The problem with abolishing coins 0

[RWB]

From the BBC:

https://www.bbc.com/worklife/article/20201012-the-problem-with-abolishing-coins

"...coins could soon become a thing of the past – at least if various governments have their way. Campaigns to draw down production of new coins regularly crop up in countries across the globe."

Read more at the link, above.

[Just Bob]

My wife and I had a brief discussion on this subject last night. My take is that as long as the government can make a profit from seigniorage, they will continue to mint coins. At some point, though, there will be a transition to a completely cashless society, at least above ground. Some cash, or at least metals, may still be used as "barter" in underground transactions.

[scopru]

Interesting discussion topic.   I  agree things will at some distant time in the future end up totally "cashless".  Now the difference of when that time is will vary greatly among people own opinion.  I can see the cent at some point in the not so far future either being completely eliminated from production, or put a hiatus on production for a period of years to study the impact of not producing the cent.   

In the US we have already had numerous pieces of legislation put forth to eliminate the cent since 1990.  Rep Jim Kolbe tried and tried but without success.   Sen McCain and Enzi put forth legislation to stop production of the cent for a 10 year period.  No success there either. 

I do not know the government making profit is the main driver to continue production.  It seems to me the cent as well as the nickel are upside down in the regard.  So there are other factors that come into play.  Strong lobbyists for the supplier to the Mint.  Potential increased cost if we cease production of the cent (and nickel) to the other coins due to shifting of burden of fixed costs.  Something has to cover fixed costs.  And then there is the general "nostalgia" people have towards touching hard currency.  That being said my last point becomes less valid with successive generations who grow up mainly using apps or credit cards to make purchases.  I am certainly minimizing the reasons down to a few vs the many.  However, at some point as I said I agree we will be cashless. 

Edited October 22, 2020 by scopru

[RonnieR131]

All sad to me, I'm one of the last 'holdouts'. My wife and I have a favorite 5 star restaurant that takes cash only. Valet loves it, everyone has cash. About $225 for two, that's having wine responsibly. Looking at the patrons, I can't even imagine what their tabs are. My wife and I are the Walmart couple that's there for a twice a year celebration, usually seated by the kitchen door behind a pole. The valet person probably lays a plastic sheet down on my drivers side and sprays for spiders before they get in. Found a few more cash only places, but they shut down for the virus and won't be back. It's over.

[VKurtB]

The United Kingdom is now moving very aggressively in the direction of a totally cashless society. They have announced that they will be minting no 2 pence or 2 pound coins, commems aside, for a decade or more. It's a process.

[Conder101]

3 hours ago, scopru said:

Potential increased cost if we cease production of the cent (and nickel) to the other coins due to shifting of burden of fixed costs.

A significant fixed cost though is the cost of all the equipment, hubs and dies needed to make 6 billion cents at a loss.  The removal of those fixed costs and the removal of the financial loss form the cent will go a long way toward abating any fixed costs of the other denominations.

[scopru]

It leads me to question would those costs be shifted to more equipment, hubs, and dies need to increase production on the coins that remain?  It wouldn't be just the cost of stopping production of cents.  It would be pulling a large amount of funds from the circulating economy.  They would need to be replaced with a like amount of funds to some degree.  Which would mean the equipment is still needed and more hubs and dies would be needed for the remaining denominations I would think.  My other question would be, when does cost reduction of overhead really occur in business or in particular government?  Overhead from my experience in the industries I have worked in typically just shifts from here to there and is a pretty steady growth in admin & equipment cost.  No argument that it can be reduced, but I think that takes strong leadership to really manage a budget and cut it.  I will do some research though as your reply Conder has me thinking of a few other items I want to look at.  

Edited October 22, 2020 by scopru

[gmarguli]

The last time I recall Congress thought about the prospect to stop minting the cent and start to round transactions, there were screams from the Dems that this would hurt the lower income people the most. Businesses would round up and the poor would suffer. Even studies done showing this was not true, businesses would round both up and down and there would be no loss to the consumers did not stop the screams. It was quickly dropped. 

Hard to get common sense things done when there are so many stupid people looking for TV time. 

