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dollar coins

Don’t kill the penny, revalue it

Ryan Cooper proposes a big idea to make coins more useful so that people start spending them again instead of hoarding them in jars for months at a time.

Millard is keeping hope alive

Here’s my solution: multiply the face value of every U.S. coin by 10. A penny will be worth 10 cents, a nickel 50 cents, a dime one dollar, a quarter $2.50, and a dollar coin 10 bucks. (We could also reinvent the half-dollar, which is barely produced now, as a nice $5 coin.)

This will have several beneficial effects: first, it will make change real money again. The whole point of having money is to facilitate the process of exchange, but studies have shown that people tend not to spend even the vaunted dollar coin. It’s no surprise, given that we’ve been training people for decades to think of change as worthless. And multiplying by 10 sounds like a lot, but if anything, it isn’t going far enough — the BLS inflation calculator only goes back to 1913, but even so, one dollar from that time was worth the equivalent of $23.87 today! The one-cent coin was the smallest then, and people still somehow survived. Rounding to the nearest tenth of a dollar in cash transactions today will be no problem.

Second, it will be easy to accomplish. We won’t have to have a big fight with the zinc lobby or Abraham Lincoln fans over whether to stop production of a particular coin, or rebuild all the vending machines around differently-shaped coins. Instead, we just alter the mint plates slightly with new numbers. (Making U.S. money more coin-based would also save the government a bit of money, since coins last much, much longer than paper money.)

Third — and this might be the most contentious part of this proposal — changing coins could be a nice piece of badly-needed economic stimulus. Effectively, we’d be printing up a bunch of new money and handing it to whoever has coins on hand. We’d have to think carefully about the details, but the idea would be to allow people who have old coins to hand them in for fresh new versions worth 10 times as much. Vending machines can be easily reprogrammed to help soak up the old currency (which will be exactly the same size and weight as the new stuff), and banks could be required to exchange for the new versions for a few years. To keep them from being swamped and to ease the effect, we could say banks don’t have to exchange more than $50 worth of new currency per person per day, or something similar.


How much money are we talking about? According to the Federal Reserve, as of 2010 there was about $40 billion worth of coins in circulation, which constituted 4.3 percent of the U.S. currency stock. We’d be increasing that by $360 billion at a stroke, which would actually be a pretty powerful economic stimulus. Indeed, it might cause a bit of moderate inflationary pressure, as all the coin hoarders with soup tureens full of pennies went on spending sprees. However, that would be exactly the kind of situation the Federal Reserve is equipped to handle. I doubt any inflationary pressure would be sustained long, but if so, it would be a godsend to the Fed, which has been stuck at the zero lower bound and mostly below its inflation target since the financial crisis. Indeed, there is a very strong case that a bit higher inflation target is wise economic policy for the future.

Usually, when I blog about coins it’s in the context of arguing against eliminating the dollar bill in favor of dollar coins, but I have also objected to killing the penny. As does Kevin Drum, I mostly like this idea, but I think Cooper sells short the problem of rounding prices to the nearest old-school dime. The limited bit of empirical evidence we have suggests this would affect poorer folks adversely, since prices would be rounded up much more often than they would be rounded down. One thing that occurred to me in writing this post is that it would likely cause a hike in transit fares around the country – here in Houston, a ride costs $1.25, which would undoubtedly become $1.30 under Cooper’s plan. I’m not sure what the best way to deal with that is. On the plus side, it would as Cooper notes provide a bit of short-term stimulus, which likely means Cooper is underestimating the opposition to his idea as well. This will never happen, but it’s an interesting suggestion. What do you think?

Is this the end for the dollar coin?

Fine by me if it is.

Millard is keeping hope alive

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.

Small bills, please

If you’re a regular reader here, you know that I’m a skeptic of proposals to replace the dollar bill with dollar coins. As I’ve said before, I personally would rather have a wallet full of bills than a pocket full of coins, and I believe that some of the pro-coin arguments such as the vending machine argument no longer hold water. Given that, you will not be surprised to learn that I consider this development to be further evidence that the dollar coin will remain a pipe dream.

Banks are rolling out ATMs that dispense exact change to the dollar.

Chase and PNC are leading the pack with the new ‘smart’ ATMs.

Chase last year entered the field. During the past 18 months, Chase installed between 350 and 400 of the lower-denomination ATMs, and is expected to double that number this year, a bank official said. The new machines are located within branches and drive-thrus, and can even dispense coins.

“In Houston, we have about five of the next-generation ATMs, mostly in ‘new build’ locations,” Chase spokesman Greg Hassell said. “We’ll add a handful this year as we open new branches.”

The new ATMs are popular because they give customers options to do more things, such as paying bills or buying a pre-paid bank card.

“It’s just part of what we do to try to introduce innovations to make banking more convenient for our customers,” Hassell said. Chase has 215 branches in the Houston area.

Not all banks are doing this, but still. Would any bank roll out ATMs that dispense singles if they thought dollar coins were on the horizon? I think we know the answer to that is “No”. Anyway, as a Chase customer I’ll be curious to see what some of these new features are – though being the dinosaur that I am I’ll probably never use them – and I’m curious to know how many people will actually make a withdrawal that requires singles. Have you ever wanted to do that?

