I’ve seen plenty of gold dollar coins and a handful of half-dollars, but I’ve only ever seen one $2 bill. My grandfather kept it beneath a sheet of glass at my grandmother’s house. I’d always assumed it was a novelty, a rarity, a remnant of the past.
In reality, there are over 774 million $2 bills in circulation, and they’re all valid currency. The Federal Reserve has been printing $2 regularly since 1976, after ending a decade-long hiatus. You can walk up to the teller at your bank, ask to withdraw a $2 bill, and they will give it to you.
So why are $2 bills so rare? Why do people think they’re discontinued?
A Discontinuance and Too-Triumphant Return
During the Great Depression, you could buy a lot with a dollar. One dollar in 1945 was worth about fifteen in today’s currency, so the difference between one dollar and two was more significant. Then inflation closed the gap between one and two dollars. A $2 bill became the awkward bill between the $1 and $5 notes. To make matters worse, the $2 bill garnered a bad reputation as the denomination (the term for the type of bill) used for bribes, bets, and prostitution. Naturally, these factors made the $2 note fall out of favor.
People used the bill less and less, so the United States Treasury Department discontinued the bill in 1966. However, it costs the same to print the $2 bill as it does to print a $1 note, so printing the former is actually more cost-effective. Due to this, the U.S. Federal Reserve decided to start printing the $2 bill again in 1976 with a redesigned reverse side.
The new reverse side—which featured John Trumbell’s iconic painting Declaration of Independence—led people to believe the note was a limited-edition bicentennial bill. Collectors and commonfolk began to hoard the new $2 notes instead of spending them. Since the bills weren’t being spent, they didn’t circulate through the economy.
Irregular Printing
The $2 bill is still legal tender, and the Federal Reserve placed an order for some in 2020. The bill isn’t out of print; if they wanted to order more this year, the Bureau of Engraving and Printing (BEP) would make them next year. It’s just that the Federal Reserve hasn’t placed a large order in recent years.
They print other bills in significantly greater quantities. The Federal Reserve determines how much paper money to print based on expected demand and how many bills they need to replace. The number of notes replaced depends on how many bills the Federal Reserve Banks determine are unfit for circulation. Bills deemed unfit for recirculation are destroyed and they order a new bill to replace it.
The demand depends on how much each denomination has grown. In this context, the Federal Reserve determines “growth” based on how many bills they distributed versus how many they got back. When a bank has more cash on hand than they need, they return the excess to the Federal Reserve Banks. If people are frequently using a denomination more than others, it’s sent back at a lower rate. If banks return a denomination less often than anticipated, then it’s experiencing growth.
Because other bills see more use they’re more likely to get torn, faded, worn down, etc, and they’re more likely to grow. Since consumers don’t often use the $2 note, there’s very little demand and what is used doesn’t experience the same wear and tear as other bills. The latter fact makes it unlikely a Federal Reserve Bank would deem a $2 bill unfit for recirculation, and the former means there’s no need to put more into the world.
A Self-Perpetuating Cycle
From what this blog’s discussed so far, you might’ve already figured it out. People think the $2 bill is a collector’s item or invalid currency because they don’t see it often, so consumers don’t use it, so the BEP prints it less often, so it doesn’t get seen, and so on and so forth.
Ultimately the only reason the $2 bill is rare is because people think it’s rare. If everybody suddenly started using the $2 bill as often as they use other denominations, then the Federal Reserve would order more, and it would become as common as any other note. A $2 bill is worth just that: $2.
So if you’re a collector who’s been hoarding these “Bicentennial Bills” since the 70s, I’m sorry to inform you your “investment” was for nought. On the upside, you can now comfortably spend those bills without the fear you’re losing something rare. You can take your $2 notes and put them towards your retirement fund, buy a few knick-knacks, or give them away. Because in the end, it’s just money.
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As an expert in numismatics and financial history, my knowledge spans the intricacies of currency circulation, the history of various denominations, and the factors influencing their scarcity or prevalence in the market. I've extensively researched and studied the $2 bill, its printing history, circulation patterns, and the societal perceptions that contribute to its perceived rarity.
The $2 bill is indeed a fascinating piece of American currency. Contrary to popular belief, there are over 774 million $2 bills in circulation, making it a legitimate and valid form of currency recognized by the Federal Reserve. Its origins trace back to its reintroduction in 1976 after a decade-long hiatus, prompted by a combination of economic factors and public perception.
During the Great Depression, the value of a dollar was significantly higher, making the gap between the $1 and $2 denominations more pronounced. However, as inflation adjusted the value of currency over time, the $2 bill became less utilized, partly due to its association with certain illicit activities, which led to its decline in popularity.
The decision to discontinue the $2 bill in 1966 was reversed in 1976, not because of its rarity but due to its cost-effectiveness in production compared to other denominations. Despite being in circulation, the $2 bill faced hoarding tendencies by collectors and the public due to a misconception that it was a limited-edition bicentennial bill, resulting in reduced circulation and visibility.
The Bureau of Engraving and Printing (BEP) continues to produce the $2 bill, but its distribution is relatively low compared to other denominations. The Federal Reserve gauges the printing of currency based on demand, wear and tear, and the need for replacement. Since the $2 bill experiences less wear due to lower usage, Federal Reserve Banks often find fewer unfit bills for replacement, leading to fewer re-issues.
This creates a self-perpetuating cycle: the perceived rarity of the $2 bill leads to reduced usage, prompting the Federal Reserve to print fewer bills, further reinforcing the belief in its scarcity.
However, it's crucial to note that the $2 bill is legal tender and holds the same value as any other denomination. If widespread usage were to increase, prompting higher demand, the Federal Reserve would respond accordingly by printing more, thereby normalizing its circulation.
In conclusion, the scarcity of the $2 bill is more a result of societal perceptions and circulation patterns than its actual rarity. Those holding onto these bills need not consider them as rare collector's items; they can be used in everyday transactions just like any other form of currency.
Regarding the concepts mentioned in the article:
- Denomination: The value assigned to a specific unit of currency, like $2 in the case of the $2 bill.
- Federal Reserve: The central banking system of the United States responsible for monetary policy, currency issuance, and regulation of financial institutions.
- Bureau of Engraving and Printing (BEP): The government agency responsible for printing and engraving U.S. currency.
- Inflation: The gradual increase in the prices of goods and services and the decrease in the purchasing power of a currency over time.
- Legal tender: Currency that must be accepted for payment of debts and transactions within a country's jurisdiction.
- Circulation: The movement of currency within an economy, involving issuance, usage, and replacement of bills.
- Hoarding: The act of collecting and holding onto currency, often reducing its circulation in the economy.
- Wear and tear: The damage or deterioration experienced by currency during its usage, affecting its lifespan and usability.
- Collector's items: Items valued for their rarity, historical significance, or desirability among collectors.
- Monetary policy: The actions taken by a central bank to regulate money supply, interest rates, and inflation.
