in practice?

The short answer is: yes, but.

Cuts to below zero have led to a widespread fall in interest rates throughout the economies that have used them, in the same way that rate cuts do in positive territory. The exception here is the transmission through banks. Click here for a detailed explanation, but for now, here’s the short one.

Mostly, when banks cut their interest rates to below zero, they don’t charge for the smaller deposits of households most of us don’t pay a negative nominal interest rate on our demand deposits. The fact that our banks don’t pass on negative interest to retail deposits could be what is preventing a run to cash. What we don’t know is how retail depositors would react to a negative deposit rate, or how negative the rate would have to be before a large reaction occurred.

Instead of charging negative retail deposit rates, banks have generally been able to increase fees on deposit accounts to make up for the loss of interest income. Fees basically amount to a negative interest rate. If you pay a $60 annual fee (or $5 monthly maintenance fee) on your deposit account, and you hold an average of $2,000 in that account, it’s the equivalent of paying a negative 3% interest rate. In some of the negative interest rate countries, banks have also been spared some of the cost of negative rates by having large parts of their money parked with the central bank exempted from the negative interest rate.

There are many possible reasons for why banks do not want to flag negative interest rates on small bank deposits, such as a desire not to lose valuable retail customers. But it is important to note that banks have other sources of funding, and some bank deposits (i.e. the large deposits held by firms and pension funds, large term deposits) do have negative interest rates in the affected countries.

Interest rates on bank loans have generally fallen, but not as much as loan rates usually fall when the central bank cuts interest rates. In Switzerland, some interest rates on long-term mortgage loans even increased. These cross-country differences are still not well understood and could be related to differences in the banks’ competitive environment.

All interest rates in money and bond markets have fallen, however, and as a general rule, negative interest-rate cuts have transmitted in largely the same way to broader financial markets as interest-rate cuts transmit when they are above zero.

Despite this, the economies that have cut interest rates to below zero have not experienced major recoveries. Doesn’t this mean that negative interest rates don’t work? Well, no, for the simple reason that central banks would usually have to cut interest rates a lot further to get a recovery going.

Cuts to below zero so far have been tiny. Japan’s recent rate cut into negative territory, for instance, was from a positive 0.05% to a negative 0.10%. The Swiss central bank cut its rate to 0.75% below zero. Most of us would barely notice an interest-rate reduction of 0.15% on our deposit account, and securing a bank loan for 0.75% less wouldn’t make many of us rush out to buy new cars. To really boost an economy with an interest rate cut, central banks normally do a lot more.

By comparison, the US central bank cut the interest rate from about 6% down to about 1% during the relatively mild US recession in 2001, and again by 5% in response to the global financial crisis in 2008. It would, in fact, have cut a lot more in 2008 and 2009 if the interest rate had not already reached zero, which was thought to be the lower bound.

This means that while negative rates probably prevented even worse deflationary pressures, the very timid cuts below zero have not been enough to provide an effective boost in most of the countries that have enacted them. The medicine works, but much stronger doses would be needed for a cure.

Central banks have hesitated to cut interest rates further into negative territory partly because they were pioneering with negative rates, and did not know whether it would work and whether there would be harmful economic side effects. We now know a lot more, but we still don’t know where the lower bound really is, and as we discuss below, uncertainties remain. Another factor that may have made central banks hesitate is the unpopularity of negative interest rates, and concerns about a resulting public or political backlash. Central banks are cautious by nature.

What are the dangers of negative rates?

The most important concern when it comes to negative interest rates is that we do not know at which point people, corporations or financial institutions will want to sell all their bonds and bank deposits and demand cash instead. We don’t know where the lower bound is, and inadvertently reaching this point could be bad for the trust and smooth functioning of the financial system.

There are various ways and tools to limit this risk. The central bank can stand ready to help banks that lose deposits, and central banks can limit the distribution of cash – but such ideas are controversial and politically problematic. At the very least, reaching the lower bound is likely to force the central bank to increase interest rates again.

