Under the Microscope: The Real Costs of a Dollar

After examining the cost of gold production, Hass McCook looks at the sustainability of printing and minting physical currency.

AccessTimeIconJul 5, 2014 at 12:25 p.m. UTC
Updated Feb 21, 2023 at 3:42 p.m. UTC
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Money makes the world go round, and for the past several hundred years, paper currency and coins were the physical manifestation of money. Once upon a time, most paper currency in the world was backed by gold and directly exchangeable for it. This system of backing currency with tangible, universally exchangeable reserves was known as The Bretton Woods system, and was used to help the world rebuild economically after World War II (United Nations, 1948). On August 15, 1971, US President Richard Nixon ended the Bretton Woods System (Ghizoni, 1971), in what is now known as “The Nixon Shock”, allowing all currencies to float freely, with only the backing of the faith and credit of their issuing sovereign state. This type of currency is known as “fiat currency”, i.e., currency that is given value by government decree (Keynes, et al., 1978). This report will not discuss the relative merits and drawbacks of gold-backed currency and fiat-money, only the triple-bottom-line impacts of each.

Future trends

With the built-in “infinite” inflation of fiat money, more and more physical currency will need to be printed and minted every year, unless we move to a completely digital system of transaction. According to a research report issued by Smithers-Pira (2014) on the world security printing market, “digitisation and convergence are two megatrends that the security printing industry needs to come to terms with. They can be seen as a threat jeopardising the very existence of the industry, or as an opportunity to innovate and evolve in order to address risk in a broader context. In the near foreseeable future, however, security printing will continue to fulfil its critical role of preventing and detecting alterations, forgeries and copies, and support product authenticity”.

In terms of printing trends, countries like Australia and Canada use polymer-based notes which reduces both economic and environmental costs of physical currency significantly, with the United Kingdom poised to go polymer in 2016 (Allen, 2013). Coins, which have a high environmental impact due to the metal required to produce them, will most likely be phased out over the next 40 years. The reason for this is it currently costs the United States Government 1.83 cents to make a 1 cent coin, and 9.41 cents to make a 10 cent coin (Zielinski, 2014). Ireland has spent €11.8m to produce €7.1m worth of 1 Euro cent coins (Reilly, 2013). Over time, due to increasing metal costs, it will become untenable for governments to make real losses on production of currency. Some jurisdictions, like Australia, discontinued their 1 cent and 2 cent coins in 1990 (Royal Australian Mint, 2014), and as inflation continues on towards infinity, it will be less and less economically viable to produce such low denominations of currency, and therefore we might expect impacts due to minted coins to reduce over time.

Physical currency lifecycle


According to the US Federal Reserve, the life-span of non-polymer paper money varies based on denomination, as shown below.

Pic 1 - Table 5
Pic 1 - Table 5

A report prepared for The Bank of Canada ahead of the implementation of Polymer notes found that they will typically last at least 2.5 to 4 times as long as paper notes (PE Americas; Tryskele, 2011), (Ahlers, et al., 2010).

Once notes have reached the end of their useful life, they are typically pulped, compressed into bricks, and sent to an official government incinerator where they are burned, leading to environmental impact during both creation of new notes and destruction of old ones (Jackson, 2010).


After coins are minted from a typical mix of copper and steel with nickel plating, they are put into circulation where their average life is roughly 25 years (U.S. Mint, 2014). Once coins have reached their useful life, or are too worn and mutilated for circulation, they are returned to the mint for recycling (U.S. Mint, 2014).

Currency in Circulation

M0 & M1 Money Supply

The M0 money supply is defined as the total amount of monetary assets available in an economy at a specific time (Johnson, 2005). The M1 money supply accounts for all physical currency circulating in an economy, but global M1 figures are difficult to obtain. The below table shows global M0 figures from 2008. After the global financial crisis, world money supply increased dramatically, however, this didn’t translate highly into printed physical currency, i.e. M1 supply – just more numbers on a screen in a financial institution, i.e. M0 supply. The rest of this chapter will simplify the analysis greatly by assuming similar proportions for M0 and M1 money supply, and typically only consider the Euro, USD and Yen, who account for 60% of the world total, and extrapolate figures from there.

Pic 2 - Fig 5
Pic 2 - Fig 5


The next sections will use the Euro and the USD to illustrate this point further, and attempt to extrapolate production to other markets.


Japan bucks the trend of the US and EU and only has about 4.5 billion coins in circulation, over 20 times less than the EU or USA (Statistics Japan, 2014).

Rest of world

Statistics from India show over 1 trillion coins in circulation – roughly 4 times the quantity of USD coins and Euro coins combined (Chinnammai, 2013). Combining the USD, EU and India accounts for only one third of the world’s population, so to be conservative, it will be assumed that 1.5 trillion coins are circulating around the planet, at an average weight of 3.5 tonnes per million coins, i.e., 5.25 million tonnes of metal circulating in the form of coins.


Due to their higher value, there are much less banknotes in the world than coins, as demonstrated in the US example in the figure below. According to the US Federal Reserve, there is approximately USD$1.27 trillion in circulation, of which $1.22 trillion is in over 35 billion Federal Reserve notes.