[RWB]

2 hours ago, gmarguli said:

The last time I recall Congress thought about the prospect to stop minting the cent and start to round transactions, there were screams from the Dems that this would hurt the lower income people the most. Businesses would round up and the poor would suffer. Even studies done showing this was not true, businesses would round both up and down and there would be no loss to the consumers did not stop the screams. It was quickly dropped. 

Hard to get common sense things done when there are so many stupid people looking for TV time. 

Actually, gripes came from across the "political spectrum." The bill I prepared early this year required rounding up or down for cash, and no rounding for electronic or account transactions. The mean gain or loss was about 4-cents per year if only the cent was eliminated and 5-cents per year if both cent and nickel were abolished. Cost of implementation was expected to be trivial for all involved, with a possible slight reduction in cash counting overhead for high-cash users such as convenience stores. (No one checked Nevada brothels.) CoVID-19 got in the way of this.

As the BBC article notes, unless required to be fair to customers, businesses usually round upward.

[World Colonial]

The main obstacle to a cashless society in the US is first, the dollar's reserve currency status.  By value, most FRN are held outside the US and the US Treasury and FRB at least will think very carefully before making this radical change.  Concurrently though, there are political proponents to do it to combat "money laundering" by tracking all financial transactions and making it easier to implement NIRP if "necessary".

Second, the unbanked which will presumably be "solved" by the use of smartphones as occurs or is in process in the developing world.

All other considerations impacting future coinage production are either irrelevant or immaterial.

[olympicsos]

1 hour ago, World Colonial said:

The main obstacle to a cashless society in the US is first, the dollar's reserve currency status.  By value, most FRN are held outside the US and the US Treasury and FRB at least will think very carefully before making this radical change.  Concurrently though, there are political proponents to do it to combat "money laundering" by tracking all financial transactions and making it easier to implement NIRP if "necessary".

Second, the unbanked which will presumably be "solved" by the use of smartphones as occurs or is in process in the developing world.

All other considerations impacting future coinage production are either irrelevant or immaterial.

But those who use the US Dollar as a reserve currency are mainly holding paper dollars and not coins. No one really likes handling coins here, and no one is handling coins abroad either. You can get rid of the penny, nickel and dime from circulation and round everything to the nearest Quarter since its really the Quarter that is the workhorse coin and inflation will still make the other denominations even more useless as time goes on. There's no other Western country where I see coins on the ground because no one cares too much about them. 

Edited October 22, 2020 by olympicsos

[World Colonial]

1 hour ago, olympicsos said:

But those who use the US Dollar as a reserve currency are mainly holding paper dollars and not coins. No one really likes handling coins here, and no one is handling coins abroad either. You can get rid of the penny, nickel and dime from circulation and round everything to the nearest Quarter since its really the Quarter that is the workhorse coin and inflation will still make the other denominations even more useless as time goes on. There's no other Western country where I see coins on the ground because no one cares too much about them. 

My interpretation of the OP was discontinuing coinage altogether.    I don't see that happening, except in a cashless society.

It's other posts such as yours bringing up removing one or more denominations.  If coinage is going to remain, it's more likely the lowest denominations would be removed while new ones are introduced to replace the lowest value currency notes.  That's what has happened elsewhere to this point.

[olympicsos]

16 hours ago, World Colonial said:

My interpretation of the OP was discontinuing coinage altogether.    I don't see that happening, except in a cashless society.

It's other posts such as yours bringing up removing one or more denominations.  If coinage is going to remain, it's more likely the lowest denominations would be removed while new ones are introduced to replace the lowest value currency notes.  That's what has happened elsewhere to this point.

I don't think replacing a $1 bill with a $1 coin will ever happen in the US. People like their paper money more than coins and there are studies that show that the $1 bill actually has recently become cost efficient than the $1 coin. 

[World Colonial]

3 minutes ago, olympicsos said:

I don't think replacing a $1 bill with a $1 coin will ever happen in the US. People like their paper money more than coins and there are studies that show that the $1 bill actually has recently become cost efficient than the $1 coin. 

I hope not.  I still carry more cash around with me than most but not a single coin.  I don't pay with coins and try to avoid receiving it back in change.  It has no purchasing power but even with higher denominations, not interested in the additional weight.