Other concerns are related to a long period of low real interest rates rather than to negative nominal rates per se. Low real interest rates for long may distort financial markets and increase the risk of financial instability. With minimal returns on bonds, and some banks even charging a fee for holding cash, investors are looking for better investment opportunities.

This is exactly how monetary policy is meant to work: to stimulate risk-taking and the economy. But if investors are ploughing money into non-productive financial assets or real estate just because these assets are expected to keep rising in value, and because they have few other alternatives, they may be generating bubbles that will one day burst. This risk is not peculiar to negative nominal interest rates, and some argue that such risks may be smaller when the economy is in a downturn.

Since the global financial crisis, keeping an eye on market prices, signs of exuberance and excessive financial risk-taking has become part and parcel of conducting monetary policy in response to negative shocks to the economy. Central banks can respond to signs of financial instability in different ways, depending on their mandates and toolkit. Some central banks may be able to regulate risk-taking directly (so-called macroprudential measures), while others don’t have that authority. Others question whether such policies are enough, and call for central banks to raise interest rates in the face of stability risks. But increasing interest rates before the economy has returned to growth obviously risks delaying the return to growth.

Some see negative interest rates as a risk to the financial health of banks, pensions and insurance funds. These risks are also mainly related to low real interest rates rather than negative nominal rates per se, and reflect the business models these institutions have adopted back when real interest rates were expected to be higher.

Business models are changing, however, and banks in countries with negative interest rates so far have not, on average, seen a fall in their profits as a result of them. While that could change[KS2] , it’s still a risky strategy to raise nominal interest rates today to protect the profits of financial institutions, because it would tend to lead to lower demand and lower growth, which in turn would prolong the period of low real interest rates. It could put even more strain on financial institutions.

Negative interest rates have become part of the central bank’s toolkit for responding to an economic downturn when nominal interest rates are already very low. They have worked largely as interest rate policy does in positive territory. This is a success and shows that central banks have a bit more firepower than they thought they had.

However, there are limits to how far interest rates can fall below zero in the absence of further measures to reduce general financial and economic risks.

With lacklustre growth, high unemployment and stubbornly low investment activity in many economies, policy-makers may want to do more, and monetary policy is far from the only option, although other types of monetary policy measures can be used. Public investment projects and a boost to government spending more generally can go a long way in complementing rate cuts. Government spending has a good track record when it comes to boosting growth, particularly when interest rates are low.

Supply-side reforms, ideally combined with fiscal policies, can also help to make economies more competitive and productive by improving the functioning of markets, upgrading educational systems, building critical infrastructure and unleashing entrepreneurship and innovation. Such measures will increase the potential for future growth. If this is understood – and believed – by the public, it could also increase confidence here and now, boosting spending and growth.

Note: The views expressed in this article reflect those of the authors and do not necessarily represent the views of the IMF, its Executive Board or IMF management.

1. Gautama Buddha

Gautama Buddha, born Siddhartha Gautama in 6th century B.C.E, was a spiritual leader whose teachings founded the Buddhist religion. He began his adult life by studying and practicing various religious teachings and living an ascetic (absent from indulgence) lifestyle. This led to his role as a religious leader. However, unable to reach inner enlightenment through his ascetic lifestyle, Gautama began to practice a more moderate way of living. When this helped him reach some understanding of himself and the world, he began to teach that life should be lived in balance (called the “Middle Way”) rather than in extreme forms.

Seeking the answers to his questions about human suffering, Gautama meditated one night until he reached pure enlightenment. In this moment, he became known as Buddha and went on to teach what he had learned. His new teachings are known as the Eightfold Path and the Four Noble Truths. These have become the foundation of Buddhism. Buddha promoted unity within his followers, allowing all classes, races, sexes, and backgrounds to join the movement. His goal of ending human suffering and reaching spiritual awakening has gone on to influence several religious faiths, as well as spiritual literature and philosophical teachings.

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