|BSP demonetizes New Design Series bills|
For the purposes of macroeconomics, according to the BSP, removing the outdated notes from circulation and burning them so that no one may ever use them again is a salient feature that shrinks the money supply — a special case of contractionary monetary policy that the central bank implements.
In money burning, the central bank does not have to exchange any assets of value for the money burnt, thus, equivalent to gifting the money back to it as the notes issuing authority, then increasing the real value of the money left in circulation — especially when the economy is at full employment equilibrium that shrinking the money supply is needed to decrease the rate of inflation.
Assuming that the burned bill is paper money with negligible intrinsic value, no real goods are destroyed, so the overall wealth of country is unaffected–instead, all surviving money slightly increases in value and everyone gains wealth in proportion to the amount of money they already hold, the BSP explained.
In here, however, the BSP local branch, instead of the old practices of disposal, donates these shredded trash to the Salitayo Livelihood Organization, whose members use them in their handmade paper crafting whose end products are highly salable, functional and decorative items made out of specialty paper.
The organization is composed of families relocated several years back from the areas threatened by Mt. Mayon eruptions and resettled at the city’s Barangay Taysan relocation site and being aided to overcome economic dislocation by the local government and several other government agencies by way of livelihood interventions.
As part of these interventions, the Department of Science and Technology (DOST) regional office here trained women members of the organization in handmade paper craftsmanship, making use of the huge volume of the shredded bank notes.
And since this material can no longer adhere in its own, abaca fiber is used by the group to reinforce it into high-quality specialty paper products, Tomas Briñas, the DOST regional director, on Tuesday said.
He said BSP-Legazpi produces an average of three tons of shredded bank notes monthly that it donates to the Salitayo and save on mobilization expenses in burning it –at the same time, abiding by the city government’s policy that prohibits the burning of garbage under its ecological waste management program.
More of this trash is expected by 2017 as the BSP is now in the process of demonetizing old banknotes belonging to the New Design Series (NDS).
The process that took off last Jan. 1 is in line with the provisions of Republic Act No. 7653, otherwise known as the New Central Bank Act which authorizes the BSP to replace banknotes that are more than five years old in circulation.
It is also part of the central bank’s intention of preserving the integrity of Philippine currency, given that the NDS bills have been in circulation for almost three decades now and to adopt the change in currency design being practiced by other central banks around the world.
BSP Legazpi City branch manager Cynthia Ariola advised the public that the NDS banknotes may only be used in cash transaction up to Dec. 31, 2015 and by Jan. 1, 2016, peso bills with denominations of 5, 10, 20, 50, 100, 200, 500 and 1,000 will no longer be accepted as payment for transactions.
She said that starting Jan. 1 until Dec. 31 next year, the public may exchange with banks as well as with BSP Central Office or branches all over the country their NDS banknotes with the New Generation Currency (NGC) Series at full face value.
She stressed that starting Jan. 1, 2017, NDS banknotes that have not been exchanged shall no longer have any monetary value being already considered officially demonetized.
The demonetization, she said, will pave the way for the circulation of a single currency series in the country – the NGC Series issued on Dec. 16, 2010 that uses new and enhanced security features for the protection of the public against counterfeiters.
According to the BSP, it spends several million pesos a year to dispose of notes that can no longer be used as currency.
“Recycling these banknotes into handmade paper means a new income-generating project for the livelihood organization, a saving on disposal expenses on the part of the BSP and environmental protection, given that burning them causes ecological degradation,” Briñas said.
Bills are treated with anti-bacterial chemicals to make them last longer and since they are made using biodegradable materials—20 percent abaca and 80 percent cotton, these materials make good recycled stuff for the Salitayo livelihood project, he said. (by Danny O. Calleja, PNA)