How Long Until People Don't Use Coins Anymore?

OK, last time I'll say it, and then I'll stop, since this appears to be a strongly held conviction which is unlikely to be changed.
This is not true.

Concerning Canada ...

Inflation is caused by the growth of the money supply being faster than the growth of the economy over a prolonged period of time. https://www.phil.frb.org/-/media/re...brma93lb.pdf

If we look at the growth of money supply during the first years of issue of the Canadian dollar coin (1987-89), we see that M1 grew by $22.6 billion Canadian. https://fred.stlouisfed.org/graph/?...MM101CAA189S, The value of the new dollar coins issued in these years was only $0.5 billion, or about 2% of the overall growth of the money supply. So these dollars were insignificant in terms of their impact on inflation.

But it is easy to see how someone who did not like this change would assign cause and effect, when it was not justified.

Looking at the percentage of cash which is coins, Canada seems to rank #1 in the world of major currencies
CAD 6.7%
GBP 6.0%
AUD 4.9%
SEK 4.8%
JPY 4.3%
CHF 3.7%
USD 2.9%
EUR 2.3%
KRW 2.2%
RUR 1.0%

I should note that while 2%-7% sounds like a small percentage, the majority of cash (by value) seems to be used as store of value and not for transactions. So those numbers are a larger percentage, of transactional cash. But there is no easy way to calculate that percentage. Canadian coins are 6.7% of all cash in circulation, but they are 21.2% of cash in denominations worth less than CAD$50.

The Russian Ruble is a relatively unstable currency, which by it's very nature is difficult to mint coins. Inflation constantly requires new denomination in banknotes or a radical shift in the amount of each denomination in circulation. That is much easier to do with banknotes.




I am not sure I understand your hypothesis. It sounds like you are saying that people treat coins as incidental money and banknotes as real money. So by Canada converting such a large percentage of cash to coins, made people less aware of price increases as they were now paying only with coins.

Negative. No one I know in Canada lost more of their earnings or any other such nonsense when the dollar and two dollar coins were introduced. Budgets were not busted because they had to buy things with coins instead of notes. It is absolute rubbish to suggest such nonsense.

Frankly, as Canadian who was an adult in 1987, when the dollar coins was introduced, and already financially astute in 1996, when the two dollar was introduced, I cannot believe the amount of unfounded rubbish, when reading your arguments Earle42.




That is merely your opinion, not fact... when I read that, this is what I see.






Only skimmed it? Seriously, if you are trying to prove a hypothesis, I would expect not only fully reading a study, but reading many studies. Do you really expect me to believe you fully understand the complexity of inflation in any given society in any period of time, by "skimming a study"?




Oh, I know research. I know exactly what that word means, as a researcher myself. Please cite your sources, and show us exactly what numbers you crunched, to support your argument.... then have it validated by peer review by experts in this field. If you are one of those experts, what degrees and publications do you have in economics and financial analyses that supports your expertise?

Then, prove to us that you are not falling into the statistical number trap of correlation versus causation, specially when it comes to the economy of Canada, versus net income of the "average Joe" Canadian.

Frankly - no matter what I write, your mind is already made up... so what I will provide is my perspective, my opinion, from an "Average Joe" Canadian, who still uses cash as well as plastic.

The impact the change of $1 and $2 bills to coins, in Canada, has had a ZERO impact on me, and any of my "average Joe" Canadian friends. If anything, the opposite has occurred. This encouraged me, and many of my friends, to save money. Almost every one of my friends has a story where they bought an RRSP by simply cashing in change jars that contained $1 and $2 coins. Financially, in the long run, they are in a better place with those change-funded RRSPs...

The "nonsense" was first pointed out to me in a discussion with a Canadian Bank manager the year the Sacagawea dollar program had been announced in the US. Sorry I made a mistake in my former posts saying the initial conversation was when the Presidential dollars were announced. Here is the first place this happened. A bank I frequented back then:



I did not feel qualified to doubt the bank manager's "nonsense" she was telling me when she said the switchover had increased prices b/c operating costs were passed onto consumers as a direct result of the Looney:
Her: I cannot believe the US is going to make the same stupid mistake we did in switching to dollar coins.
Me: (surprised - we had been talking halves and clad Canada dollars) What do you mean?
Her: (I do not have the exact words as this was awhile ago, but the gist of the reply was three points)
1. We banks don't like to take the coins in bulk b/c it costs us so much more to ship, let's say, a million dollars of metal instead of paper to exchange lower denominations for higher ones.
2. We have had to pass the added costs onto businesses who pass it onto consumers.
3. We had to raise our prices for the average consumer to also cover our new costs to handle them coins.

Being of curious nature I questioned a bank manager in Chippewa, Ontario concerning their opinions of the new US dollars and got the same results. As is my habit, I was careful to ask a non-leading question something to the affect of, "So what do you think of the US implementing the new dollar coins? The question was also proffered to a bank manager at the (now Starbucks) bank (Scotiabank at one time I think?) sitting at the Clifton Hill Rd. and Victoria Ave. intersection in Niagara Falls, Ontario. I got the same reply. Overall costs had increased because of the implementation.

So the "nonsense" idea I got from three professional Canadian financial institutions at the time also led me to what seemed an "aha! moment." I now knew why the typical items I always bought in Canada had an unusual uptick in price not long after the new (and I thought cool!) Looney had been introduced.

Inflation:
BTW - I am going to try to not use the word "inflation" so it will not continually be being mistaken as a reference to the official inflation rates as seen over time. I did mention I made a mistake in using that specific word b/c I did not foresee how it could mislead into a separate subject.

