Why exactly
do we have a coin shortage?
-
Banks
tell us that the Fed are not releasing enough coins.
-
Armstrong
Economics wrote that faith in governments has been eroded. It sees governments
as promoters of the idea that money is dirty, and the solution is to eliminate
coins and paper money even though physical money as a medium of exchange has
been in circulation for centuries.
-
The
U.S. Treasury reported a disruption in the coin supply chain and its velocity
of circulation due to the lockdowns and the huge reduction in consumption in
the last four months of forced lockdowns in all 50 states. People shopped
mostly for food and avoided all other venues of direct commerce for fear of
Covid-19 infection and because so many places were closed. Many shopped online
or in large retailers like Costco, Target, Walmart, and Amazon.
-
Allegedly,
the U.S. Mint has minted less coins to protect employees from COVID-19. It is
an interesting issue to ponder since minting coins and printing paper currency
are highly automated operations, with expensive computers driving the printing
and minting presses and requiring very few employees, mostly in checking roles
to make sure the machines run properly and the mint/print are done correctly,
as well as controlling the quality of each batch that is bound and packaged for
distribution and circulation.
-
Some
central banks are sterilizing money with UV light to prevent the spread of
viral infections.
-
The
Fed purportedly quarantined for ten days U.S. dollars returning from Europe and
Asia. https://www.armstrongeconomics.com/armstrongeconomics101/economics/hoarding-cash-2/
The U.S.
Treasury sees the current coin shortage in U.S. businesses as a decrease in velocity
of various coins in circulation. The Treasury estimated the value of coins in
circulation in April 2020 of $47.8 billion as an adequate coin supply, larger
than last year’s supply of coins by at least half a billion. But the closing of
retail shops, many permanently, bank branches, transit authorities, and
laundromats due to Covid-19 fears, eliminated the typical places where coins enter
circulation.
Nobody knows
exactly if people are hoarding coins on purpose or if the businesses that have
closed temporarily or permanently have cleared out all their cash registers of
coins and paper currency.
“The coin supply chain includes many participants,
from the U.S. Mint who produces new coin, to the Federal Reserve who
distributes coin on the U.S. Mint’s behalf, to armored carriers, banks,
retailers and consumers, all of whom have a role to play in helping to resolve
this issue.”
On June 11, the Federal Reserve announced the
Strategic Allocation of Coin Inventories which was a temporary coin order
allocation in all Reserve Bank offices and Federal Reserve coin distribution locations
effective June 15, 2020.
The Federal Reserve also established a U.S. Coin Task
Force in early July to deal with disruptions to normal coin circulation. All interested parties participated – U.S.
Mint, Federal Reserve, armored carriers, American Bankers Association,
Independent Community Bankers Association, National Association of Federal
Credit Unions, Coin aggregator representatives, and retail trade industry. https://www.frbservices.org/news/communications/063020-federal-reserve-convenes-us-coin-task-force.html
The Federal Reserve said that “it is confident that
the coin inventory issues will resolve once the economy opens more broadly and
the coin supply chain returns to normal circulation patterns, however, “it
recognizes that these measures alone will not be enough to resolve near-term
issues.”
Can I still coin a phrase? 😀
ReplyDeleteThis comment has been removed by the author.
DeleteCoin away, Paul.
DeleteWhen I get enough coins in a container I keep at home, and/or in a container in my car, I count them and either get cash bills or deposit. I have accounts at two local banks which have coin counters free of charge for customers. Now with COVID-19, the bank lobbies are closed, so account holders can't go in to count their coins. When I go, always seems to be a line. They only have ATM or drive up banking now. So, I imagine a lot of coins are out of circulation for this reason too. Also, casinos were closed until recently and for a fee, like the ones in grocery stores, etc., they have a coin counter and both places that charge a fee seem to have a line of a few people to count coins. These shutdowns due to coronavirus have long lasting and far reaching effects.
ReplyDeleteYou are right, Marijane, I never thought of casinos and all their slot machines.
DeleteIn 1950 in Romania and in 2010 in Venezuela...coin production by Central Bank STOPPED! Why? With a 1000% inflation and 10,000% devaluation, metals are only good for making tools....
ReplyDeleteAurel, you are so right. It's always been the case here as well. For example, the metal in a penny cost more than the actual value of the coin. And, with inflation, the coin face value would become worthless but the metal would be used in making tools and parts.
DeleteMinting new coins from precious metals, because of antimicrobial properties, may be on the horizon. Judy Shelton, a staunch gold standard (and cryptocurrency) advocate and Trump economic advisor, yesterday was passed by the Seante banking committee. A vote by the full Senate for her appointment to the Federal Reserve is imminent.
ReplyDeleteInteresting idea, James. When Nixon removed gold as backing for our currency, our debt has exploded. I am not sure we have so much gold left in the inventory at Fort Knox. It has not been inventoried since 1972, I believed, by a group of Congressmen. There is gold underneath Manhattan in the keep of the Federal Reserve of New York but it does not belong to us, it belongs to various countries around the world. Part of Canada's stored gold, I believed, melted during the intense underground fires from 9/11 attack in 2001. There was a reason why there was so much security surrounding the pile of smoldering rubble. Additionally, we have not discovered significant sources of gold since Spain brought large amounts from the New World. We mine it but in small quantities because of environmental issues created by gold exploration and the acid by-products used. So, I am not so sure using gold to back the currency again is feasible. For now, fiat money, which is what the dollar is, deemed worthy by the government and the trust we have in it, seems to be it. I am not sure there was enough gold mined in the history of the earth to cover the trillion dollars worth of debt this Congress alone has created by printing and giving it away.
DeleteIf I am not mistaken, Mitt Romney (of course!) opposed this appointment!
Delete