http://money.cnn.com....html?hpt=hp_t2
NEW YORK (CNNMoney) -- A nonpartisan, investigative arm of Congress is calling for the United States to stop printing dollar bills and switch entirely to $1 coins instead.
Why? Because the Government Accountability Office believes it could save Uncle Sam money.
A $1 coin typically costs about 30 cents for the U.S. Mint to produce, but then the government can sell them to Americans for a dollar each. That financial gain is called seigniorage, and over a period of 30 years, it could save the U.S. government about $4.4 billion, the GAO said. These coins typically last around 30 years.
In contrast, producing paper bills is cheaper, at about 5 cents apiece. But they also wear far more quickly. A typical $1 bill lasts only 4.7 years, according to GAO estimates.
The push is nothing new. The GAO has been recommending the change for the last 22 years, and will try again Thursday in a hearing before the House Financial Services Committee.
"We continue to believe that replacing the note with a coin is likely to provide a financial benefit to the government if the note is eliminated and negative public reaction is effectively managed through stakeholder outreach and public education," Lorelei St. James, a GAO director, said in prepared remarks to be presented Thursday.
St. James points to 10 countries, including Canada and the United Kingdom, that have successfully replaced low-denomination notes with coins, even in spite of public disapproval.
The report also notes that as inflation erodes the purchasing power of a currency, low-denominated notes like the $1 bill are circulated more quickly, causing wear and making the switch to coins more worthwhile.
The main challenge is the switch remains controversial among the public, the vending machine industry and even the Federal Reserve.
As of May, the Fed had amassed $1.4 billion in $1 coins in its vaults because demand for the coins remains weak.
The Treasury Deprtment suspended the production of the coins, for the most part, last December. The U.S. Mint now only produces a few new presidential designs -- like those featuring Chester Arthur and Grover Cleveland -- to satisfy the demands of collectors.
Louise Roseman, director of the Federal Reserve Bank operations and payment systems, wrote a letter to the GAO last year, questioning whether switching to coins would pose any broader economic benefit.
Seigniorage, she said, is merely a "revenue transfer from the private sector to the government", and it doesn't include the costs to the banking industry, retailers, the Federal Reserve and consumers.
Under seigniorage, the U.S. government gains money when it produces dimes, quarters and dollar coins, because it costs less to produce these coins than they are worth in circulation.
The government loses money, however, when it produces pennies and nickles -- a problem President Obama has asked Congress to fix, by granting the U.S. Mint greater flexibility to use a cheaper makeup of metals in their production.
Kill the dollar bill, for $1 coins instead?
Started by
concert andy
, Nov 28 2012 08:11 PM
28 replies to this topic
#3
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- VibeTribe
- 6,331 posts
Posted 28 November 2012 - 08:18 PM
Sounds like a poor idea to me. At the rate of monetary inflation, the coins, which are already made of the cheapest medals available, would end up like the penny is today.
So you are saying they wont be worth anything because of the medal used? Or that in the future the medal will increase in value, making it cost more to manufacturer the coin?
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I am on board with this.
Europe and UK have not had a $1 note since before I was there in 1996/1997.
I feel the penny is useless because well, what can you get for a couple of penny's? A couple of dollars on the other hand can get you a bunch (coffee, snack, gas, etc...)
The value of saving the money over the long term is what is most intriguing to me.
#4
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- VibeTribe
- 8,415 posts
Posted 28 November 2012 - 08:20 PM
I agree with minting coins instead of bills for $1 denominations, and/or just reinstate the $2 bill into wider circulation to achieve the same thing. But that article totally misses the point. Minting money should be seen as strictly a cost to government and taxpayers not as some kind of profit-generating "seigniorage." That is bullshit of the highest order since the decision of how much money to put into circulation has absolutely zero to do with what form the currency takes.
#5
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- VibeTribe
- 16,761 posts
Posted 28 November 2012 - 08:28 PM
So you are saying they wont be worth anything because of the medal used? Or that in the future the medal will increase in value, making it cost more to manufacturer the coin?
No to the first one. Our monetary system isn't based on any market variables of precious medals. it's all on US govt. confidence. Yes to the second question. That's exactly what happened to the penny. Most of the coins, especially the quarter, were silver before 1964. Then the medals became worth more than the currency. So they started mixing the vtas with whatever was cheapest. Zince, nickel, copper, etc...now it's all mainly cheap zinc.
The same thing would happen here. Maybe that's the point. Maybe not.
No to the first one. Our monetary system isn't based on any market variables of precious medals. it's all on US govt. confidence. Yes to the second question. That's exactly what happened to the penny. Most of the coins, especially the quarter, were silver before 1964. Then the medals became worth more than the currency. So they started mixing the vtas with whatever was cheapest. Zince, nickel, copper, etc...now it's all mainly cheap zinc.
The same thing would happen here. Maybe that's the point. Maybe not.
#6
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- VibeTribe
- 6,331 posts
Posted 28 November 2012 - 08:32 PM
So you are saying they wont be worth anything because of the medal used? Or that in the future the medal will increase in value, making it cost more to manufacturer the coin?
No to the first one. Our monetary system isn't based on any market variables of precious medals. it's all on US govt. confidence. Yes to the second question. That's exactly what happened to the penny. Most of the coins, especially the quarter, were silver before 1964. Then the medals became worth more than the currency. So they started mixing the vtas with whatever was cheapest. Zince, nickel, copper, etc...now it's all mainly cheap zinc.
The same thing would happen here. Maybe that's the point. Maybe not.
I think the point is the US public likes the dollar bill, and have rejected the dollar coin at every turn.
Supply and demand. Cost is not a concern to most of the public.
#9
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- VibeTribe
- 6,331 posts
Posted 28 November 2012 - 08:41 PM
Good lord, where's Spel Chk Jimy when we need him?
medal - metal
I am going to blame TASB. He used it first and then I used it assuming he was correct.
I admit I am a poor speller, but I usually do correct the spelling error if the red line is under the word. In this case Medal is something you win, so it is spelled right. Just used incorrectly.
#23
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- VibeTribe
- 8,026 posts
- Locationthe Island
Posted 28 November 2012 - 09:16 PM
I want my dollar bill...who really cares that coins last longer?!? 30 years? they only last 30 years cuz no one uses them for spending on a regular basis.
also it only leaves 2 spots you can place the coins on your favorite stripper...I haven't won 500 million yet so yes...singles for the stripper
also it only leaves 2 spots you can place the coins on your favorite stripper...I haven't won 500 million yet so yes...singles for the stripper
