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How Long Until People Don't Use Coins Anymore?

 
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 Posted 02/09/2019  11:10 pm  Show Profile   Bookmark this reply Add jbuck to your friends list Get a Link to this Reply

Quote:
Maybe cash will only be the money of choice for criminals and others trying to avoid detection. Sort of like bitcoin, but with actual coins.
I cannot imagine fiat money retaining any value once the supporting government abandons it. Perhaps those living "outside of the system" will complete their transactions with barter, hard currency, bullion, gems, etc.
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 Posted 02/10/2019  06:45 am  Show Profile   Bookmark this reply Add PacoMartin to your friends list Get a Link to this Reply
Silver certificates were initially redeemable for their face value of silver dollar coins and later (for one year - June 24, 1967 to June 24, 1968) in raw silver bullion.
No dollar coins had been issued in thirty years, but beginning in 1969, legislators sought to reintroduce a dollar coin into commerce. President Richard Nixon, who had served as vice president under Eisenhower, signed legislation authorizing mintage of the new $1 Eisenhower coin on December 31, 1970.

After half a century it seems as if the idea of issuing a $1 and $2 coin adopted by much of the world is dead in America. Instead of talking about eliminating the penny and nickel, perhaps we should be discussing eliminating coins entirely. You could collect change on a phone app or a card and turn it in for cash or deposit it into an account.

The elimination of coins will also radically reduce the need for small value banknotes particularly the $1, $5, and $10 as there will be a convenient way to pay for small value transactions.
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 Posted 02/10/2019  07:41 am  Show Profile   Bookmark this reply Add tdziemia to your friends list Get a Link to this Reply
I was kind of curious about what the actual trend might be for the amount of cash in the U.S. economy.

As it turns out, the rate of growth of U.S. currency has been increasing, not decreasing: https://fred.stlouisfed.org/graph/?id=CURRNS,
Again this is mostly paper, as opposed to coin, but I am a little surprised at this trend since I would have thought that in response to growth in e-commerce, the rate of currency growth might have slowed down. (I guess that's why I'm not an economist).

I looked around a little for any kind of trend data for the amount of only coins in circulation, but it does not appear that this information exists(?). However, we can infer that the number may have been decreasing for the last two years, since coin production has been declining since 2016, and, I would guess that the number of coins being "retired" each year is increasing (since the number of relatively "old" coins eligible for retirement is increasing each year). I would be curious if anyone has seen numbers.
(Edit: looking over longer term mintage figures (50 years), we might even have been declining for a decade or so, depending on whether the number of coins being retired is constant, increasing or decreasing. The number of coins produced in the last 10 years -- 113 billion -- is the lowest since the 1970s).
Edited by tdziemia
02/10/2019 1:52 pm
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 Posted 02/10/2019  2:59 pm  Show Profile   Bookmark this reply Add Ballyhoo to your friends list Get a Link to this Reply
Won't happen and here is why from two different person experiences. A few years back, while on the road miles from home, my banks system was down for maintenance. I could not access their system to complete a fuel pump transaction. Luckily I had cash. Just last week, getting my morning coffee before work, the credit card machines were out. Again, cash only. So, no. Not going to happen.
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 Posted 02/10/2019  9:34 pm  Show Profile   Bookmark this reply Add mikem007 to your friends list Get a Link to this Reply

Quote:
Interesting that CBS news ran a story on this (cashless businesses) this morning. A couple of important angles they mentioned (also touched on here):
- cash transactions have the possibility to avoid detection for taxation purposes, which will continue to make them popular
- 30% of people earning under $30,000 rely on some kinds of cash transactions


There is a lot of news happening on this topic here in Northeastern U.S., I live in New Jersey and it's currently daily news. The local NJ government intends to ban cashless businesses for the entire state.

https://www.nj.com/politics/2019/02...ng-cash.html

The fines look pretty steep for businesses that don't want to accept cash. My guess is that these same businesses will probably try to avoid coins by handling paper money only.
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 Posted 02/10/2019  10:16 pm  Show Profile   Bookmark this reply Add rayder to your friends list Get a Link to this Reply
From Govexec.com

"Fortunately, dimes and quarters are cheaper to make, costing less than their monetary value. So the Mint makes up the losses incurred on pennies and nickels with its 10- and 25-cent coins, and last year reported making $391.5 million in seigniorage."

