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 Replies: 57 / Views: 5,653 |
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Pillar of the Community
United States
2295 Posts |
 Good point, so it could take less than 3 years to make a profit. |
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Moderator
 United States
188612 Posts |
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At the risk of sounding like a monetary heretic, the USA should review the currency approaches done by its neighbors regarding downsizing coins and eliminating the 1/100 unit (ie our cent). This is really a no-brainer--imo You say heretic, I say pragmatist.  |
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Moderator
United States
188612 Posts |
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Because the coins are minted for face value unlike the dollar bills which carry a collateral of debt in order to be printed. Right, but my point (which was not clear and I apologize) was that they still have the same control. They can still "game the system" with the other denomination notes; and do it with less paper.  |
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Valued Member
United States
284 Posts |
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New Member
United States
37 Posts |
I did not make it up when I said that it would be ten years before the government realizes a net savings in the transition to dollar coins. According to the GAO (GAO-11-281) Quote:
the federal government would incur a net loss during the first 4 years. Yearly net benefits begin to accrue in the fifth year of our analysis, and in the tenth year (2020), the initial start-up costs are paid back and overall net benefits begin to accrue. The early net loss represents the up-front cost of producing a large number of coins during the transition from notes to coins, together with the limited interest expense the government would avoid in the first few years after replacement began. Furthermore, all the gains are from increased seigniorage, not lower production costs. Quote:
While the estimated benefits in earlier GAO analyses were due to both seigniorage and reduced costs of coins (as compared to notes) over 30 years, our current net benefit estimate is solely due to seigniorage. In fact, the cost of producing coins for a full replacement is never fully recovered during the 30-year analysis, likely due to the longer note life and relatively higher cost of coin production today than was the case when our earlier studies were conducted. There is the potential savings for the government in switching to the dollar coin. However they still need to be weighed against potential costs. It is not a simple question. Certainly a worthwhile debate. |
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Pillar of the Community
Germany
992 Posts |
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The early net loss represents the up-front cost of producing a large number of coins during the transition from notes to coins But a large number of $1 coins IS alreday in the vaults. Fact is: Sooner than later a switch to $1 coins from notes would save money or make a ''profit.'' |
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New Member
United States
37 Posts |
The 1.1 billion coins in government vaults are accounted for in the analysis. Quote:
Fact is: Sooner than later a switch to $1 coins from notes would save money or make a ''profit.'' I agree. The GAO makes a strong case for that. These "profits" still need to be considered along with the costs and benefits to the private sector as well. I would like to leave open the possibility that net-benefits to society are positive. For example, coins are a lot easier for cashiers to count than dollar bills, in my opinion. However a transition would likely force banks to expand and reinforce vaults to handle the additional weight of coins, such expansions are not trivial. |
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Bedrock of the Community
United States
17884 Posts |
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The early net loss represents the up-front cost of producing a large number of coins during the transition from notes to coins How can you have a net loss producing a large number of coins each of which represents an immediate profit of over 60 cents apiece? I make one I have 60 cents profit. If I make a thousand I have 600 dollars profit. If I make a million I have 600,000 dollars profit. But if I make a LARGE number I have a net loss? |
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Pillar of the Community
United States
4132 Posts |
It's a net loss because you lose money removing the decommissioned dollar bills from circulation.
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Pillar of the Community
United States
2335 Posts |
You would not have to immediately remove decommissioned dollar bills from circulation. Stop printing & set the date at which they are no longer legal tender at the end of the life cycle for the last run printed.
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Pillar of the Community
United States
1903 Posts |
Decommission them? Heck....just stop printing them but allow them for use.....in two years they will all be mush anyway.
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Pillar of the Community
United States
4132 Posts |
When dollar bills are unfit for circulation, they get sent back to the fed be shredded and replaced (in this case, with coins). You don't get seigniorage when that happens.
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New Member
United States
37 Posts |
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When dollar bills are unfit for circulation, they get sent back to the fed be shredded and replaced (in this case, with coins). You don't get seigniorage when that happens. Seigniorage is only realized when new currency enters circulation. Otherwise you are only replacing one valueless dollar bill with a valueless coin, that costs more to make but lasts longer. |
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Bedrock of the Community
United States
17884 Posts |
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When dollar bills are unfit for circulation, they get sent back to the fed be shredded and replaced (in this case, with coins). You don't get seigniorage when that happens. For every two ones that come back issue one Two dollar note. Currency is still replaced, no seigniorage loss, and in fact you gain a bit because you are replacing two notes with one and saving on the printing. And the increase in twos is why you will not have to have 1 1/2 coins for every dollar note currently in circulation. |
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Moderator
United States
188612 Posts |
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For every two ones that come back issue one Two dollar note. Currency is still replaced, no seigniorage loss, and in fact you gain a bit because you are replacing two notes with one and saving on the printing. And the increase in twos is why you will not have to have 1 1/2 coins for every dollar note currently in circulation.  |
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Replies: 57 / Views: 5,653 |
First Page
Posted 02/29/2012 2:53 pm
