Sitt'n on the Capitol Hill~
So how much of a bill is needed for it to retain its value? No, I am not talking about a resolution before the President signs it into law but rather the physical paper we all have in our pockets. (correction: those of us in America who still have a job left.)
So how much would you guess? 20%? 45%? 50%? 75%? 100%?
If you picked 50% or below, congratulations! You have now excluded yourself from the population that has money. Long story short, the myth used to be true way back in the day. Now, it is no longer the practice. Mutilated bills are worth as much as the paper they are printed on...which is zelch, nothing, 0, nada.
Originally, currency was minted using precious metals since they were rare and very malleable. Then different civilizations started putting their faces and "numbers" onto the coins. This is where the whole money exchange myth all started. For example a gold coin is still gold regardless if it belonged to Caesar, the Pharoh, or Greek warlords. Often the conquering empire would steal/gather up all the gold of the previous empire, melt it down and re-mint it with their own design. So it made sense for people to take it at the gold's "face value."
Where it runs into trouble is during the modern era where, for some reason, we seem to obsessed with the need to artificially boost our economy beyond what it is. I speculate that the economy reflected the need to be financially solvent as people have become more untrustworthy and their words cannot be trusted. So whenever we have a war or start a business, we needed a huge capital of money. But the world's supply of precious metals is finite so we had to make our own money out of paper stamps and promissory notes of repayment. FYI stamps were just promissory notes that looked pretty and anyone could make it provided that the purchasing power is back by somebody. When Congress was given power to mint the national version of stamps, i.e. the dollar bill, there was a mass trade-in from the war-time currency into the bills. But, keep in mind that this is only the US operation, there are other hundreds of countries doing the same thing, albeit at different times but still in the same era.
How could we manage to print/mint more money if the world's supply of precious metal is finite? One, we dig more hoping to get lucky and "find" more money out of "thin air," sort to speak. Two, we move down the line from using more expensive metal to less expensive ones. The old dollar use to have an equivalent worth of gold in it, so the minters file down the coins so it has precisely the same weight. Then we switched from gold standard to silver standard; the new dollars are worth less than the old, which represents a huge disparity between its worth and "face value." Which explains why a $5 dollar gold coin made in 2010 is sold for over $400 dollars today.
So essentially, the world of money today is run like a demented business. The government holds all the goods (gold and silver etc.), and every dollar is a share in that sick business. Worse, we do not get any return for holding onto the shares. The Federal Reserve also retain the right to issue all the notes they want, but the stockpile of goods is not necessarily increasing. Thus for every share printed, its value is diluted. REMEMBER, it is NOT in their interest to let you reclaim a share once you or someone else had destroyed it. Just as if you lose the shareholder's certificate, the issuing company retains your shares. So YOU LOSE. Just to be annoying, Congress made a bunch of laws, covering their asses, by telling you not to destroy your shares. They then made a whole department (i.e. FBI) to catch you if you do try to reclaim the dollar by making your own.
Fun Facts: Since it is illegal for you to destroy the reserve notes or coin, you also cannot will an executor to destroy your money after you have died.
So now you actually need 75% or more of any currency for it to retain its legal tender. Any mutilation, warping, shearing, or puncturing renders the coin invalid. Believe it or not, this is actually how the federal reserve destroy the old, retired coins. The only exception are excessive scratches and color distortion due to corrosion. However, for some coins, they still retain their numismatic value despite the above mutilation, i.e. their collector's value.
So go burn some money so I can get rich XP
This is ChaosErrata signing off--
