Production and Distribution
A commercial bank that maintains a reserve account with the Federal Reserve can obtain notes from the Federal Reserve Bank in its district whenever it wishes. The bank must pay the face value of the notes by debiting (drawing down) its reserve account. Smaller banks without a reserve account at the Federal Reserve can maintain their reserve accounts at larger "correspondent banks" which themselves maintain reserve accounts with the Federal Reserve.
Federal Reserve Notes are printed by the Bureau of Engraving and Printing (BEP), a bureau of the Department of the Treasury. When Federal Reserve Banks require additional notes for circulation, they must post collateral in the form direct federal obligations, private bank obligations, or assets purchased through open market operations. If the notes are newly printed, they also pay the BEP for the cost of printing (about 4ยข per note). This differs from the issue of coins, which are purchased for their face value.
A Federal Reserve Bank can retire notes that return from circulation by exchanging them for collateral that the bank posted for an earlier issue. Retired notes in good condition are held in the bank's vault for future issues. Notes in poor condition are destroyed and replacements are ordered from the BEP. The Federal Reserve shreds 7,000 tons of worn out currency each year,
Federal Reserve notes, on average, remain in circulation for the following periods of time:
| Denomination | $1 | $5 | $10 | $20 | $50 | $100 |
| Years in circulation | 4.7 | 3.8 | 3.6 | 7.0 | 11.9 | 21.6 |
The Federal Reserve does not publish an average life span for the $2 bill. This is likely due to its treatment as a collector's item by the general public; it is, therefore, not subjected to normal circulation.
Read more about this topic: Federal Reserve Note
Famous quotes containing the words production and, production and/or distribution:
“Production and consumption are the nipples of modern society. Thus suckled, humanity grows in strength and beauty; rising standard of living, all modern conveniences, distractions of all kinds, culture for all, the comfort of your dreams.”
—Raoul Vaneigem (b. 1934)
“From the war of nature, from famine and death, the most exalted object which we are capable of conceiving, namely, the production of the higher animals, directly follows. There is grandeur in this view of life, with its several powers, having been breathed into a few forms or into one; and that, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.”
—Charles Darwin (1809–1882)
“The question for the country now is how to secure a more equal distribution of property among the people. There can be no republican institutions with vast masses of property permanently in a few hands, and large masses of voters without property.... Let no man get by inheritance, or by will, more than will produce at four per cent interest an income ... of fifteen thousand dollars] per year, or an estate of five hundred thousand dollars.”
—Rutherford Birchard Hayes (1822–1893)