Lexi Webster
Money burning is the act of purposefully destroying money, often by setting banknotes on fire. While it is illegal in some places, such as the United States, individuals in other places have burned money publicly as a form of protest. Central banks also destroy worn-out currency, but this does not affect the money supply. In Australia, the Reserve Bank (RBA) has a Damaged Banknotes Facility that allows eligible holders of incomplete or badly damaged/contaminated Australian banknotes to make legitimate claims and receive reimbursement. However, it is an offence under the Crimes (Currency) Act 1981 to intentionally deface, disfigure, mutilate or destroy Australian banknotes without the consent of the RBA or Treasury.
| Characteristics | Values |
|---|---|
| Burning Australian money | Illegal under the Crimes (Currency) Act 1981 |
| Reasons for burning money | Communicating a message, artistic effect, protest, or signal |
| Effect of burning money | Decrease in the wealth of the owner, reduction in money supply, and a decrease in the inflation rate |
| Money burning by central banks | A way to withdraw money from circulation without exchanging assets, equivalent to gifting money back to the central bank |
| Money burning in practice | Central banks destroy worn-out coins and banknotes and replace them with new ones |
| Replacement of burnt money | The Reserve Bank of Australia (RBA) accepts damaged cash and reimburses the owner |
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What You'll Learn
Burning Australian money is illegal without Reserve Bank consent
Burning Australian money is illegal without the consent of the Reserve Bank. Under the Crimes (Currency) Act 1981, it is an offence to intentionally deface, disfigure, mutilate or destroy Australian banknotes without the permission of the Reserve Bank or Treasury. This law also prohibits the sale of banknotes known to have been defaced or mutilated. The Reserve Bank has the authority to treat unfit banknotes as incomplete or badly damaged, and it may reimburse individuals for damaged cash, including burnt money, through its Damaged Banknotes Facility.
The act of burning money, also known as money burning, is the deliberate destruction of banknotes or coins. While it may be done for artistic expression, protest, or as a signal, it reduces the money supply and slows down inflation. In some cases, burning money can be a form of philanthropy, as proposed by economist Steven Landsburg, who suggests that burning one's fortune in paper money can be more egalitarian than donating it.
Central banks typically collect and destroy worn-out currency to maintain a healthy supply of usable money. However, when individuals burn money, it decreases their wealth without directly enriching anyone else. Additionally, burning money can be illegal in certain jurisdictions. For example, in the United States, burning banknotes is prohibited under 18 U.S.C. § 333: Mutilation of National Bank Obligations.
While the Reserve Bank of Australia (RBA) does not encourage the burning of money, it provides a Damaged Banknotes Facility for eligible holders of incomplete or badly damaged Australian banknotes. The facility aims to ensure public confidence in the integrity of Australian currency. The RBA assesses each damaged banknote on a case-by-case basis and may reimburse individuals for their trouble. However, it is important to note that the full face value may not be paid for incomplete banknotes, and the bank has procedures in place to prevent the facility from being used for criminal purposes.
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The Reserve Bank reimburses for damaged cash
In Australia, the Reserve Bank provides a Damaged Banknotes Facility for eligible holders of incomplete or badly damaged/contaminated Australian banknotes to make legitimate claims. The aim is to ensure that the public has confidence in Australian banknotes as a secure means of payment and store of wealth. The presence or absence of a serial number does not affect the assessed value of a claim. However, full face value is not paid on incomplete banknotes, so care should be taken when accepting them. The Reserve Bank pays value for badly damaged or contaminated banknotes based on visual assessment and, at its discretion, other processes.
It is an offence under the Crimes (Currency) Act 1981 to intentionally deface, disfigure, mutilate or destroy Australian banknotes without the consent of the Reserve Bank or Treasury. This includes selling banknotes known to have been defaced. The same applies to coins. The Reserve Bank reserves the right to treat unfit banknotes as if they were incomplete or badly damaged/contaminated, at its discretion.
If you have damaged Australian currency, you can take steps to get it replaced. First, separate any coins and paper currency, as they are processed by different offices. Then, compose a letter to explain the damage, including your name and contact information, the original value of the currency, and how the currency was damaged. Finally, take or mail your currency and letter to the appropriate office. If you live in or near Canberra, you may be able to hand-deliver your damaged currency.
In the United States, mutilated currency is a note that has been damaged to the extent that one-half or less of the note remains, or its value is questionable. In such cases, special examination by trained experts at the Department of the Treasury or the Bureau of Engraving and Printing (BEP) is required before any exchange is made. Under regulations issued by the Department of the Treasury, mutilated United States currency may be exchanged at face value if more than 50% of a note identifiable as United States currency is present. Alternatively, if 50% or less of the note is present, the method of mutilation and supporting evidence must demonstrate to the satisfaction of the Treasury that the missing portions have been totally destroyed. Burnt currency that is clearly less than one-half of a complete note and cannot be handled without compromising its integrity is considered mutilated currency.