Pic 4 - fig 6
Pic 4 - fig 6

The EU has 15.8 billion notes in circulation that are valued at €933.7 billion as at February 2014 (European Central Bank, 2014). Japan, the country with the 3rd Japan, 2014). With the US, EU and Japan accounting for 60% of the world’s M0 money supply, and through assumption, 60% of the world’s M1 money supply, it can be assumed that at least 200 billion bank notes are in circulation around the world.

Economic costs of physical currency


Smithers-Pira estimates the global market for security printing in 2018 to reach USD$35.3 billion, based on a compound annual growth rate of 5.9% between 2013 – 2018, putting the current global market size at USD$26.5 billion (Smithers Pira, 2013).

Pic 5 - fig 7
Pic 5 - fig 7

As a check, the United States paper currency budget for 2014 is USD$826.7 million (U.S. Federal Reserve, 2014). The United States has typically cheaper printed currency, due to their cotton-linen mix as opposed to typically polymer-based security currency. Whilst polymer notes cost twice as much as cotton ones, they last 4 times as long, effectively cutting the whole-of-life costs by 50% (Ahlers, et al., 2010).

Due to their increased defence against counterfeiting, as well as their longevity and lower environmental impact, it is expected that if the world does not go digital with their currency, polymer security notes will take over the cotton-linen market.


The budget to mint US Coins in 2013 was USD$459 million (U.S. Mint, 2014) however, it is difficult to glean a detailed breakdown of these costs. To take the simplest approach, we can multiply the mass of all coins in circulation by the cost to buy the equivalent amount of raw materials, with a 25% premium put in place for the production process.

In 2013, the US used 37240 tonnes of metal to produce coins, of which 90% was copper and 10% was nickel (U.S. Mint, 2014). At a copper price of $7000/tonne and a Nickel price of $16,000/tonne (London Metal Exchange, 2014), this equates to USD$350 million in materials. A 25% premium brings it to just over USD$430 million, which is close to the official figure of USD$459 million.

Applying this logic to Euro coins which have similar composition, and the very conservative assumption the Euro and USD account for only half of the world’s yearly minted coin stock, it can be concluded that international coin minting costs over USD$1.5 billion every year.

Pic 6 - table 8
Pic 6 - table 8

Environmental Costs of Physical Currency

Again, whilst little globally aggregated data exists, we can analyse data on coins, paper and polymer-based notes from the world’s major economies. Detailed data exists for the USA, Euro, Australia and Canada.

Paper Currency

A very comprehensive sustainability assessment undertaken by Ahlers et al (2010) attempts to quantify the environmental impacts of the US Dollar, in contrast with polymer-based notes produced in Australia. The major environmental costs, based on data from 2002, are as follows (Ahlers, et al., 2010):

  • Water Use During Paper Making: 1 million gallons / day = 1.4 billion litres per year
  • Water Use During Printing: 250,000 gallons / day = 0.35 billion litres per year
  • Waste Ink & Pulp Sludge = 6 million pounds = 2720 tonnes
  • Electricity Use During Printing: 97850 MWH of electricity = 0.35 million GJ
  • Electricity Use for Pulp Making = Same as electricity used during printing = 0.45 million GJ
  • Ink Usage = 3540 tonnes
  • Over 7100 tonnes of cotton
  • Over 2300 tonnes of linen

Using the above data, production of US paper notes in 2002 has similar electricity use to the Euro (0.8 million GJ vs 0.87 million GJ), and as the M0/M1 money supplies of both countries grew pretty similarly, it can be concluded that current electricity need to produce all notes in circulation is on par with the Euro at around 4.6 million GJ.

The Euro publishes sustainability statistics on their currency, and according to latest estimates, 3 billion banknotes printed in 2003 had an equivalent energy impact of 460,000 60W bulbs switched on for a year, which equates to 240 million kWh, or 0.87 million GJ. With circulation now at 15.8 billion notes, this would scale up to 4.6 million GJ (European Central Bank, 2007). To get to a global figure, for the purposes of this report, I will be multiplying this figure by a factor of four (i.e. a proportional share of global M0/M1 money supply). Therefore, we reach a figure of 18.4 million GJ, which would correspond to almost 3.07 million tonnes of CO2 equivalent.

Using heuristics from analysis of 100 paper bank notes, the conclusion can be drawn that 200 billion notes produce 3.2 million tonnes of CO2, with 100 paper notes producing 1.59kg CO2 equivalent (PE Americas; Tryskele, 2011). This figure checks well.


Polymer Currency

Polymer Currency has shown to produce at least 30% less environmental impact than cotton-paper currency (PE Americas; Tryskele, 2011). Due to the relatively small volume of polymer-based currency currently circulating internationally, polymer based currency will not be considered further in this report. As discussed earlier, due to economic, environmental, and social superiority to cotton-paper money, it is likely that over the next generation, all paper money circulating in the world will become polymer based.


