I've bitched about the US coinage system on this blog before, but in case I wasn't clear, it's completely bonkers. Michael Zielinski at Coin Update sums up, in a gently-worded article about the "unusual" state of our circulating coinage:
The cent and nickel each cost more than their face value to produce and distribute. The quarter dollar is in the midst of a lengthy circulating commemorative program, although unfortunately the coins are nowhere to be found within circulation. The half dollar continues to be minted [for collectors] but is not issued for circulation. The $1 coins are issued in five different designs, while at the same time paper $1 bills are issued for the same denomination. After recent developments at least four of the $1 coin designs will no longer be issued for circulation.
Most of the problem coins, of course, don't even need to be struck, due primarily to the fact that we as a people have more resistance to changing our coinage than to letting our government inflate away the value of our currency.* Pennies and nickels are struck in huge numbers** at great cost, transported all over the country at great cost, used by merchants to make change, and lost, discarded, or saved up by consumers to eventually be redeemed for a small amount of paper money. All to facilitate splitting transactions down to absurdly fine fractions, so that nobody feels like he's been cheated out of three cents by a rounding system.
The system is absurd. Kill the penny. Kill the nickel. Kill the dollar bill and the five, and strike a five-buck coin (which would have about the same buying power as a mid-20th century 50 cent piece, so no bitching about how hard it is to "lug around" a few coins). Such a system will hold its usefulness in the face of inflation at least long enough to make the whole argument academic when physical money goes out of fashion entirely.
And as long as I'm dreaming, let's get the dead Presidents off our coins, too. Our traditional Liberty motifs would be best, but even a wholesale switch to silly looking cartoon Indians would be preferable to the current crop of Emperors. All this apotheosis of Presidents is unseemly in a constitutional republic.***
[* - This may not be entirely fair. More specifically, the public-opposition/government-incentive ratios are way off. Even if Americans were twice as opposed to inflation, it's less visible and there's an enormous incentive for government to keep doing it. Keeping the coinage system in its current broken form represents a very small cost for government.]
[** - The Mint has already passed four and a half billion 2011 pennies, and the machines are still running.]
[*** - It's also, incidentally, another source of resistance to fixing the system. Worshipers at the Church of Lincoln are for some reason incensed at the idea of their culture-hero losing his place of honor on the world's lowest-value coin.]
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I've never understood the cult of personality that built up around Lincoln. He did one good thing during his entire presidency, and all the bad things are supposed to be ignored? I don't get it.
ReplyDeleteWashington I could understand, even Jefferson, But Lincoln?
It's the assassination. Lincoln was deeply controversial even in the north, up until John Wilkes Booth made the worst calculated political statement ever and turned the man into a divus.
ReplyDeleteYou want to massively overpay even more for a candy bar at a vending machine? The vending machine at my office contains items that range in cost from $0.65 to about a buck, with the bell curve peaking around $0.80, and the incremental price delta quantum is 5 cents because they don't stock pennies in the machine.
ReplyDeleteI don't get the point of having the quantum of money be a relatively large step, I really don't. The benefits of having a large quantum of money accrue to the State and the banks, since the State requires round-off in their favor, and the bankers can make a decent account of money playing with the fractions in their bookkeeping, even if the round-off rules are the same for depositors and borrowers, which they don't have to be.
A smaller quantum of money helps the smaller businesses, since they can't afford to buy their widgets in volume large enough to afford to fill a large quantum; see candy bar example above.
(Whether it makes sense to continue to issue coins made of valuable metals at all is another question entirely. The problem there for the coins other than the penny is the massive installed base of coin-handling equipment that assumes that each coin denomination will have physical.properties unchanging withing a very small tolerance range. I doubt it would be easy to replace the quarter, for example, with a plastic that would be any cheaper once you made it as dense as the metallic sandwich it is currently made of.
I don't get the point of having the quantum of money be a relatively large step, I really don't.
ReplyDeleteRelative to what? Should the Mint start striking mills so that your candy bar isn't rounded to the nearest cent? The state and banks are stealing your mills! ;)
We didn't strike mills fifty years ago, when the mill was worth about what a current cent is worth, because the value wasn't worth it. A century and a half ago we gave up on the half cent for the same reason (complicating factor: it was big and heavy relative to its value). There's a meatspace threshold for units of value below which representing them physically is no longer practical, and the current US cent is below that threshold.
To be fair, I do think there's a better case for keeping the nickel, but that's specifically because the quarter is so useful and commonly used. Killing the quarter would be close to impossible (and undesirable, IMO), so we'll need to be able to pay for purchases in multiples of five cents. This is a fact I always forget when writing about currency reform.
On metals, I agree that plastic is a better from-scratch solution, but in practical terms there's presently only a problem with the penny and nickel, and the other coins have intrinsic value so far below face value that inflation rapid enough to bring them close in the near future will give us much bigger problems to worry about. I strongly suspect we'll be paying vending machines with our phones before it becomes an issue.
A quick reading of your post led me to believe that you wanted to abolish denominations lower that $5 and make that a coin. I evidently drew the incorrect inference.
ReplyDeleteAs for the disappearance of the mill and ha'penny in ages past, so what? The economy has changed. We can really keep track of quite small amounts of money effectively. Empirically, we have small businesses who can survive on profit margins measured below 5% (some of whom do price in mills, incidentally a practice I don't agree with, but probably has to do with tax rates, which puts the onus on government) and do cash business.
I could live with the loss of the penny, I suppose, but out would mean that fitment would be making additional money on the rounding of sales tax. (The bankers' case doesn't bother me). In NJ, an additional ~3 cents on the dollar of rounding is a nice chunk of change to graft with, for example.
I was unclear. I think we should kill the penny, and I _wish_ we could kill the nickel but don't think it's practical. I'd like to see a currency reform that left us with the nickel, dime, quarter, dollar coin, and ideally a five dollar coin with bills starting at the ten.
ReplyDelete