Question: How much does it take to make pennies and paper notes? Is this value more than the value of the pennies/ paper notes?

James Pope answered on 29 Jun 2012:

Hi abichohan,

Money in the form of paper and coins is a promise to the person holding it (called the ‘bearer’) that the Bank of England, Royal Bank of Scotland, Bank of Scotland, Clydesdale Bank or Ulster Bank (the banks allowed to print their own money) will pay that person for the value they have in their hand. So in effect all paper or coin money is a promise of value and doesn’t have any value.

I don’t know the exact amounts, but I expect it is relatively cheap to produce, or as it is called ‘mint’ money as it can be done in massive production lines. The most expensive part of the process is probably creating news ways to stop people creating fake money, so things like the type of paper used, watermarks, the metal strips and complicated design patterns, which are hard to fake and so make fake money easier to spot. The banks have to be careful to ensure the amount of money available is controlled, so they also destory money on a regular basis by burning it, to make sure too much isn’t around which can cause the money to be worth less than it should be (called inflation).

In the past, when coins were made from precious metals, you paid for goods in a weight of gold or silver that fitted the value of the goods, so you went away with the value in goods that you handed over in precious metals. This though required people to be careful that no one fiddled with the money, such as replacing gold coins with coins made with lead and painted with thin layers of gold to make them look gold.