Sunday, May 4, 2014

Saving Money One Coin At A Time

Dollar Coins are the way of the future
Currency should be designed by the government as a simple and efficient medium for exchanging goods and services. The U.S. Mint has produced $1.4 billion in surplus dollar coins that are sitting in vaults. They make hundreds of millions of these coins every year with 40% of them being returned to the Federal Reserve because nobody wants them. Using the coin in Post office vending machines created a relatively small demand, but the USPS eliminated all those machines by 2010. Dollar coins have found little popular acceptance in circulation in the United States despite several attempts since 1971 to increase their usage. To store all the unused coins, the Federal Reserve told Congress they will need to spend money to build a new vault in Dallas to hold them. Shipping the coins to the new secure facility will cost an additional $3 million. Sadly the government is still messing around with these stupid programs. 

The Sacagawea dollar was authorized by Congress in 1997 because the supply of Anthony dollars, in inventory since their last mintage in 1981, was soon expected to be depleted. Dollar coins are used infrequently in general commerce. There are approximately 1 billion Sacagawea coins currently in circulation (about 3 for each person living in America) and a large number in reserve. In December 2005 Congress decided to create a new series of $1 coins to honor former U.S. Presidents. At least one-third of all dollar coins produced are still Sacagawea coins, with the remaining coins being the four presidential coins annually. The presidential dollar coin is the same size and composition as the Sacagawea dollar. In 2007 four different designs of Presidential coins were produced, another four designs will be produced each year honoring the Presidents in order of service. This is intended to create renewed interest in the dollar coin like that seen from the "50 State Quarters" program. To emphasize what a joke Washington has become and how far this farce has gone after all the spending and wheel spinning the program scheduled to run until 2016 but was canceled to save money.

This move is controversial because phasing out paper bills and replacing them with a new $1 coin will save billions over time. If the presidential coin is such a clear case of wasteful government spending it is surprising to see the reaction from government watchdog groups. "We're honestly outraged about this," said Tom Schatz, president of Citizens Against Government Waste, "If they wanted to stop producing something that loses money in terms of minting coins, they should get rid of the penny and nickel." The dollar coin, he said, actually saves taxpayers money. That's because it costs 18 cents to produce, with the rest going to the government as profit. Because coins last longer than bills, shifting to a dollar coin could save $5.6 billion over 30 years says the Government Accountability Office. Last year the super-committee charged with cutting trillions of dollars from the US debt endorsed the idea to cut spending by replacing the dollar bill with the dollar coin. Getting this done in dysfunctional Washington is another issue.

The Obama administration's decision to suspend production of the dollar coins is too many just the latest blunder on dollar coin policy that has been mismanaged since the introduction of the Susan B. Anthony dollar decades ago, the coin was often confused for a quarter. Other countries have saved money by moving their low denomination bills to coins. It now appears to shift to a dollar coin the treasury would have to take dollar bills out of circulation. "I don't think that's something Americans want to see us do," said Rep. Kevin Yoder, R-Kan., the author of one of the several bills to suspend production of dollar coins. Current policy has been to promote both the dollar bill and the dollar coin with Americans consistently choosing the dollar bill. In other countries, these coins have largely succeeded because of a removal of their corresponding paper issues.  Groups on both sides of the issue are voicing their opinions, with "Americans for George" claiming that the public prefers the paper bill, while the Dollar Coin Alliance points to the cost savings. 

It is time to wrap this up. If the stupid politics and expensive time wasting of those in Washington do not make you cringe remember many of these crazy policies and decisions are helped along by lobbyists and industries with ties to the money-making industry. Enough of these "cute" coins and constant design changes and get back to basics.  For many years there have been discussions about discontinuing the penny which has become obsolete because of its minuscule purchasing value. The debate against continuing the penny is overwhelming, the penny is a perfect example of our government's inefficiency and waste, "the penny doesn't make sense". If the government cannot deal with the penny that carries negatives for the economy and society such as the energy used to make, transport, and distribute the worthless coin we are left with little hope that will get this right.


Footnote; This post dovetails with many of my recent writings, for more I might suggest reading the article below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged.
                   http://brucewilds.blogspot.com/2012/03/canada-drops-their-penny-so-should.html






2 comments:

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  2. Congress is the single biggest roadblock to reform. First and most important, they've rolled over in response to pressure from Crane Paper, the company with a monopoly on the special paper used for dollar bills. Crane would lose almost half their sales if we switched to coins - they send an army of lobbyists to DC any time someone even BREATHES the idea. Congress actually passed a law forbidding any action on $1 and $2 bills! Unless and until they develop a spine (HA!) we're going to continue to waste ~$750 million every year printing paper bills.

    The other problem is that even those few proposals that make it out of committee completely ignore the need for an effective $2 coin. Every other major country that got rid of their $1 bill (or equivalent) also makes wide use of a Two. If there were only $1 coins and $5 bills it's much harder to counter the "pocketful of coins" objection raised by nay-sayers.

    Finally there is no possibility of getting rid of the nickel along with the penny unless we also replace the quarter with a 20¢ coin. Again, that's something every other country has done when eliminating their 5¢ coins. If we had only two circulating denominations, 10¢ and 25¢, there would no reasonable way to make change because of the gradeschool reason that you can't divide 25 evenly by 10.

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