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.
There’s a far bigger difference between dollar coins and paper dollars than those discussed in this article; and a far dirtier story line, of underhand anti-coin activism at the Federal Reserve. Why do you think the 1979 Susan B. Anthony dollar was so similar to a quarter that its production soon had to be halted? Ex-Mint chairman Philip Diehl’s testimony as to the Fed creating “barriers” to distribution is at http://financialservices.house.gov/uploadedfiles/hhrg-112-ba19-wstate-pdiehl-20121129.pdf.
Whenever the Treasury mints a $1 coin, it gains $1 minus the production cost–just as the Federal Reserve now garnishes $1 in assets for every $1 bill it issues, minus the printing cost. The transfer of these face-value profits in issuing all $1 denominations, from the Federal Reserve to the Treasury, will result in gains VASTLY in excess of those reported by the GAO, which are taken as true by the proponents of S. 1105. In other words, the case for the change to a $1 coin is FAR stronger than that which is being made by the bill’s sponsors and advocates. In particular, there will be prompt multi-billion dollar gains, rather than the predicted start-up losses.
The difference is the subject of a lawsuit seeking findings of misrepresentation against the Treasury and GAO, now pending in the Ninth Circuit. See the articles “How The One Dollar Coin Can Cure The Economy” at http://www.opednews.com/articles/How-The-One-Dollar-Coin-Ca-by-Clifford-Johnson-130515-443.html, and “Federal Court Affirms Sweeping ‘Bully Pulpit’ Government Right to Lie,” at http://www.opednews.com/articles/Federal-Court-Affirms-Swee-by-Clifford-Johnson-130221-478.html.