http://www.economist.com/news/business-and-finance/21621226
In
the article, the author explains why banknote printing has become less
profitable in recent years. Although interest rates have been low coupled with
quantitative easing, one would think that the demand for hard cash would be up,
but that is not the case. De La Rue is a currency printer that produces over
150 national currencies. It ranges from printing currency for the island of
Fiji to printing currency for the Bank of England. The new English banknotes
will be made partially of plastic for the first time.
Despite
De La Rues success in acquiring new contracts, the company projects its profits
to fall by $21 million this year to roughly $110 million. The reason for the
decrease in profitability can be attributed to the banknote division. De La Rue
has new competition in printing plastic money from companies such as Giesecke
& Devrient from Germany and Oberthur from France. On top of that,
Australian firms have been using polymer-plastic printing technology for the
past decade. Reportedly, De La Rue secured its contract with the Bank of
England to print new plastic currency because it offered a large discount,
which in turn it will now have to offer to other contracts.
However,
De La Rue also provides other services such as printing passports that it can
fall back on. Nowadays, most transactions take place without any hard currency
so there have been talks from central banks to dispose of printing currency
completely. Also, since the demand for money has decrease over time due to
technology, the supply of real money needs to decrease as well in order for
there to be less inflation.
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