Why do banknotes have a higher nominal value than coins?
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Back in the day, coins were made of valuable metal and their value was based (roughly) on the value of the weight of that metal. One could imagine that carrying around $1 worth of silver isn’t too heavy, but carrying around $20 would get tedious very quickly.
A bank note was a solution: rather than carrying around $20 worth of silver, you make the bank carry it around and they give you a slip of paper that makes them promise to give you the $20 in silver when you return that slip. The slip of paper weighs practically nothing and takes up practically no space so you can carry a lot of them.
Money has evolved past the need to base it on precious metals but coins remain very convenient for small amounts – they’re easy to sort without any kind of scanner, so they’re useful in machines. So we keep them around, but again carrying around large dollar amounts in coins gets pretty tedious.
This cannot be the real reason but I always figured it’s because coins are easier to lose? We used to print notes and bills super large but I think eventually people got used to carrying them around and we learnt their importance (invented wallets etc) so the notes and bills started to shrink. I only say notes AND bills because they’re used interchangeably for cash in different countries.
Back in the day, money had a real value based on a semiprecious or precious metal. Money was made using that metal so it’s value was independent of anything but itself. This has two issues. One; carrying around a lot of money can be unsafe and heavy. Two; The finite supply of these metals become a hindrance to an economy’s ability to grow.
Back in the late middle ages, banks became a safe place to store your money, and they would give you a slip of paper showing how much money was deposited. It eventually came to be realized that trading these slips of paper was much more convenient than bringing the actual money to buy things, especially when one was traveling. This concept formed into paper money.
As the second issue came to be more of a problem, governments switch to what is known as fiat currency. This pegged the value of money to the faith and credit of the government that issued it instead of to something tangible like metals. This allowed economics to grow beyond the value of metals they had on hand.
So, tl;dr: paper money first was a way to carry around a lot of money safely and easily, then became a way for economies to get bigger than the value of precious metals a country had.
Nowadays, which is easier to carry – 20 x £1 coins, or 1 x £20 note?
Another reason we don’t use high denomination coins is because they would be ridiculously easy to forgery. Melt and restamp.
Coins are worth so little, there is no profit margin to be had.
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