Tuesday, June 24, 2008

Money Nobody Wants

Sherman Oaks, California

Until 1995, China had two currencies: renminbi for locals and Foreign Exchange Certificates (FECs) for foreigners (pictured). Old China hands tell of how they were limited to eating in overpriced (and dreadful) hotel restaurants, the only places that accepted FECs. Hungry expats resorted to private transactions (haters would say "the black market"), trading FECs for renminbi for real Chinese food.

It sounds like an amusing throwback to Communist days, but we currently have two tiers of currency in the United States. Although it goes virtually unnoticed (and is on a far smaller scale than the renminbi/FEC system), the U.S. government uses a form of money that is almost never used in private commerce.

I refer, of course, to the one-dollar coin.

The average U.S. citizen encounters the dollar coin in a single situation: receiving change from a Postal Service vending machine.

No one in the private sector wants anything to do with the copper tokens. The vending machine companies don't want to rejigger their millions of machines. Most private stores don't want to deal with the oddly sized coins (because banks make the stores create separate rolls for dollar coins and how often will a store receive enough dollar coins to roll them, anyway). The coins are heavy and bulky, and the people have spoken: We want bills.

That's not good enough for our commissars, who are acting like their counterparts in Maoist China. Coins are easier for the government to use, they're cheaper for the government to maintain, and that's how it's done in Europe, so it must be better. This report from the Federal Reserve Bank of Cleveland lays blame on the fact that Congress still allows the dollar bill to circulate, instead of forcing Americans to use a coin they don't like.

In a ploy to tempt Americans to go metallic, the U.S. Mint has been releasing a dollar coin for each U.S. president. The people at the Mint release four presidential coins a year, and they're up to Andrew Jackson. I didn't know about the program until this afternoon, when I bought some stamps from a Postal Service vending machine and realized that John Adams was incongruously staring back at me from a pile of change.

In other news, the penny -- a coin which nobody wants (except the Lincoln devotees in Illinois and the zinc interests in Tennessee) and nobody uses (not even the people in Illinois or Tennessee) -- is also still with us.

Currency reform: China did it. We can't. Where's our Deng Xiaoping?

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Blogger jgeary27 said...

Sir --

As someone who's worked in the financial industry for 15 years or so, I'd like to clarify this post a bit. A few points with regard to our (not so) desirable dollar coins:

-- In fact, banks do not experience a shortage of dollar coins (or half dollars, or even $2 paper for that matter). If you go to any full-service bank branch, I'm sure the teller will be happy to provide you with as many rolls of Kennedys and [insert-President-or-Indian-or-suffragette-here] as you want. Banks don't distribute these coins because, well, how often do you go to the bank and ask for $100 in singles? They rarely have the opportunity to circulate them.

-- The dollar coin is indeed available in USPS vending machines. Also, in many transit system ticket kiosks. These are applications where the product value is small (e.g., book of stamps, subway ticket), but the customer is likely to pay with a $20. It's easier to have a machine distribute $15 in change in coins rather than bills (although massively inconvenient for the customer).

-- The Fed is right that the continued issue of the $1 bill is primarily what prevents the coin from being adopted. However, your analysis that this is desired by the public is incorrect. A more likely reason is that the Massachusetts congressional delegation has applied great pressure to the BEP to avoid discontinuing the paper $1. The fact that Crane & Co. is located in Dalton, MA is entirely coincidental...

9:58 AM  
Anonymous Anonymous said...

I'd like to correct a few points you made.

First, the dollar coin is not made of copper.

Second, vending machines have been capable of taking dollar coins since 1979. Since the metallic signature of the Sacajawea and Presidential dollars are the same as the Anthony dollars, no changes are necessary to vending machines other than to possibly flip the switch inside to allow the machine to take them.

Third, the public has _not_ voted against the dollar coin, as they have not even been given the chance to get many of them, much less use them on a daily basis. If they did, they would find what people in Canada, Europe, Australia and the rest of the world has found--they are more convenient than dollar bills.

Fourth, the only thing preventing widespread use of dollar coins is the continued production of dollar bills. Did you know we waste a half-billion dollars a year printing dollar bills over and over and over again?

Fifth, dollar coins are neither heavy nor bulky. Did you know that if we got rid of the penny and dollar bill, the weight of coins on average in your pocket would go _down_? This is because instead of letting coins build up in your pocket all day, you'd actually use them. Also, you'd need fewer quarters. One dollar coin is much lighter than four quarters.

Sixth, you are correct about the penny. What a waste of time and money, especially now that it costs more than a penny to make one.


9:40 PM  
Blogger Paul Karl Lukacs said...

According to the U.S. Mint, the dollar coin is 88.5% copper.

4:55 AM  
Anonymous Anonymous said...

No, not "88% copper" but "Composition:Manganese-Brass: 88.5% Cu, 6% Zn, 3.5% Mn, 2% Ni"

6:33 AM  
Blogger Paul Karl Lukacs said...

Please explain how that means something other than that the dollar coin is primarily copper.

3:13 PM  
Anonymous Anonymous said...

They are bulky and heavy. Anybody that says they aren't is a Moses damned idiot. Those coins suck. Keep the penny. We value accuracy in this country. We are not wanting to round up to a nickel. You people are going to get a boot in your face if you try to do any more stupid things via your stupid O'puppet.

8:01 PM  

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