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Archive for Sunday, July 20, 2008

Time to make the switch?

Many argue paper dollars are out of date, costlier to make than sturdier coins

July 20, 2008

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Dollar facts

$522 million: Annual savings to U.S. if we switched to $1 coins

4 cents: Cost to produce a dollar bill

21 months: Dollar bill's life expectancy

20 cents: Cost to produce a $1 coin

30 years: Dollar coin's life expectancy

4.147 billion: Dollar bills printed in 2007

9.2 billion: Dollar bills currently in circulation

1.18 billion: New $1 coins minted since their debut in February 2007

Not many: New $1 coins Americans are actually using

Sources: U.S. Government Accountability Office, Tribune research

Could it be our fascination with George Washington's Mona Lisa-smile? What else keeps the dollar bill alive despite its obvious obsolescence?

Most industrialized economies don't waste time with paper money of such paltry purchasing power. For the 15 European countries in the eurozone, the smallest denomination of printed bank notes is the 5 euro, worth $7.83. In Britain, the lightest piece of folding money is 5 pounds, worth $9.85. In Japan, it's 1,000 yen, about $9.30.

Even the humblest Mexican bill, a 20-peso note, is worth almost twice as much as the dollar bill. Canadians scrapped their paper dollar and switched to coins in 1987.

The Government Accountability Office has said that if the U.S. switched to $1 coins, it would save taxpayers about $522 million a year in production expenses. That's mainly because a dollar bill, which costs about 4 cents to produce, has a life expectancy of 21 months. The $1 coin, which costs about 20 cents to produce, lasts 30 years or more.

For me, the issue was decided earlier this year when I returned to the U.S. after living abroad for 18 years. I wanted to buy a candy bar from a vending machine, but I didn't have five quarters in pocket, so I fed the machine a $5 bill. I got my M&Ms all right - and I also got a gusher of change that made me feel as if I had just hit the slot machine jackpot.

Jingle, jingle

So why does America cling so tenaciously to its dollar bills?

The argument in favor of paper that I heard most frequently is that Americans don't like carrying around a lot of coins.

That also was the main complaint of Italians before the 2002 introduction of the euro. This was all about la bella figura and the supposed Italian obsession with looking good in their clothing. A lot of coins in your pocket, it was thought, ruined the line of your clothing. As it turned out, the euro did not result in carrying more coins, and Italians still cut la bella figura.

At a minimum, a $1 coin would mean four fewer quarters jingling around in your pocket. It would also mean that instead of scrounging around for eight quarters, you could feed a parking meter two coins for two hours of parking.

Creatures of habit

I know that previous attempts to wean Americans from their dollar bills ended in failure. The Susan B. Anthony $1 coin, rolled out to much fanfare by the U.S. Treasury in 1979, was widely regarded by the public as something akin to the Depression-era wooden nickel. The Sacagawea $1 coin, introduced in 2000, got an equally unenthusiastic reception.

"Americans are creatures of habit. They are used to using dollar bills, and it's hard to get them to change," said Edmund Moy, director of the U.S. Mint.

That didn't surprise me, but what did was the news that the U.S. Mint was in the midst of yet another effort to get Americans to use dollar coins instead of dollar bills.

Bring on the presidents

This latest bid might best be described as the stealth approach to currency modernization. The Presidential $1 Coin Act of 2005, passed by Congress and signed by President Bush, directs the U.S. Mint to produce a series of $1 coins carrying the portrait of past presidents. It also directs the U.S. Treasury and the Federal Reserve to assure "robust circulation" of the new coins.

The plan is for four presidents to be introduced each year, starting with George Washington.

Since their debut in February 2007, more than a billion new $1 coins have been minted. The John Quincy Adams came out in May. But most Americans have never seen one, and outside of collectors and other enthusiasts, very few people seem aware of their existence. If you show people one of the shiny, gold-colored coins, the almost universal reaction is, "It looks fake."

