Why Is It Illegal To Burn Money In The US?

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In the early ’90s the infamous drug baron, Pablo Escobar was said to have burned over $2 million while on the run just to keep his family warm. This was reported by his son who has now changed his name to Sebastian Marroquin.

Perhaps, there were no implications for this activity due to the ruthlessness of the individual involved. It could also be that Colombian laws at the time were not against it. However, burning that amount of cash or any cash at all certainly has consequences in many countries today.

Several countries in the world criminalise the mutilation and destruction of bank currencies. This is also the same for the United States where it is considered a federal crime to burn money and is punishable under federal law.

In this article, we will be discussing why burning money is an illegal act in the United States starting with how money works. This can help us better understand why burning it has been considered a crime by many nations including the US.

To burn money is considered a federal crime.

How does the concept of money work?

Money works as a medium of exchange between individuals. Before the invention of currencies, commodities were exchanged between parties based on need. This posed a problem because exchange could only happen if both parties had what the other party needed.

Inventing currencies eliminated this problem hence, individuals or entities can now buy a certain commodity and present the currency value of that commodity. This currency can be used to purchase other commodities according to their currency value.

Now, imagine what happens when this currency that is used as an exchange for a commodity gets destroyed. While there is no actual destruction of a commodity, the currency value is lost. If you are really rich, you may not feel the loss but imagine being broke and having your last card thrown in a furnace.

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This article strictly deals with money as a currency and not as a commodity for trade by barter.

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What are the implications of burning money?

1. Diminishes money supply

When you burn paper currency or destroy coins, you are directly reducing the number of dollar bills in supply. This singular act completely destroys the purpose of money by reducing your own wealth without adding to the wealth of another party.

2. Causes deflation

A reduction in the supply of money can lead to a fall in the prices of things. This is because more money in circulation will not increase the output of an economy rather, it will put pressure on the prices of things.

In the same vein, if the circulation of money is decreased, consumers will have limited currency. This will lead to a fall in the demand for goods leading to deflation. While deflation seems cute, it can lead to long-term consequences like slower economic growth.

3. Incurs minting costs

Money, whether coins or bank notes do not fall from the sky. They are produced via a rigorous process that involves the use of various equipment and tools. These processes are also performed by people who get paid to carry out these functions. Well, to be brief, let’s say it costs money to make money.

The Bureau of Engraving and Printing is responsible for carrying out this function in the United States.

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Why is it illegal to burn money in the U.S.?

To maintain a stable economy, the amount of money circulating needs to remain stable. This will ensure that inflation or deflation is put in check. For this reason, when there is a fall in currency circulation due to destruction or mutilation, the Federal Reserve is forced to replace lost currency by minting replacement. These replacements cost money.

According to the Board of Governors of the Federal Reserve System, the US budgeted $1,060,000 in 2022 alone for the production of new currencies. This accounts for currencies that have been lost or destroyed. While directly burning bank notes may not have very detrimental consequences for an economy short-term, it can pose a loss for the government and incur costs when minting currency.

What is the punishment when you burn money in the U.S.?

In the US, destroying bank notes and coins attracts huge fines or jail sentences under title 18, chapter 17 of U.S. Codes as it states:

“Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued shall be fined under this title or imprisoned not more than six months, or both.”

This is a federal crime and is bound by the law that prohibits arson (the intentional destruction of property). The intent of the destruction is highly considered in such cases and one could be declared innocent only on the grounds of accident or intoxication if the act was not carried out deliberately.

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Exceptions to the law on burning money

There is no solid exception to the law when it comes to burning money however there have been arguments about whether burning money or altering coins could be a form of free speech like burning the American flag.

These kinds of actions need to be put in check. Permitting the burning of currency during protests under the guise of free speech could have devastating effects. Some may see it as a go-ahead to burn large amounts of money.

There have been recorded occurrences by the media where protesters burned paper money without facing any major consequences.

Final words

Now you are aware that your money may be yours but you are not free to do whatever you like with it. Doing something like burning currency could land you in jail. It can also leave you paying fines or a combination of both even if the money belongs to you.

If you have lots of money to spend and you have a problem figuring out how to spend it like Pablo Escobar, make sure that you do not burn it. There are lots of charities that you can donate the money to instead.