The dollar coin is an idea that just won’t die

It keeps turning up like a bad penny, as it were.

I have still never seen one of these

American consumers have shown about as much appetite for the $1 coin as kids do their spinach. They may not know what’s best for them either. Congressional auditors say doing away with dollar bills entirely and replacing them with dollar coins could save taxpayers some $4.4 billion over the next 30 years.

Vending machine operators have long championed the use of $1 coins because they don’t jam the machines, cutting down on repair costs and lost sales. But most people don’t seem to like carrying them. In the past five years, the U.S. Mint has produced 2.4 billion Presidential $1 coins. Most are stored by the Federal Reserve, and production was suspended about a year ago.

The latest projection from the Government Accountability Office on the potential savings from switching to dollar coins entirely comes as lawmakers begin exploring new ways for the government to save money by changing the money itself.

The Mint is preparing a report for Congress showing how changes in the metal content of coins could save money.

The last time the government made major metallurgical changes in U.S. coins was nearly 50 years ago when Congress directed the Mint to remove silver from dimes and quarters and to reduce its content in half dollar coins. Now, Congress is looking at new changes in response to rising prices for copper and nickel.

The bit about changing the composition of existing coins in order to save money makes sense and is something I’d support. The rest is a story we’ve heard before, so I’ll just refer you to the points I made the last time this report was in the news. Brad Plumer echoes my arguments and adds some further information. As I’ve said before, I doubt anyone’s mind will be changed by any of this, so as always we’ll see what if anything comes of this.

Still trying to kill bills

Planet Money reports on the continuing efforts to eradicate the paper dollar bill and replace it with dollar coins.

I have still never seen one of these

In its most recent report, the GAO recommends switching to coins, which could make $4.4 billion for the government over 30 years. But the report says the government benefit does not come from the fact that coins are more cost effective. Instead the benefit comes from something called “seigniorage.”

Seigniorage is the profit the government makes from having money out in the economy. More money out there means more profit for the government.

Over time, coins earn more seigniorage for the government, but only because we don’t like using them.

“Lots of people when they take coins out of their pocket or purse at the end of the day put them in what we call a coin jar,” says the GAO’s Lorelei St. James, who oversaw the agency’s most recent study.

As a result, the GAO estimates that if the government were to eliminate $1 bills and switch to coins, it would have to replace every two bills with three coins, because one of the coins would sit idle.

So more coins means more profit for the government. But where does that profit come from? It comes from us — the public.

If you put a dollar coin in a coin jar, that’s a dollar you haven’t invested, a dollar you’re not doing anything with. Economists consider this a kind of tax.

I’ve said before and I’ll say again that I’d rather have a wallet full of bills than a pocket full of coins. That’s basically a matter of taste, so let me give two more reasons why I don’t care for this, and why I think it’s as unlikely as ever to happen.

One reason is vending machines. Remember when they only took coins, and only coins up to a quarter? There was an argument that once they all converted to accept dollar coins, they’d finally get a foothold. There was always a certain chicken-and-egg quality to that argument – did we need the newer vending machines to drive acceptance of the dollar coins, or did we need acceptance of the dollar coins to push the adoption of the newer vending machines – but that’s all moot now. This is because nowadays every vending machine out there accepts bills. And the next generation of vending machines after that won’t be of any help because what they’ll have in place of a coin slot is some form of connectivity – Bluetooth and/or an IP address – to accept payment from your smartphone. For the dollar coin, that ship has sailed.

I’m also skeptical of the seigniorage argument. For one thing, projecting out over 30 years is tricky business. Hell, we could be completely cashless by then. For another, I just have a hard time believing that a significant number of dollar coins would get tossed into a jar or change drawer and forgotten about. Actually, that’s probably what happens now while they’re basically novelties. I almost never take coins with me when I leave the house in the morning, so on those rare occasions when I get one as change, I suppose I do just toss it in with my collectible coins and never spend it. My point is that if those were the only dollar singles I had, I wouldn’t do that. Why would I, once they’re no longer novelties? The $4.4 billion over 30 years works out to about one lost dollar coin per person every two years, so I suppose it’s not a ridiculous assumption. It just doesn’t strike me as being particularly persuasive, and that’s before we discuss whether seigniorage is a good way for the government to get revenue.

Anyway, just another entry in the great bill-versus-coin debate. Has anyone’s mind changed on this topic over time? I can’t say I feel any differently now than I did a decade ago. What about you?

Coinis interruptis

No more Presidential dollar coins will be minted for general circulation.

Have you ever seen a $1 presidential coin? Neither have we. Except that one time when we received seven of them in change from a MetroCard machine in the New York City subway system and, perplexed as to where to fit such weighty coins in our dainty-sized wallet, we relegated them to the bottom of our junk drawer.

And perhaps for that very reason, Vice President Joseph Biden announced Tuesday that the U.S. Mint would halt the production of those pesky $1 coins for circulation, because they’re not exactly in demand.