Although there is no concrete data of global yearly minting statistics, data from the EU and US can be extrapolated globally. As a check, you can divide the number of coins currently in circulation in the world, 1.5 trillion, by the average life of a coin, 25 years, to reach a figure of 60 billion coins minted per annum. For reference, the U.S. mint minted 10.7 billion coins in 2013 (U.S. Mint, 2013), so a global figure of 60 billion is not unreasonable.

Using weight data from earlier sections of this report, the average weight of one million coins is roughly 3.5 tonnes. This means that 60 billion coins will require 210,000 tonnes of metal. Simplifying further and optimistically assuming that coins are 50% copper and 50% steel by weight, and using the carbon emissions data from the table below, we reach a figure of 21.25 million GJ to simply mine the materials used for coin making, not including the energy required for cutting and stamping coins.

Pic 8 - table 10
Pic 8 - table 10

Using the GJ to kW to tCO2 heuristics from earlier in the report, 21.25 million GJ equates to 3.5 million tonnes of CO2.

Pic 9 - table 11
Pic 9 - table 11

Socioeconomic Costs of Physical Currency

Due to its inherent physical and economic properties, fiat currency can be highly advantageous to malevolent actors. Paper money is very easy to counterfeit and launder, and almost impossible to trace and track. Due to its inflationary nature, nefarious types like drug dealers, human traffickers, corrupt public officials and other members of the shadow economy use it as their currency of choice to facilitate their ongoing operations. The socioeconomic costs of these activities are shown below.

Money Laundering

In 1996, the IMF estimated that 2-5% of the entire world’s economy involved laundered money – a figure translating to about $1.5 trillion a year. Whilst this figure seems large, several other experts estimate that the value is closer to $2.85 trillion per year (Smith, 2011). These experts are backed by a 2008 UN report into money-laundering and globalisation which put the figure at anywhere between $800 billion and $3 trillion per annum (UN Office on Drugs and Crime, 2008).

A report by The Council on Foreign Relations translates this dollar figure poignantly into human costs, citing 50,000 deaths in Mexico over the past 6 years due to drug trafficking, as well as the enslavement of 27 million people in forced labour, prostitution, and other activities relate to human trafficking (Council on Foreign Relations, 2013). Social costs of illegal arms trafficking are difficult to quantify, but are no doubt significant.


As shown in the above calculations, the cost to print money is substantially less than what the money is valued at. The result is inflation / loss of consumer buying power. Global average yearly inflation is 3.9% (CIA World Factbook, 2013), which makes your money worth more than 30% less after 10 years, less than half after 20 years, and 70% less over 30 years, a reasonable estimate for length for a retirement commencing in 2014.


In addition to the social damage and the trillions of dollars that money laundering costs the global economy, it is estimated that an additional $1.6 trillion is lost to governments around the world every year (BBC News, 2009) due to corrupt politicians and public officials.

Transactional fraud

Transactional fraud, mainly through credit and debit cards, cost the global economy a staggering $190 billion per year (LexisNexis, 2013).

Institutional Fraud

The Association of Certified Fraud Examiners estimates the yearly cost of fraud to be 5% of global revenues, or, $3.7 trillion per year, based on 2013 global figures (Association of Certified Fraud Examiners, 2014).

It should be noted that institutional fraud is a problem that is systemic to humans, and not to monetary systems per se. However, as there have been several attacks against the quantity of institutional fraud and scams found in the unregulated world of Bitcoin, it is useful to quantify the magnitude of fraud in the regulated world of corporations. Due to the frequency and magnitude of fraud in the legacy system, I will only refer to single fraud events larger than the largest ever single alleged institutional Bitcoin fraud event (Mt Gox in 2014), so as to not encumber the reader with too many examples.

Pic 10 - table 12
Pic 10 - table 12


Again, it should be noted that theft is a problem that is systemic to humans, and not to monetary systems per se. However, as there have been several attacks against the quantity of thefts found in the world of Bitcoin, it is useful to quantify the magnitude of thefts found in legacy systems. Due to the frequency and magnitude of thefts in legacy systems, I will only refer to single theft events larger or similar in size to the largest ever single alleged Bitcoin theft event (Mt Gox in 2014), so as to not encumber the reader with too many examples.

Pic 11 - table 13
Pic 11 - table 13

Further to the above single events, it is estimated that 1.4% of retail revenues, or $112 billion in 2012, are lost to petty theft and shop-lifting every year (Griffin, 2013).

The Black Market

In addition to the more than $3 trillion dollars lost to laundering and corruption, the world’s economy is subject to a further loss of $1.8 trillion dollars to the black market. A lot of the money that enters the black market is “clean”, i.e., a citizen using legally obtained money to purchase illegal goods. The breakdown of this $1.8 trillion dollar market is shown in the table below (Havoscope, 2014).

Pic 12 - table 14
Pic 12 - table 14

We've now looked at the costs of printing and minting physical currency, alongside gold production and bitcoin mining. Check back next week for the penultimate article in the series, in which Hass McCook calculates the environmental and social costs associated with the banking system.

Pound image via Shutterstock


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