[steveinthecity]

I always hear about replacing the dollar note with a coin, but wouldn’t it make more sense to replace the $50 or $100 notes with a coin?  Wouldn’t that be a greater deterrent to counterfeiting?

[RonnieR131]

I've only got maybe 10 years or so to go, surely I can hold out that long without getting my first cell phone or credit card. Surely.

[Conder101]

On 10/22/2020 at 2:20 PM, scopru said:

It leads me to question would those costs be shifted to more equipment, hubs, and dies need to increase production on the coins that remain?

Eliminating the cents wouldn't really result in much if any increase in the amount of other coins required, but it would result in a much smaller number of hubs, dies, and repair parts and maintenance on a lot of mothballed presses.  It would also result in a very large savings in the purchase of all those cent planchets.  Elimination of the cent would increase the Mints profit by at least $68 million.  And any increase in the production of other denominations (except nickels) would increase that profit even more.

On 10/22/2020 at 2:22 PM, gmarguli said:

there were screams from the Dems that this would hurt the lower income people the most. Businesses would round up and the poor would suffer

What is there to stop businesses from rounding up their prices  anyway?  Competition.  If some start rounding up and others don't, those that round up lose customers to the ones that didn't.  The idea to make a little less per sale, but make it up in volume.

 

On 10/22/2020 at 7:13 PM, olympicsos said:

But those who use the US Dollar as a reserve currency are mainly holding paper dollars and not coins.

I would suspect that most of the "reserve currency" being held is in the form of securities and electronic currency not physical paper money.

 

On 10/22/2020 at 5:24 PM, World Colonial said:

Second, the unbanked which will presumably be "solved" by the use of smartphones as occurs or is in process in the developing world.

Yes it's amazing, people don't have bank accounts, but they have smartphones.

[scopru]

6 hours ago, Conder101 said:

And any increase in the production of other denominations (except nickels) would increase that profit even more.

An increase in wear and tear due to increased production in other denoms equipment would increase as well.  I do not argue that removing the cent would reduce the expense in a perfect world.  We do not live in that world from what I see in gov't or business.  I am of the opinion that any expense savings for cent production would simply be shifted elsewhere for a net net gain of zero.  Could I be wrong?  Certainly and time will indeed tell at some point.  But as I said above it takes strong leadership to manage a budget and make meaningful and significant cuts to the actuals. This is not just a cut in a product line, but a fundamental change (see what I did there haha) for the entire country.  Take revenue and expense out of the conversation and I think this is an still a steep uphill battle to remove the cent.  Not as steep as it once was, but still a significant hurdle.   

 

7 hours ago, Conder101 said:

What is there to stop businesses from rounding up their prices  anyway?  Competition.  If some start rounding up and others don't, those that round up lose customers to the ones that didn't.  The idea to make a little less per sale, but make it up in volume.

Agreed.  Competition and free markets tend to keep things generally level.  However, I do think a removal of cash or certain denoms would have rounding addressed vs left to the individual business to decide.  But in a 100% cashless society I do not see rounding as an issue since it is all digital vs hard currency. 

Change is a coming! (pun intended again and I am not sure why I am finding that more humorous than it is )

 

 

[VKurtB]

On 10/22/2020 at 8:33 PM, World Colonial said:

My interpretation of the OP was discontinuing coinage altogether.    I don't see that happening, except in a cashless society.

It's other posts such as yours bringing up removing one or more denominations.  If coinage is going to remain, it's more likely the lowest denominations would be removed while new ones are introduced to replace the lowest value currency notes.  That's what has happened elsewhere to this point.

I don't see why this should be so. Switzerland eliminated the 1 rap and 2 rappen without creating a new denomination, and even the 5 rappen barely circulates. Canada created the Loonie and Two-nie LONNNNG before eliminating the cent. Look at a modern Canadian mint set. It looks like someone cut out a cent.

[World Colonial]

2 hours ago, VKurtB said:

I don't see why this should be so. Switzerland eliminated the 1 rap and 2 rappen without creating a new denomination, and even the 5 rappen barely circulates. Canada created the Loonie and Two-nie LONNNNG before eliminating the cent. Look at a modern Canadian mint set. It looks like someone cut out a cent.

