StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Dollar Coin Supporters Trying To Sell Us The Brooklyn Bridge

01 Feb 2012
Posted by Stan Collender

For some reason the dollar coin keeps coming up.

A press release in my inbox yesterday announced that Senators Tom Harkin (D-IA) and John McCain (R-AZ) had introduced the "Currency Optimization, Innovation and National Savings (COINS) Act" that would create yet another dollar coin. This is the Senate version of a bill introduced in the House last year.

As I've posted several times before (here, here, and here) I know from very very personal experience with the Golden Dollar in 2000 that, as far as the budget is concerned, a dollar coin is a good idea for the federal government.

I also know, however, it's been impossible to eliminate the bill so that the dollar coins that have been created have been a supplement to rather than a substitute for the greenback. That completely changes the transaction: Instead of producing savings, the dollar coins that have been minted have ended up costing taxpayers more rather than less. The real beneficiaries have been the suppliers of the raw materials for the coins and the armored carriers that delivered them to banks and retailers.

Think of it this way. Suppose there was a old bridge that cost the government a great deal to maintain every year and someone determined that replacing the bridge with one that was more efficient made a great deal of budget sense. It clearly was going to cost more in the first few years to build the new bridge than to maintain the old one, but the new one was going to save money over the next three decades compared to what it would cost to keep the old one in place.

But there's a problem: Drivers like the old bridge and aren't going to use the new one because it's located 3 miles further down the road. They also don't like the design of the new bridge and have trouble getting there because the access points are difficult to maneuver.

As a result, traffic on the old bridge only decreases slightly and the government still has to pay to maintain it while it also pays for the new bridge. The result is more rather than less spending. That makes the new bridge a good deal for the companies and workers that build it and the steel and concrete manufacturers that provide the raw materials. But it's a terrible deal for taxpayers.

I'm sure you see where this is going. The savings can be guaranteed if the old bridge is torn down. That, in fact, is what the newly introduced COINS act would do: it would mandate that the dollar bill be eliminated.

But that doesn't take into account the politics of the situation. The bill is very popular (some consumers feel incredible loyalty to it and think of using a coin as the equivalent of cheating on a spouse), and retailers don't like them because they are more expensive to have delivered than bills.

Vending machine owners whose machines don't already accept dollar coins don't like them because it costs a good deal of money to make the conversion (It was $50 per machine in 2000; that's undoubtedly $75 or more now).

Banks don't like new dollar coins because they still have large inventories of Susan B. Anthony dollars -- maybe the most unpopular coin is U.S. history -- and can't get get consumers to take them.

And lets not forget the companies that manufacture the paper and ink for the bills that want to keep selling that to the government.

So the likelihood that the dollar bill will be phased out is small to nonexistent. That means that the transition to a dollar coin in the U.S. will not produce the budget savings its supporters claim.

It also means that the supporters are just trying to sell us a bridge.

Hmm, I wonder if

Hmm, I wonder if Freeport-McMoran or Koch has any interest in this? Wonder if the bill would say that the EXISTING supply of dollar coins out of supply? I now one thing, if this goes through, I'm long copper. I'm sure it's just a coincidence that Arizona is a big mining state.


Dollar coin ramblings

Your bridge analogy is incorrect. The new bridge (dollar coins) is actually more convenient than the old bridge, not three miles down the road.

Did anyone think in 1976 that a 25-cent bill would have made any sense? Not that I recall. Because of inflation, a dollar coin serves the exact same purpose as a quarter in 1976.

It's time to eliminate the dollar bill (wastes hundreds of millions of dollars a year) and the penny (also wastes a couple hundred million dollars a year). The average person would then have less weight in coins in their pocket and find that the dollar coins are more convenient than dollar bills.

The public has never had a chance to use dollar coins. Banks make them hard to get, and almost no one will go to an extra effort to get a particular type of coin--they'll just use what's handed to them at the bank or at a store.

Yes, the Susan B. Anthony dollar was badly designed. But the Sacajawea and Presidential dollars are a different color and have a smooth edge. You would no more confuse a new dollar coin with a quarter than you would confuse a quarter with a nickel.

There's not a big stockpile of SBA dollars. There may still be some in the pipeline, but the number of "golden" dollars produced greatly exceed the total number of SBA dollars ever made.

Paul


What exactly are you claiming?

I think that your arguments are rather sloppy in this post.

If the COINS act is enacted as it currently exists, will it produce the savings its supporters claim? Your rhetoric indicates it will not, but none of the evidence you present supports this.

You state that a dollar coin without a dollar bill is better than the status quo, from a budgetary perspective. The COINS act would implement this.

If your problem is that we would instead get a watered-down act that doesn't eliminate the dollar, then the real issue isn't the COINS act, or its supporters, but our broken political process.


I just came back from

I just came back from vacation in Paris, where of course they are on the euro and there are 1 and 2 euro coins rather than bills. The smallest bill is a 5. Which means, if you are out and about during the day, you can end up with quite a pocketful of coins. While it's true that one's spending as a tourist is somewhat different than normal, it didn't make me long for a return to dollar coins here.


This a classic example of

This a classic example of crony capitalism influencing our politics. The Mars family (think billions of dollars of wealth) privately holds Mars candy and Mars Electronics Inc. (MEI). MEI makes the coin recognition and processing units that are found in millions of vending machines; MEI doesn't want to hurt profits by retrofitting machines. Meanwhile, another crony group wants dollar coins, be it precious metal types or whomever. Thus, we get this back and forth!


Experience in other countries

Experience in other countries suggests that after some initial resistance consumers would get used to coins if they replaced bills. But getting there would require a smidgeon of spine in congress.

http://www.grocheteau.com/papers/The%20Fate%20of%20One-Dollar%20Coins%20...


Experience in other countries

The Sacajawea dollar is very popular in Ecuador (which uses US currency).


You have to tear down the old

You have to tear down the old bridge!

Stop printing 1 dollar bills, people will switch.


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Question

This argument has been going on for decades. The Dollar coin has never been popular over the paper dollar. My question comes from the arguments people use to persude the demise of the dollar bill. If these arguments are true, why keep any paper bills around. If a coins life is longer and cheaper than a paper bill, why not make a 5 dollar, 10 dollar, 20 dollar, 50 dollar and 100 dollar coin and stop making paper money altogether. If it makes sense to get rid of the paper dollar then get rid of them all! If you do not agree with this, then you can see why the paper dollar is still around. Even in Europe, they still have paper money so explain why it makes sense to keep some paper money but not all?


What a laugh

We've eliminated the dollar bill many years ago and the world didn't turn upside down.
We went metric back in the 70's and most of us barely remember pounds and miles anymore.
You used to be a young modern country. Now you've old and stuck in your ways. Have fun in the past.

LOL

Canada


Swipe cards

Why have coins of any sort? Why not have plastic swipe cards for transactions?

Banks and credit card companies charge a transaction tax. Why not push the loan sharks aside and have BigG cards with cheaper transaction rates?

Just Asking




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