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Burning money is a form of protest
Burning money is often done as a form of protest or political expression, which is protected under the First Amendment of the U.S. Constitution. However, there have been cases where individuals have been prosecuted for burning money, particularly when done in public. For instance, an Oregon man was fined $500 for burning a $20 bill in front of a group of children, explaining that he was protesting the high cost of education. Similarly, a man in Florida was arrested and charged with disorderly conduct for burning a $5 bill in front of a police officer, claiming to be protesting the government's handling of Hurricane Katrina relief efforts.
While small, private acts of burning money may be overlooked, public displays of burning currency are often seen as a challenge to the established economic order and can lead to legal repercussions. In the United States, burning banknotes is prohibited under 18 U.S.C. § 333: Mutilation of National Bank Obligations. Similarly, in the United Kingdom, the Theft Act 1968 makes it illegal to destroy or deface currency, and Australia has the Crimes (Currency) Act 1981, which prohibits the intentional defacement or destruction of Australian banknotes without the consent of the Reserve Bank or Treasury.
Despite the legal risks, some high-profile protests or artistic statements involving money burning have occurred without legal consequences. One notable example is the KLF's million-pound stunt, which became a cultural milestone and forced a reconsideration of the role of money in art and society. Another example is the 2016 protest in front of the Trump International Hotel, where several people burned $1 bills to protest then-president-elect Donald Trump's policies.
In some cultures and religions, burning money is customary or even sacred. For instance, some Hindus burn their deceased loved ones' money as part of the cremation process, while in other cultures, burning paper money at weddings or funerals ensures the deceased has enough money in the afterlife.
Overall, while burning money as a form of protest may carry legal risks, it has been used throughout history as a powerful way to challenge societal norms, critique economic systems, and express political beliefs.
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Money burning is a contractionary monetary policy
Monetary policy is a set of actions to control a nation's money supply and achieve economic growth. It is commonly classified as either expansionary or contractionary. Money burning is a contractionary monetary policy.
Contractionary policies aim to reduce the rates of monetary expansion by limiting the flow of money in the economy. This is done by increasing interest rates, which reduces the amount of money circulating in the economy. This can slow economic growth and increase unemployment, but it is often seen as necessary to stabilize the economy and curb inflation.
Central banks, such as the U.S. Federal Reserve, can enact contractionary policies by raising interest rates. Increasing taxes also reduces the money supply and decreases consumers' purchasing power. This can slow down production or lower asset values. Reducing government spending in areas like subsidies, welfare programs, public works, and employment can also be part of a contractionary policy.
The purpose of a contractionary policy is to slow economic growth to a healthy level, typically targeting an annual GDP growth rate of 2-3%. While it may lead to reduced business investment and consumer spending, it helps prevent unsustainable speculation and capital investment triggered by previous expansionary policies.
In Australia, it is an offence under the Crimes (Currency) Act 1981 to intentionally deface, disfigure, mutilate, or destroy Australian banknotes without the consent of the Reserve Bank or Treasury.
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Central banks destroy worn-out currency
In Australia, it is an offence under the Crimes (Currency) Act 1981 to intentionally deface, disfigure, mutilate or destroy Australian banknotes without the consent of the Reserve Bank or Treasury. The Reserve Bank of Australia (RBA) provides a Damaged Banknotes Facility for eligible holders of incomplete or badly damaged/contaminated Australian banknotes making a legitimate claim. The aim is to ensure that the public has confidence in Australian banknotes as a means of payment and a secure store of wealth.
The presence or absence of a serial number does not affect the assessed value of a claim. However, full face value is not paid on incomplete banknotes, and there is no obligation to accept an incomplete banknote in payment or change. A banknote with a significant piece missing is classified as incomplete and may not be worth full value. The RBA pays value for badly damaged/contaminated banknotes based on visual assessment and, at its discretion, other processes.
Unfit banknotes, which have become worn or sustained minor damage, are not generally covered by the Damaged Banknotes Facility. However, the Reserve Bank may treat unfit banknotes as if they were incomplete or badly damaged/contaminated. An example of an unfit banknote is one that has sustained minor damage, such as wear, tear, staples, and marks, which do not impact their value. Generally, unfit banknotes can still be used, but the RBA recommends that Australian banks prevent any unfit banknotes from circulation.
For the purposes of macroeconomics, burning money is equivalent to removing the money from circulation, and locking it away forever. Burning money shrinks the money supply and is, therefore, a special case of contractionary monetary policy. Money burning is thus equivalent to gifting the money back to the central bank or other money-issuing authority.
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Frequently asked questions
It is an offence under the Crimes (Currency) Act 1981 to intentionally deface, disfigure, mutilate or destroy Australian banknotes without the consent of the Reserve Bank or Treasury. However, the Reserve Bank provides a Damaged Banknotes Facility for eligible holders of incomplete or badly damaged/contaminated Australian banknotes making a legitimate claim.
The good news is that these scarred notes aren't worthless. In fact, the Reserve Bank of Australia (RBA) happily takes damaged cash and reimburses you for your trouble. You can take your scarred banknote into any bank branch, credit union or building society, according to the RBA.
Money is usually burned to communicate a message, either for artistic effect, as a form of protest, or as a signal. In some games, a player can sometimes benefit from the ability to burn money. Burning money is equivalent to removing the money from circulation, and locking it away forever; the salient feature is that no one may ever use the money again.
