Congress Considering Replacing Dollar Bill With Steel Coin
The US government wants to save money by replacing the $1 paper bill with the $1 steel coin. Like the thought of having your pants sag?
HR 6162: Lets Research About Better Ways To Make Money
Today in a House Subcommittee meeting, congressmen sat around the table discussing about switching our nations paper currency to a multi-plated steel coin.
Now why you may be shaking your head wondering why politicians are caught up in meetings talking about the merit of coins over paper money, its all part of President Obama's Coin Modernization and Continuity Act of 2010 and required by law. The Act's purpose is to give control to the Secretary of the Treasury over the research and development of coins. In addition it lets Congress to oversee coin production.
Some of the information (I took notes) was pretty interesting that you can read through and of course I have my opinion on it.
Coins Suck. I Hate The Way They Sag My Pants!
In my personal experience, I rarely come across $1 coins in my daily life. When I do, I often mistake it and toss it into the piggy bank for a quarter. Whenever a machine or someone tries to exchange $1 coins for paper bills, I just cringe because I know that I am going to end up carrying this thing in my pocket - and I hate carrying coins. They cause my pants to sag and make that funny jingling sound whenever I walk. Paper is lighter and I can carry it in my wallet where it belongs.
$1 coins don't work. The problem is, these are novelty items that go out of circulation. The government goes out minting too many of these things only to find nobody wants to use them. They end up in some Federal Reserve bank vault unused. You place them in your ceramic piggy bank and then when it is full, head over to some Coinstar machine which then takes them off the open market back to, yes you guessed it, the bank vault.
Silly isn't it? And you paid for it through taxes.
The Future Isn't Coins. Thats Old School.
The future isn't in coins or paper money. For the most of us, the future is in electronic transfer via mobile electronic devices. That alone in the next 30 years is going to make this whole issue moot. I say most of us, because there are the poor and electronically disconnected who do not have the means to use mobile devices for transactions. There is still the need for coins and paper. But, the point is there will be less need for it.
Look, this is all so silly. Nobody gives a crap about saving the country money printing coins especially when we don't get something tangible back in return. In fact, maybe if the government would stop spending tens of thousands of dollars holding these oversight meetings, they could actually focus their attention on more meaningful issues.
Here's the notes I took from the hearings. I think you'll find some of this information quite interesting. Clearly, whenever something like money is being discussed, it is, well, about money and how someone wants to print, distribute, and control it.
I would venture to say, that the people who print money, are more concerned about technology overtaking it.
Testimonies: Panel 1
Moderated by David Schweikert, US Representative of Arizona.
Richard Peterson, Deputy Directory of the US Mint
- The US mint is 6 locations of 1,800 employees
- Circulation of $1 coins was suspended December 2011
- US Mint Research and Development in Philadelphia is looking for metallic alternatives
- In December, will report to Congress as required by law under the Coin Modernization and Continuity Act of 2010 their findings
- Aluminum, Steel, Zinc, Lead are the only four candidates out of the periodic element table suitable for coin production
- Cost 2 cents to produce a penny
- Mint has cut circulation costs 20% to $180 million in 2012
- In the cost of a penny, 47% is in cost of metal; mint production cost 35%; G&A 16%
- In 2012, the mint created 9.1 billion coins
Lorelei St. James, Director, Government Accountability Office
- GAO has recommended 6 times in meetings the benefits of $1 coins
- $4.4 billion dollars in savings by switching to coin over the next 30 years
- Costs to produce coin and dollar are less than face value
- Assumes 1 1/2 coins to replace each note
- Over the last 48 years many countries such as Canada and UK have benefited in cost savings
- Initial public reaction was against coin usage
- Future model based on 30 years. Break even point after 10 years
- There is a 10 year front loaded cost, and a back ended saving element in coin minting
- US does not have electroplating technology and must find vendor
- Lifespan of a note is 40 months
- Federal Reserve Bank says lifespan of a note is 56 months
Beverley Lepine, Chief Operating Officer, Royal Canadian Mint
- Attempted to replace note with coin twice in 1996 and 1987
- Uses multiplied plated steel material technology
- Steel technology used in other 30 countries around the world
- Transit and vending
- With the help of Coinstar have recycled coins
- The $1 coin saved $175 million over the first 25 years
- 94% steel core, 6% nickel and copper
- Lower cost to move away from metal price volatility
- By using multiplied steel, offers better security in vendor and transit machines
- Canada's technology is patented and is licensed
- Canada has licensed to US Jarden Zinc
- Publicity was important for coin acceptance in way of savings
Steve Stivers, Ohio Congressman
- Can save millions of dollars by changing from alloy to steel
- In 2006, a penny cost 2.4 cents to mint
- In 2006, a nickel cost 11.1 cents to mint
- In April 2012, Navigant Consulting reported that the US could save $192-207 million a year
Testimonies: Panel 2
Moderated by Blaine Luethkemeyer, US Representative of Missouri
Phillip Diehl, Former Director, US Mint
- $1.4 billion of coins sit in Federal Reserve vaults
- Production costs would exceed the production cost of dollar bill
- Seigniorage is the difference between nominal value and cost in producing it
- To maintain commerce, you need 3 coins to replace every two bills
- Not until 10 years would benefits show
- Benefit goes to private sector, which is a tax
- Believes $100 million increase in budget deficit
- Three out of four Americans believes this is a budget gimmick
James Miller, Former Director GAO
- Since 1990, the GAO has issued 7 reports on change to coin from dollar bill
- Replacing will save taxpayers $4.4 billion and $15.7 billion over the next 30 years
- Demand for Sacagawea $1 dollar coin was successful
- Production had to be increased
- Resistance from competition government and banking industry caused Sacagawea dollar to fail
- Federal Reserve Bank strong prefers the $1 bill
- Banks and FRB wanted proof that the Sacagawea $1 coin would be accepted
- Walmart distributed 100 million Sacagawa coins
- The US Mint profits from the distribution of $1 coins
- The Federal Reserve bank profits from the distribution of the $1 bill
- In the past 20 years, FRB cited the lifespan of a $1 bill to be 13-18 months.
- In 2011, the FRB cites the lifespan to 56 months
Mark Weller, Director of Americans For Common Cents
- Penny is important for economy
- Steel is a coin material that saves money
- Congress is on right track to find lower production costs of minting
- Two HR bills exist to make penny and nickel to steel
- Recommends changing to multiplated steel
About Kerry Kobashi
Kerry is the founder of KerryOnWorld. He lives in Silicon Valley.