In fact, the U.S. Treasury Department said there are 1.4 billion surplus $1 presidential coins just sitting in the vaults of the Federal Reserve, and that the government would save taxpayers at least $50 million per year in production and storage costs by suspending their production.

Instead, U.S. Mint will produce a limited number of the coins, which “will be sold at a premium to collectors, so it will ensure that the coins will not be produced at a cost to taxpayers,” said Treasury spokesman Matt Anderson.

Until Tuesday’s announcement, the U.S. Mint had been on track to produce 1.6 billion more of the $1 presidential coins through the year 2016, even though the 1.4 billion in surplus is enough to meet demand for more than a decade, Anderson said.

File that under “more reasons why the paper dollar bill will never go away”, despite the insistence of some that it’s more cost efficient. Not if no one wants them it’s not, and given our track record I daresay any effort to mandate their usage by getting rid of the paper dollars will be about as successful as metric coversion has been. Don’t get me wrong, I like the idea of dollar coins, but as an option, not a requirement. Kevin Drum has more.

The quest for a dollar coin that people will use continues

Now with extra special deficit reduction capabilities!

Americans are a tight-fisted people when it comes to their dollars.

So in order to replace the paper currency with dollar coins — a long-advocated move that could save the government an estimated $5.5. billion over 30 years — the General Accountability Office called on Congress, the Federal Reserve and the Treasury to help yank the $1 note from circulation.

In the past 20 years, the GAO, Congress’ investigative arm, has issued four recommendations for a switch to metal dollars in order to save all the money spent to replace worn-out dollar bills. Dollar bills last longer than they used to and now have a life span of up to 40 months. But the coins have an average life span of 30 years.

For the record, I just checked my wallet, and I have three Series 2003 dollar bills, and three Series 2006 dollar bills. Forgive me if I look skeptically on that “life span of up to 40 months” claim.

“The United States is one of the most conservative countries when it comes to the use of coinage,” said Ute Wartenberg, executive director of the American Numismatic Society and a member of the government’s Coinage Advisory Committee, a group of citizens that weighs in on currency policy and designs.

Several surveys commissioned by the GAO suggest that the public is wary of giving up its George Washingtons, simply because it’s what they know and because they are reluctant to carry around more coins.

In the most recent survey, a Gallup poll conducted in 2006, 79 percent of respondents opposed eliminating the $1 note and replacing it with $1 coins. Even when respondents were told the replacement would eventually save taxpayers a lot of money each year, the opposition was still at 64 percent.

“You have to withdraw the actual dollar bills, because we already have plenty of dollar coins and no one even knows what they are,” Wartenberg told AOL News. “They don’t use them and people refuse to accept them.”

We’ve been through this before. I don’t know about you, but I carry dollar bills in my wallet. I carry coins in my pocket. I’d rather have a walletful of bills than a pocketful of coins – the latter is annoying and can make you feel heavy if you have too many of them. Nobody gives dollar coins in change, and vending machines have long accepted bills. The savings from ditching the greenback are quite modest. Why is anyone still pursuing this? The Express News sums it up nicely.

I do have one alternate suggestion, to balance Americans’ love of the paper dollar with the desire to save a bit on printing costs: Why not print more $2 bills? You only need half as many of them, after all. I also happen to have a pair of deuces in my wallet, both of them Series 1995. It’s a win-win! More here.

Slowdown at the Mint

They’re not making as many coins as they used to.

As falls the economy, so falls the jingle of coinmaking at the U.S. Mint.

Production at the federal government’s coin factory in Denver fell a sharp 26 percent in 2008 from the previous year, contributing to a national output decline of 30 percent.

Mint officials said the drop is a direct reflection of the plunging economy and the resulting fall in cash-register transactions that require merchants to provide change.

“Coin demand is definitely affected by economic activity,” said Greg Hernandez, acting director of public affairs in Washington for the U.S. Mint.

“Banks are not ordering as many coins as they were,” he said. “If local banks are not getting orders from local merchants, it’s going to affect Mint production.”

The U.S. Mint in 2008 produced 10.1 billion general-circulation coins, the fewest in at least 10 years.


Part of the coin-production decline stems from diminishing consumer interest in collecting quarters issued for each of the 50 states — a phenomenon that had ramped up the minting of quarters to a record level in 2000.

And some analysts say increasing use of credit and debit cards, and other electronic transactions, has played a role in reduced demand for coins and currency.

But economic conditions are believed to be the biggest factor.

“If people are just buying fewer things and there are fewer transactions, that will have an effect” on the demand for cash, said Dennis Stansbury, assistant vice president for cash operations at the Denver branch of the Federal Reserve Bank of Kansas City.

That makes sense, though I admit it’s not something I ever would have thought of. Learn something new every day.

Mint officials said they expect production of at least one coin type — the relatively new U.S. presidential $1 coin — to increase as the government conducts a marketing push for merchant and consumer acceptance of the coin.

It’s been more than a year, and I’ve still never seen one of these coins. Maybe some day.