Saturday, March 05, 2011

$1 Coin Would Save $5.5 Billion, Let's Do It

According to this new government (GAO) study:

"Replacing the $1 note with a $1 coin could save the government approximately $5.5 billion over 30 years. This would amount to an average yearly discounted net benefit—that is, the present value of future net benefits—of about $184 million. However, GAO’s analysis, which assumes a 4-year transition period beginning in 2011, indicates that the benefit would vary over the 30 years.  The government would incur a net loss in the first 4 years and then realize a net benefit in the remaining years. The early net loss is due in part to the up-front costs to the U.S. Mint of increasing its coin production during the transition.

GAO has noted in past reports that efforts to increase the circulation and public acceptance of the $1 coin have not succeeded, in part, because the $1 note has remained in circulation. Other countries that have replaced a low-denomination note with a coin, such as Canada and the United Kingdom, stopped producing the note. Officials from both countries told GAO that this step was essential to the success of their transition and that, with no alternative to the note, public resistance dissipated within a few years."

MP: It seems obvious that the key to a successful transition to a $1 coin is the elimination of the $1 note, to overcome the "tyranny of the status quo." 

HT: Paul Kedrosky

22 Comments:

At 3/05/2011 12:13 PM, Blogger PeakTrader said...

Will the government force dollar coins on the people?:

Economist Robert Whaples:

The public right now is voting with their pocket book, and saying there are these two things in circulation, we like this other one better. We're using it. We're showing you that we like it better by using it.

Whaples says the only way to get people to switch to coins is by following in the footsteps of the Europeans and getting rid of the notes altogether.

 
At 3/05/2011 12:17 PM, Blogger IowaBill said...

Seems a bit like a tautology to call the $1 coin a 'success' after the $1 note is withdrawn, no?

 
At 3/05/2011 12:20 PM, Blogger Buddy R Pacifico said...

I was curious how much a recent one dollar coin was valued at. This coin is about 90% copper sandwiched between brass outer layers.

Hmm, metal prices are soaring so; what is the value of an uncirculated 2005 unciculated Sacajawea dollar? U.S. $0.99 "current" bid on EBAY!

 
At 3/05/2011 12:41 PM, Blogger morganovich said...

i can't speak to the rest of the country, but if you want to do a little "dollar coin arbitrage", chuck e cheese tokens (25c) are accepted as sacajawea dollars at a great many parking meters and vending machines in SF.

might be worth trying where you live...

 
At 3/05/2011 12:45 PM, Blogger John said...

Suppose you have a cash drawer that usually has $400 in $1 bills, where are you going to put 400 coins?

 
At 3/05/2011 1:03 PM, Blogger rjs said...

seems like it would take a lot of money out of circulation; for one, i'd only carry fives, and dollar coins received as change would go in the same can as the quarters & pennies...

 
At 3/05/2011 1:17 PM, Blogger Buddy R Pacifico said...

UPDATE: The Sacajawea coin winning bid was for $2.10.

 
At 3/05/2011 2:07 PM, Blogger juandos said...

"Replacing the $1 note with a $1 coin could save the government approximately $5.5 billion over 30 years"...

Well that's seriously lame @ssed joke...

We could save quite a bit more than that in one year just by dumping Medicaid or the school lunch program...

 
At 3/05/2011 2:40 PM, OpenID eh1mnwy said...

The competition between the dollar note and the dollar coin is valid. Perhaps we should be looking for the reason and address those. The 400 dollars in a drawer certainly fits my anecdotal research into the problem. The dollar coin is too big. The Canadians offer a solution with the two dollar coin, but I would suggest that the Australians have come up with an even better solution: Their dollar coin is the same diameter as a dime, but is twice as thick as a nickle. It's no more a bother to carry $10 in dollar coins than $10 in notes. And the Australians have a $2 coin that is the same thickness as the $1 dollar coin but the diameter of a quarter.

 
At 3/05/2011 2:43 PM, Blogger Mike said...

@John No one leaves $400 in 1's in a cash drawer. I worked retail and restaurants for years.

I'm all for the coins and the savings. Just don't come up with anything remotely close to loonie or toonie.

While we are at it, let's drop the penny as well.

 
At 3/05/2011 3:17 PM, Blogger Benjamin said...