I've never met a politician that didn't like free money.

As long as the mint is making that kind of money just for making coins they won't stop making them. They will probably try to get rid of pennies and nickels fairly soon though since they cost more to produce than they are worth.

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 Posted 02/10/2019  10:58 pm  Show Profile   Bookmark this reply Add Earle42 to your friends list Get a Link to this Reply
The day when flea markets, garage sales, farmer markets, bake sales, fundraisers, bottle shows, insulators shows, RR shows, steam tractor shows, fill-in-the-blank-hobby shows, auctions, carnival operators, food venders, and such are eliminated is when there will be no need for coins.

I can see where people in cities would have a more of an idea that coins are not needed, it makes sense.

Thankfully I still can enjoy flea markets etc. where its not uncommon to see "anything this table .25." I know that has to be incomprehensible to city life where the cost of living is so much higher.
- When I value " being right" more than what IS right, I am then right...a fool.
- How much squash could a Sasquatch squash if a Sasquatch would squash squash?
- Real men play Fizzbin.
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 Posted 02/11/2019  12:09 am  Show Profile   Bookmark this reply Add CelticKnot to your friends list Get a Link to this Reply
I agree with Earle... it ain't happening any time soon.

But hopefully reform happens soon (i.e., retire the $1 note and cent).

Not holding my breath on either.
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 Posted 02/11/2019  12:53 am  Show Profile   Bookmark this reply Add PacoMartin to your friends list Get a Link to this Reply

Quote:
tdziemia
As it turns out, the rate of growth of U.S. currency has been increasing, not decreasing:

From the end of 1945 until the end of 1962 the supply of circulating federal reserve notes increased by only 1.33% per year on average.

The Silver Purchase Act was passed in 1934, the annual demand for silver bullion rose steadily from roughly 11 million ounces (1933) to 110 million ounces (1962). Public Law 88-36 (PL88-36) was enacted on 4 June 1963 which repealed the Silver Purchase Act of 1934. In repealing the earlier laws, PL88-36 also repealed the authority of the Secretary of the Treasury to control the issue of silver certificates. While retaining their status as legal tender, the silver certificate had effectively been retired from use. In March 1964, Secretary of the Treasury halted redemption of silver certificates for silver dollar coins.

In February 1965 President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. He sent the French Navy across the Atlantic to pick up the French reserve of gold. His example was followed by several countries.

By 1966, non-US central banks held $14 billion, while the United States had only $13.2 billion in gold reserve. Of those reserves, only $3.2 billion was able to cover foreign holdings as the rest was covering domestic holdings.

On 16 December 1966, the MasterCard credit card was introduced to complement earlier American Express, Diners Club Card, Visa plus store cards.

On June 24, 1968 - President Johnson issued a proclamation that all Federal Reserve Silver Certificates were merely fiat legal tender and could not really be redeemed in silver.

Although the process essentially began in WWII, it was now clear that the US Dollar was completely replacing gold and silver as the world standard for money. The French quickly dubbed it America's exorbitant privilege.

From 1962 to 1969 Federal Reserve Notes were increased by an average of 6.5% per year (nearly 5X the rate of 1.33% per year on average from 1945-1962).

By 1969 the US government decided the illegal utility of banknotes higher than $100 outweighed the legal use. So they announced that the higher value denominations would remain legal tender, but every note turned into the central bank would be destroyed. In addition, they pledged never to print a higher denomination banknote again.

