IMAGINE THE IMPACT ON OUR INDUSTRY!
In June of 1987 the Federal Government announced that there would be a currency changeover, probably in the fall of that year. The changeover has not yet occurred. And one of the most interesting things about this particular "happening" is that nobody involved will now talk about it. Economist William Baxter in a January, 1990 publication talks about "secret plans for a new currency". According to Mr. Baxter, "a tight veil of secrecy has been lowered over the entire question of a currency change. The 'official' position is that the project is still proceeding 'on schedule' but no one will say just when or how an actual currency change will be effected."
After reading his report on the new currency, we interviewed Mr. Baxter, and would like to share his comments with our readers.
When asked if he knew of an update on this situation, he said, "If you go to the Bureau of Engraving, the Federal Reserve Board or to the Treasury Department, they tell you to check their press release. This is such an ancient press release that it is absurd. I think the fact that they won't give a current position on it tells you something."
We then questioned him on whether he thought this would be a gradual change-over. Baxter said, "I find this inconsistent with the policy to date, and I have not found one government representative who can assure it. How can you put a new currency out that is counterfeit proof when you still have old currency circulating alongside of it?
"American money is one of the most vulnerable to imitation. It is the target of counterfeiters both at home and abroad. About two-thirds of all U.S. currency is held outside the United States, so it is very easy for counterfeiters in other countries to put bogus money in circulation. If there is widespread counterfeiting, it would destroy confidence in the currency. That is a hazard the U.S. Treasury Department and its associated bureaus simply cannot allow. For this reason alone, you can be assured that a new currency WILL be issued.
"The reason given by the government for redesigning the currency is to stop casual counterfeiting on today's new, laser-accurate color copying machines."
"We were told that when the new currency was made available that there would be a gradual changeover of all U.S. currency. But now the thought is a total recall in order to eliminate the possibility of counterfeiting."
Baxter was then asked if he thought there would be panic among the elderly if informed that their old green money would not be good any more. He replied, "Well, I think there will be a sensitivity to that, more so in the United States than in some other countries. It probably would not be an overnight thing. It's hard to say how Treasury will handle that. There are many people who believe the prime reasoning on this is to trap the drug trade and those who are not reporting their income as they should. In these cases, an overnight change would be most effective."
"Currency changes occur in other countries all the time. It has happened in Germany, in Canada, and most recently, in England. The government denies, and denies, and denies, as all governments must, right up to the last minute. This lulls everybody into a false sense of security and complacency, so that when they do change it, they're going to try to make it a fast change. For most people it is not a disaster."
Baxter also ventured a guess that "something like the Susan B.Anthony dollar could come back, especially to replace the dollar bill." But he foresees no change in the coins.
Our final question to Mr. Baxter concerned the financial institutions handling of the exchange and whether he thought the U.S. Treasury might offer some compensation for the exchanging of money. His reply provides some insight on what is to come.
"No, the government has done just the opposite in recent years with no quid pro quo. They've just layered on one expense after another on the banks-record keeping requirements and reporting-and what does the bank get out of it? Nothing. It is just the easiest way for the government to do it at another's expense."
We'll keep you updated on this as information becomes available.
William J. Baxter is a noted economist who writes BAXTER, A WORLD ECONOMIC SERVICE, a newsletter serving investors since 1924, 1030 East Putnam Ave., Greenwich, Conn.
Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 3, 3/90
First published on 03/01/1990