So imagine I lost a note of $10 and it somehow burns or anything that makes it disappear forever, what impact does this have on the economy or anything?
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Individually almost nothing, there is so much currency out there that the impact of a single note, even tons and tons of notes is not noticeable.
For example, Pablo Escobar kept so much money in cash that he estimated he’d lose 10% of it per year (roughly $2 billion dollars) due to things like weather, getting eaten by animals, or simply just forgetting the warehouse existed. This loss did not materially affect the economy.
Nothing, other than that you’re down $10.
The central bank monitors the supply of currency and, based on the needs of other banks and commercial groups, will print or destroy currency to keep the supply stable.
There is always some attrition in notes and coins that are lost or destroyed, and the central bank will also intentionally destroy notes that are looking a little ratty. Banks regularly send their not-so-good notes back to be replaced with new ones.
It only becomes impactful when you lose more than the FED and ECB are printing.
So no, there are like 3 people on earth who can burn enough money to impact the economy.
You just created deflation. You decreased the amount of money in circulation. That means the rest of the money in circulation is worth more now.
That said, there’s an estimated $2.1 trillion in circulation. That $10 represents about 0.0000000004% of the money circulating in the economy. It’s inconceivable that you could ever destroy enough physical currency to have a real deflationary effect on the economy.
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