Strategy

The U.S. Mint's Moy said the new strategy is to introduce the public to the new coins by focusing first on "coin intensive transactions," such as vending machines and public transport, and then try to win the support of businesses that rely heavily on "cash intensive transactions." The main targets here are the fast-food industry and giant retailers such as Wal-Mart.

Moy said that beginning next month the strategy will be test-marketed in four cities: Charlotte, N.C., Portland Ore., Austin, Texas, and Grand Rapids, Mich.

The European way

There's a better way. If Congress is serious about modernizing U.S. currency, it could simply withdraw all the $1 bills from circulation within a fairly short time, say six months to a year. After that, dollar bills could no longer be offered as legal tender, except at banks, which would take them in exchange for coins.

The European Union successfully introduced the euro virtually overnight by making it clear that old currencies would be withdrawn quickly from circulation. Despite the deep attachment of the French to their francs and the Germans to their marks, everybody got used to the new currency within days.

Comments

dandelion 6 years, 5 months ago

The Government Accountability Office has said that if the U.S. switched to $1 coins, it would save taxpayers about $522 million a year in production expenses. That's mainly because a dollar bill, which costs about 4 cents to produce, has a life expectancy of 21 months. The $1 coin, which costs about 20 cents to produce, lasts 30 years or more.$522 million savings! Stop printing these stupid paper bills.

tangential_reasoners_anonymous 6 years, 5 months ago

dandelion: "Are you too weak to carry around coins? Buy a belt so your pants don't sage, and carry coins."I understand this one's being heavily lobbied by the suspenders industry.

dandelion 6 years, 5 months ago

Just stop making the dollar paper bill. Quit wasting taxes! Madmike, you complain about taxes a lot. Here's one way to cut government expenditures. Are you too weak to carry around coins? Buy a belt so your pants don't sage, and carry coins. It might give you a little workout to carry around the coins, and get you in better shape. They should just stop making the paper bills, then this would be a non issue. You'd have no choice.

BigPrune 6 years, 5 months ago

I wonder if the Federal Government will ever get smart enough to make $1 dollar coins that are larger than the size of a quarter?

tangential_reasoners_anonymous 6 years, 5 months ago

And why are dimes smaller than both nickels AND pennies?What's up with that?!

dandelion 6 years, 5 months ago

Oh I forgot to disclose that I'm heavily invested in suspenders.

beatrice 6 years, 5 months ago

It also costs 1.23 cents to make a penny, and 5.73 cents to make a nickle. Even though we like our traditional currency, it is high time to do away with these low-currency coins and to stop producing paper dollars.

TopJayhawk 6 years, 5 months ago

Big Prune is right, the biggest problem with the Susan B's was just the size. Make it bigger than a half-dollar, and it wouldn't be confusing. Just stop making the paper ones, and stop asking permission. I also think a gold color would be a nice touch.

gccs14r 6 years, 5 months ago

"I wonder if the Federal Government will ever get smart enough to make $1 dollar coins that are larger than the size of a quarter?"They are larger. When they were huge, the complaint was that they were too big. The current dollar coin is smaller than a 50-cent piece, which was also considered too big to carry. "And why are dimes smaller than both nickels AND pennies?"Because they used to be silver, which is worth more than nickel and copper. If you want to see small, check out the 1849 gold dollar.

gccs14r 6 years, 5 months ago

"It also costs 1.23 cents to make a penny, and 5.73 cents to make a nickle."Yep. We've already debased the penny once, by making it copper-clad zinc, and now we're talking about debasing it further by making it steel. We need to stop our insane policies that are exporting our wealth overseas. "Even though we like our traditional currency, it is high time to do away with these low-currency coins..."You mean like Zimbabwe? That's the end result of a fiat currency run amok.

George_Braziller 6 years, 5 months ago

Don't make them bigger, make them thicker. A British one pound coin is about 3/4 the size of a quarter. You put your hand into your pocket and you can easily distinguish it from the rest of the change. It also doesn't take up the space of an Eisenhower dollar or even a Kennedy half-dollar.------------------------------------BigPrune (Anonymous) says: I wonder if the Federal Government will ever get smart enough to make $1 dollar coins that are larger than the size of a quarter?

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