I agree with you. 

All I was saying is that I interpreted the OP to be in the context of eliminating all coinage entirely.  It's possible I misunderstood.

[Conder101]

On 10/26/2020 at 10:54 AM, scopru said:

An increase in wear and tear due to increased production in other denoms equipment would increase as well

But the total number of coins produced would greatly decrease and the increased wear and tear from the increase in the other denominations would be much less than the wear and tear from the 6 billion + cents no longer being made so overall the loss to wear and tear would decline.  Plus the increased seigniorage profits from those other denominations would be greater than the same number of cents.

[RWB]

1 hour ago, Conder101 said:

But the total number of coins produced would greatly decrease and the increased wear and tear from the increase in the other denominations would be much less than the wear and tear from the 6 billion + cents no longer being made so overall the loss to wear and tear would decline.  Plus the increased seigniorage profits from those other denominations would be greater than the same number of cents.

Like bread and milk at the grocery, cents and nickels are "loss leaders" for the Mint.

[Conder101]

Yes but loss leaders are to get customers in the store where they will then buy other products.  I don't think making cents and nickels at a loss encourages people to use other coins any more than they would use them without cents nd nickels.

[World Colonial]

The one way trip from the bank to the change jar is primarily a function of the non-existent purchasing power in current denominations, even among those who pay regularly with cash.  I normally pay for everything by CC to get the points or rebates but I still carry up to several hundred in folding money.  I don't like to be without (hardly) any currency like most seem to now. 

Concurrently, I never carry any change and try to avoid receiving it back because it doesn't buy anything.  Other than paying Florida tolls since I don't live there, I recall maybe a handful of times in the last five or ten years where I had to pay in cash and received change back.

[Just Bob]

4 hours ago, World Colonial said:

 

Concurrently, I never carry any change and try to avoid receiving it back because it doesn't buy anything.  Other than paying Florida tolls since I don't live there, I recall maybe a handful of times in the last five or ten years where I had to pay in cash and received change back.

With the current coin shortage, I have been using change in most of my transactions lately - from a snack at the convenience store, to a $59.99 purchase at JC Penney this morning. Tellers seem to like getting exact change these days.

[VKurtB]

The primary use today for U.S. cents is in sales tax collection.

[olympicsos]

32 minutes ago, VKurtB said:

The primary use today for U.S. cents is in sales tax collection.

I guess the amount of sales tax that's coming in more than makes up for the losses incurred in producing cents. It's like a federal subsidy to states without the federal government actually giving them money. 

[Conder101]

On 11/9/2020 at 2:04 PM, VKurtB said:

The primary use today for U.S. cents is in sales tax collection.

The primary use is exact change back after a purchase with or without sales tax.  (A lot more people get change back than actually count out cents for exact change paying for their purchase.)  Round tot he nearest 5 cents after any sales tax in applied to the final amount and no cents are needed to ether pay the tax or for exact change back.  So round to the nearest 5 cent the the cent coin has no use.

 

On 11/9/2020 at 2:37 PM, olympicsos said:

I guess the amount of sales tax that's coming in more than makes up for the losses incurred in producing cents.

Except the Federal government takes the loss making the cents, and the state governments get the sales tax money.  So the sales tax doesn't make up the loss at all.

Edited November 11, 2020 by Conder101

[VKurtB]

11 minutes ago, Conder101 said:

The primary use is exact change back after a purchase with or without sales tax.  (A lot more people get change back than actually count out cents for exact change paying for their purchase.)  Round tot he nearest 5 cents after any sales tax in applied to the final amount and no cents are needed to ether pay the tax or for exact change back.  So round to the nearest 5 cent the the cent coin has no use.

 

Except the Federal government takes the loss making the cents, and the state governments get the sales tax money.  So the sales tax doesn't make up the loss at all.

We call those “intergovernmental transfers”. LOL. 

[Modwriter]

Cash transactions were not allowed at The Los Angeles Rams/Chargers preseason game yesterday at the new Sofi stadium. Cashless may be coming faster than the Taliban takeover of Afghanistan.