The penny should go too. It is a typical federal rural sop, this time to Greeneville, Tenn., a where zinc company makes the penny blanks.

 
At 3/05/2011 4:12 PM, Blogger bix1951 said...

and get rid of the nickel
round everything to the nearest 10 cents

 
At 3/05/2011 4:15 PM, Blogger juandos said...

How about questioning what the GAO has to say?

Lies, Damn Lies & Government Statistics: How Bureaucrats Use Numbers to Manipulate Us

 
At 3/05/2011 8:36 PM, Blogger Jet Beagle said...

The GAO study did not comput the extra cost incurred by non-government entities for transporting $1.00 coins.

Suppose each of the 130 or so passengers on every U.S. domestic flight carries five $1.00 coins rather than five $1.00 bills. The extra energy consumption would total tens and perhaps hundreds of millions of dollars annually. Likewise, the additional energy cost to truck millions of additional coins daily to and from banks would add up very quickly to many millions of dollars.

The GAO study also did not calculate the cost which would be imposed on tens of thousands of vending machine operators.

The GAO - like most government agencies - almost certainly attaches little importance to the costs its actions will impose on the provate sector.

 
At 3/05/2011 8:44 PM, Blogger Jet Beagle said...

Mike: " No one leaves $400 in 1's in a cash drawer. I worked retail and restaurants for years. "

I owned retail businesses for years, Mike, so my perspective may be different from yours.

It is very easy for all but the smallest retailers to accumulate $400 in dollar bills in a single day. Counting, storing, bundling, and transporting 400 coins requires more effort than doing the same for 400 bills.

 
At 3/06/2011 12:06 AM, Blogger Michael Hoff said...

We don't want a dollar coin. Isn't that obvious by now?

How about this: make the dollar out of tyvek. That way it lasts longer and they don't have to shove a dollar coin down our throats.

 
At 3/06/2011 11:21 AM, Blogger Jet Beagle said...

In my post above, I think I overestimated the cost to transport air passengers' dollar coins. After using the weight and fuel model of my airine, I now believe the annual cost for all U.S. carriers to be in the $5 million to $10 million range. That's at current fuel prices.

 
At 3/06/2011 12:50 PM, Blogger juandos said...

"I now believe the annual cost for all U.S. carriers to be in the $5 million to $10 million range"...

Hmmm, maybe that could be a bit on the low side depending on how many other carriers have a similer contract...

Two or three times a week (depending on what time of the year it is) an amored car company brings between one dozen and two dozen metal buckets filled with coinage out to plane side for the flight to DCA...

Each metal bucket with coins is one hundred and thirty pounds...

Each bucket has a different coin type in it but the max weight coins and bucket is 130 pounds...

Now whether there are special contract rates (usually there are) its still a movement of somewhere between 4500+ pounds and 9000+ pounds weekly...

It seems to me that between air freight costs, transportation costs, and maybe more importantly paperwork costs (special paperwork over and above what used to be needed for DHS) your guesstimate might possibly be a bit low...

 
At 3/06/2011 5:28 PM, Blogger Hydra said...

How much is it going to cost in additional worn out trousers?

How much more is the underside of your car seat going to be worth?

 
At 3/07/2011 3:37 AM, Blogger Ron H. said...

juandos

"It seems to me that between air freight costs, transportation costs, and maybe more importantly paperwork costs (special paperwork over and above what used to be needed for DHS) your guesstimate might possibly be a bit low..."

There wouldn't be any extra paperwork costs for coins carried by passengers, would there?

I still like the idea of forcing passengers to use the restrooms before they board to save on weight. These FRRVs, (forced rest room visits) could be observed by TSA agents as an addition security measure. Refusing an FRRV could be viewed as cause for additional scrutiny in the form of a mandatory enema.

 
At 3/07/2011 5:47 AM, Blogger Jet Beagle said...

juandos,

I wasn't aware that coins were being transported on planes. My estimate only considered the dollar bills currently being carried by passengers. So, yes, if bulk shipments of coins by air are a frequent occ, then the fuel costs for replacement dollar coins would be much, much higher.

 
At 3/07/2011 9:39 AM, Blogger Rand said...

Note to Joe Beagle: Perhaps we could transport coins on all those high speed trains that the current administration is so fond of promoting. It would be one way to fill all those empty seats.

 

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