Think of it this way. Represent normal economic inflation as the affects of a wave pattern, caused by a small and continual wind, hitting the bank of a small pond. Someone throws a rock into the pond (switching to Looney-only) and the action generates its own small waves.

The rock's waves (one time Looney-only economic impact) will still hit the same shore (price increases). But the rock's waves are not an actual part of the wind-system-waves (normal, annual economic rate of price increases caused by repetitive circumstances).

Busted Budgets:


It is also rubbish *** offensive statement and image removed by the staff ***. I made neither statement.

Please stay rational for the sake of good debate. You have once again introduced sensationalism - maybe (I have no idea) thinking it adds affect to your post?

I never said anything about budgets being busted, people losing earnings on a massive scale, Canada being ruined (previous use of sensationalism), or for that matter, the end of the world (just in case).

I did say prices went up as a result of the switch. I gave the source from which I first heard of the issue as being a bank in Canada who went through the change (no pun intended, but I like it ). I stated the bank's information was the first time I heard the ("nonsense") explained to me as to why they thought the US should learn from their mistake (their concept) in eliminating $1.00 bills b/c it brought higher costs to everything. I have now also shared that more than one bank shared the same "nonsense" with me as a direct result of their financial dealings and experiences.

I grew up crossing the border and shopping in Canada as well as frequenting the banks for roll searching, currency exchange and collecting the clad dollar coins and halves. For some strange reason (not really) neither coin circulated to the point I ended up asking for managers b/c the tellers had no clue there were such coins made. A manager typically would say, "We might have a few back in the vault, let me check," and return with very few coins in hand saying they rarely ever see or get either denomination. It was one of those times that led to my first discussion with them concerning the US implementing Sacs.

I also don't think calling the issues nonsense will ever bring back to me the extra money I ended up spending at the time due to the situation. Facts, unfortunately, are not subject to emotional desires or whims.



I will reiterate. Typical inflation rates are not affected, a one time price increase resulted

As stated, the banks are the ones who told me there were large costs increases to them and other businesses who handled volumes of money. The bank manager(s) told me the costs of moving/shipping large amounts of $1 of metal vs. $1 pieces of paper is where a main problem making the difference existed.

Explanation:
One Looney - originally 6.988 grams - means 1,000,000 1987 coins was 7.7 US tons.
One million 1986 issue Canadian paper $1 bills would weigh just over 1.1 US tons (approximated using US dollar bill weight since finding the weight of the 1896 series Canadian bills proved elusive online- yet the Canada bills are .5 square inches larger - hence more mass when dealing with such a large number).

Bringing this home.
490 bills = 1 pound

56 dollar coins = 1 pound

Toting and shipping can become weighty/expensive quickly.

Do the math for shipping and handling costs as well as for other things we don't generally think about such as equipment needed to move large amounts.

Personal example: in the past I got a small hand cart for roll searching four $500.00 boxes of on a regular basis. But carrying the 2K to pay for the boxes, even if it was in $1.00 bills, could easily be done on person without physical strain (~4 pounds of paper vs ~100 lbs. of halves).



Nowadays yes - we are talking about 1987.


In fact, come to think of it...I would think our past history of rejecting dollar coins in the US implies an elimination of bills would just drive more people to use their credit/debit cards for even more smaller purchases. The coins, as before (and before, and before), would not circulate and we get all our small purchases being recorded somewhere.

The argument that the government will save unit manufacturing costs by issuing $1 and $2 coins and eliminating corresponding bills seems irrefutable if the analysis ends there.
But actions can have unforeseen consequences. Earle42 has raised one relating to increased transport costs for banks and others who move large amounts of money. Maybe there are others, maybe not, I don't know. But I do know I won't use the dollar coins because I never carry change. Ever. Haven't in 40 years. If they come to me, they are going out of circulation and into the coin jar. Just like pennies.
Has anyone done a study or made projections about whether other people will do the same thing? If others are like me, then the mint will have to make billions of dollar coins a year just to replace those being stashed away as a matter of convenience or personal preference. I've never heard of anyone hoarding dollar bills.
I don't know. I just wonder. At the end of the day there will be some amount of inconvenience, and the value question is "is it worth it?

I think this point is logical and demonstratable,

Statistics from Canada (assume present day population of 36,309,000) up through end of 2017.
1,381,206,441 1 Dollar coin 38.04 per inhabitant
914,316,500 2 Dollar coin 25.18 per inhabitant
2,295,522,941 total

The USA has printed over 100 billion banknotes during that time period, but at the end of 2017 the Fed reports a count of notes that have been issued but not destroyed
$12.1 billion, $1 notes
$2.4 billion, $2 notes

Now obviously billions of the $1 banknotes are lost, eaten by dogs, and inadvertently thrown in the trash. To a much lower degree so are the Canadian coins. But we have to ignore this statistic since it is difficult to measure and it doesn't affect the outcome very much. I am going to ignore the USA $2 banknotes since they are all in drawers somewhere.

But as of the end of 2017 circulation figures are:
1 Dollar coin 38 per inhabitant in Canada
2 Dollar coin 25 per inhabitant in Canada
1 Dollar banknote 38 per inhabitant in USA
2 Dollar banknote 7 per inhabitant in USA

That seems to indicate you need more coins than banknotes, presumably because people don't hoard dollar bills.

We see a similar pattern in Scandinavia where the 20kr (between $2 and $3) is a banknotes in Sweden, and a coin in Norway and Denmark. The banknotes are circulating at a much lower rate than the banknotes.

Another source of data is from casinos. Profit margins soared when casinos stopped accepting real coins and installed noisemakers that sound like coins dropping into a bin.