Money, money, money. We all want and need it, but how much do we know about it? What is money made of, why is it valuable, and how much money is there? These are all questions we can ask ourselves about money.
What Is Money Made Of?
So what is money made of? Originally, money was made of parchment paper, making it easy to make counterfeit money.
Then, around 1870, the U.S. Department of Treasury was officially created by Congress to make money less reproducible. Today, only the Bureau of Engraving and Printing (BEP), part of the U.S. Department of Treasury, can print paper money.Â
So what is money made of today? In the United States, money is a blend consisting of 75% cotton and 25% percent linen. Using a unique formula created by the BEP, black, color-changing, and metallic ink is used to print the front of the bills. Only green ink is used to print on the back.
To deter counterfeiters, $5 bills and higher denominations have watermarks added to the printing paper. $100 dollar bills also have a 3D ribbon woven within them and an additional special icon that also uses high-tech color-shifting ink.Â
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What Is Money Made of Around the World?
In other countries, you’ll find that different materials are used for the creation of their currencies:
United States: 75% cotton and 25% linen
Australia: A waxy, waterproof polymer is used.
Canada: A thin, flexible plastic known as a polymer is used to make Canadian banknotes.
The United Kingdom and Euros: U.K. banknotes are made of a mixture of cotton fiber and linen rag; euro notes are 100% cotton
India: The paper currently being used for printing banknotes in India is made using 100% cotton
Japan: Japanese banknotes are made from mitsumata (Edgeworthia papyrifera or Oriental paperbush), abaca pulp, and other fibers, giving the finished product a unique coloring and texture.
Why Does Money Have Value?
Another money question you might ask yourself, besides what is money made of, is why it has any value in the first place. As we’ve seen, it’s simply cotton and linen combined, but we can’t take our bedsheets to a store to pay for anything, am I right?
The idea of money can be traced back to simple bartering. I have something you need, you have something I need, so we trade items.
The issue here is that I don’t always have something you need, and you don’t always have something I need. So you either needed to bring in more people with items of value or simply not get what you needed. Â
Common currencies were created to deal with this common dilemma. Instead of trading goods, barters could now use the common currency. With this concept, the idea of money was born.
Originally, precious commodities like gold and silver were used to back up paper currency due to their inherent value. However, slowly this practice became outdated. For example, up until 1971, the U.S. dollar was backed by gold. Since then, the gold standard has been removed.Â
Why Was the Gold Standard Removed?
During the 1970s, the mining of gold was outpaced by the amount of available money. So, in 1971, the U.S. government decided to remove the gold standard because the government could no longer guarantee an even exchange for gold.
At this point, the U.S. government changed the value of money to what is known as fiat money. Fiat money means that a government declares a type of printed paper to be legal tender with no inherent value to back it up.
With the fiat system comes the concept that the strength of a country’s economy will also determine the value of that country’s money. When the economy worsens, the currency’s value lowers domestically and internationally due to inflation. Conversely, when the economy recovers, the currency’s value rises.
In addition, the value of most currencies is determined by purchasing power. So when more money is printed, the value of that money is less since there is now more of it available, and you’ll need more to purchase goods.
What Kinds of Money Are There?
With all this money floating around, besides wondering what is money made of, you might also wonder if there are different types of money. Well, there are! Money is typically separated into three categories.
Active money is put into the M1 category. M1 includes all physical currency (paper and coins), checking accounts, checks, and other standard bank accounts. Money that can be immediately available to make a purchase is generally considered M1 money.
M2 money includes everything in M1, plus time-related deposits and non-institutional money market funds. In addition, money that can be liquidated easily will be considered M2 money.
M3 money included everything in M1 and M2, plus large deposits, institutional money market funds, significant liquid assets, and short-term repurchase agreements. As a result, M3 money is the least liquid currency of the total money supply.
Where Is Money Made?
Now that we know the answer to what is money made of, you might want to know where does all our money come from and where is it made? As mentioned earlier, the Bureau of Engraving and Printing is in charge of printing the U.S. dollar.
Every year billions of dollars are printed in facilities in Washington, D.C., and Fort Worth, Texas. As of February 2021, there is $2.05 trillion in federal reserve notes in circulation. In addition, there are another 50 billion in coins and older U.S. notes.
How Is Money Made?
In the U.S., money is made by the Bureau of Engraving and Printing using the following steps:
- Design: Banknote designers utilize art tools (pen, pencil, brush) to create a design that contains security measures hidden within to deter counterfeiting. The design has to be approved by the Secretary of the Treasury.
- Engraving (Intaglio Art): Engravers shrink the design to the right size and engrave it on steel dies. Drawings are broken down into several different dies, such as one with just the portrait, the text, etc. The engraving must also be made as a mirror image to print correctly.
- Siderography: Siderography is transferring the steel plate to a steel cylinder that can be used in a rolling press. In this step, the individually hand-engraved dies are combined and moved onto a printing plate to create a master die. Then, duplicate individual plastic molds are made and assembled.
- Plate Making: Using electroplating, hundreds of identical printing plates are made of the original master.
