The dollar wars have raged for years, with various sides battling over what a dollar should look like: Should it be a green piece of paper (cotton, actually) that you can slide in your wallet? Or should it be a metal coin that you put in your pocket?
On one side are the vending machine companies, the miners, and anyone who has traveled enough in Europe to know the convenience of a coin worth one or two euros or pounds. On the other side is Crane, the company that makes the paper for dollar bills, and the banks and retailers that prefer the convenience of paper bills.
A working assumption has been that coins would be cheaper, in the long run, for the government. They cost more to make but last much longer than paper money. The Government Accounting Office estimated the move could save $4.4 billion over the next 30 years. Others have been doubtful that such savings would materialize, as Wonkblog’s Brad Plumer details here.
Now, researchers at the Federal Reserve are weighing in, and they, too, find that getting rid of $1 bills entirely wouldn’t be the panacea that some analysts have claimed.
The most important points of the new working paper, by Michael Lambert, Shaun Ferrari and Brian Wajert, boil down to this: Coins aren’t all they’re cracked up to be.
See here for my previous entry in this ongoing bit of obsession, and be sure to read that Brad Plumer piece from last year as well. Basically, the Fed questions the “seigniorage” effect, which is the primary driver of savings for the government, and points out a bunch of costs that hadn’t previously been taken into account. The net result is that the presumed benefit of switching to coins is likely to be pretty small, especially considering they’re spread over a long time period. As noted at the end, the pro-coin people disagree with this finding, so my hope that this debate is over is almost certainly premature. But I can hope.