- Offset Printing: For $20 bills, subtle background colors are added as another security measure against counterfeiting. The design is then transferred to offset printing plates by Photo engravers. The designs are then printed using the BEP’s Simultan presses, which can print 10,000 sheets per hour. Lastly, the sheets are stored for three days to dry in WIP (Work-In-Progress) cages.
- Plate Printing (Intaglio Printing): About 20,000 lbs. per square inch transfers ink from the printing plates to the paper money. This process is used to print the scrollwork, portraits, numerals, vignettes, and lettering for each type of bill. The backs of the bills are printed first. They are allowed to dry before printing the face side. Special cut-out ink rollers are used on the front to print the three different colored inks needed (black, color-changing, and metallic ink). Finally, they are given another three days to dry.
- Inspection: State-of-the-art technology is used to inspect the printed sheets of money to ensure the highest quality. No minor imperfections such as ink spots or smears are allowed. Imperfect sheets are rejected and scheduled for destruction. The 32-subject sheets are split into two 16 subject sheets.
- Overprinting: In the final step of printing bills, the Currency Overprinting Processing Equipment (COPE) printers add serial numbers, Federal Reserve seals, Department of the Treasury seals, and the Federal Reserve identification numbers.
- Cutting, Stacking & Packaging: Each sheet will undergo a second inspection. Next, sheets are passed down in piles of 100 to guillotine cutters, where they are made into individual currency notes. They are then stacked into 100 bills to form a strap. Next, ten straps are shrink-wrapped together to create a bundle (1,000 bills). Finally, four bundles are shrink-wrapped and labeled to form a brick (4,000 bills).
- Packaging: In this final step, the bricks of money are marked with a unique number and then grouped into four bricks with color-coded shrink film under 450 degrees of heat. This is called a cash-pack (16,000 bills). 40 cash-packs of 640,000 bills are placed together on a skid (similar to a pallet).
How Does the U.S. Mint Make Coinage?
While the Bureau of Engraving and Printing makes all paper currency, the U.S. Mint is responsible for all coin production.
Coins like the penny, nickel, dime, quarter, and even less common, the $1 coin, are all created by the U.S. mint. In addition, copper, silver, and gold have all been used to produce coins. However, cheaper metals are now used due to rising prices for these metals.
For example, pennies were made initially with copper, but when it became scarce because of World War II, zinc pennies were minted. Today’s pennies are still primarily composed of zinc, with only 2.5 percent of their making up being copper.
Silver coins, like quarters, had their silver content slowly decline until 1964. Today, no standard denominations of coins contain silver. Instead, they typically contain copper and nickel.
Gold was also used in coins until The Great Depression. Then, the mint stopped using gold to help stabilize its price and never returned to using it in coin production.
Coin production now uses computer technology. Computers can create as many as 720 coins per minute using dies and presses. With 65 presses available, the U.S. Mint can create 46,800 coins per minute.
What Is Money Made Of: Common FAQs
What is Money Made Of, Paper?
Yes, American money is made out of 75% cotton and 25% linen paper.
What is money made of? Cotton or paper?
Money is made out of paper, but that paper is made from cotton and linen.
How Much Money Is Printed every day?
The Bureau of Engraving and Printing produces 38 million notes a day with approximately $541 million worth.
What Is Money Made Of: Other Money Facts
$20 bills last in circulation for about two years.
In 1875, Pocahontas was featured on the back of the $20 bill
Before cash currency, animal skins, including bucks (male deer), were used as tender. Hence why, we sometimes refer to money as “bucks.”
A piece of currency can be folded forward and back 4,000 times before it will tear.
Traces of cocaine can be found on approximately 90% of the money, based on a study done in 2009
Twenty-one months is the typical lifespan of a dollar bill.
Pennies cost more to make than they are worth, costing 2.4 cents to mint.
The Secret Service was created during the civil war to prevent counter-fitting.
China invented the world’s first paper currency over 1,400 years ago.
The front side of bills features portraits of famous, deceased American statesmen: George Washington on the $1 bill, Thomas Jefferson on the $2 bill, Abraham Lincoln on the $5 bill, Alexander Hamilton on the $10 bill, Andrew Jackson on the $20 bill, Ulysses Grant on the $50 bill and Benjamin Franklin on the $100 bill.
The backside of bills features famous images from U.S. history: the Great Seal of the United States on the $1 bill, the signing of the Declaration of Independence on the $2 bill, the Lincoln Memorial on the $5 bill, the Treasury Building on the $10 bill, the White House on the $20 bill, the Capitol on the $50 bill and Independence Hall on the $100 bill.
The motto “In God We Trust” first appeared on U.S. coins in 1864. In 1955, a law was passed that required all new designs for coins and currency to bear that inscription.
The first modern $1 bills were issued in 1963. Their design, featuring George Washington on the face and the Great Seal on the back, has never changed.
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What Is Money Made Of?: Final Thoughts
Money is everywhere and at the forefront of many of our minds. There is a lot of history with money and a lot of work that goes into creating money before it ever reaches our hands or bank accounts.
Over the centuries, money has evolved from simple bartering, currency backed by metals, to today’s modern fiat system. How will money change in the future? With the introduction of decentralized cryptocurrency and other modern technology, the possibilities seem endless.