In an attempt to prevent dirty money from entering the U.S. financial system in the first place, the United States Congress passed a series of laws, starting in 1970, collectively known as the Bank Secrecy Act (BSA).

The USA decided that the US paper currency was no longer convertible into gold, an announcement made by President Nixon in August 1971.

After that, the FED could essentially print as many $100 banknotes as there was demand. As the world's currencies began to crumble, the demand for $100 bills exploded. America's exorbitant privilege kicked into high gear as we began to buy things with money we printed. In the 48 years since 1969 the value of federal reserve notes has increased by an average of 7.7% per year which is far faster than the average rate of GDP growth.

At the end of 2017 79.7% of the value of circulating banknotes is in the $100 denomination, a percentage that is certain to increase once the 2018 numbers are published. The $100 banknote has surpassed both the $20 and $1 banknote as the high number of notes in circulation.

Many people correctly point out that the $100 banknote is primarily used in foreign countries as a store of value. However, other than Sweden and Norway, the cash supply of every country in the world is increasing, and in almost every case faster than the rate of increase of the GDP of that country.
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 Posted 02/11/2019  09:24 am  Show Profile   Bookmark this reply Add tdziemia to your friends list Get a Link to this Reply
Here is another link showing the value of circulating currency as mentioned by PacoMartin:
https://www.federalreserve.gov/paym...oin_data.htm

That graph (or the data behind it) provokes lots of comments/questions:
1. The number of small denomination notes ($50 and smaller) in circulation has grown slowly over the last ten years (about 3%/year, or 40% over a decade), but it is still growing. To me, this says we have not yet reached any kind of tipping point yet about cashless transactions. When we do, I would expect to see something like the rate of currency growth in proportion to GDP growth take a turn.

2. I noted this comment in the previous post:
Quote:
Many people correctly point out that the $100 banknote is primarily used in foreign countries as a store of value.
. I am curious if there is any way to quantify that. As best I can tell, the FED figures can't tell how many of those notes are circulating inside the U.S. versus being kept elsewhere. But I am also wondering if the capitalization requirements for U.S. banks after the last recession are responsible for part of the increased demand for $100 notes?


Edited by tdziemia
02/11/2019 09:39 am
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 Posted 02/11/2019  09:35 am  Show Profile   Bookmark this reply Add basebal21 to your friends list Get a Link to this Reply
US cash isn't going anywhere during the lifetime of anyone alive. Huge parts of the country outside of cities use it regularly and more importantly it is a world reserve currency. Several other countries around the world use USD as well.

Some businesses may go cashless so they don't have to worry about employee theft and other smaller countries may try it out, but the USA is not going to be cashless this century.
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 Posted 02/11/2019  10:07 am  Show Profile   Bookmark this reply Add jbuck to your friends list Get a Link to this Reply

Quote:
As long as the mint is making that kind of money just for making coins they won't stop making them. They will probably try to get rid of pennies and nickels fairly soon though since they cost more to produce than they are worth.
Sounds good to me.
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 Posted 02/11/2019  10:20 am  Show Profile   Bookmark this reply Add PacoMartin to your friends list Get a Link to this Reply

Quote:
tdziemia
To me, this says we have not yet reached any kind of tipping point yet about cashless transactions. When we do, I would expect to see something like the rate of currency growth in proportion to GDP growth take a turn.


A study in the Bank for International settlement looked at growth currency in circulation (CIC) from 2006-2016 compared to Growth in GDP to try and get a comparison and show that CIC is growing much faster than GDP around the world.

Growth in CIC           Country                Growth in GDP
-44%                    Sweden                  22%
-2.4%                   Norway                 -7.6%
20%                     Denmark                 8.2%
27%                     Japan                   9.0%

59%                     Canada                  36%
76%                     New Zealand             54%
78%                     Switzerland             54%
79%                     Eurozone                7%
81%                     Australia               63%
84%                     U.K.                   -2%
87%                     U.S.                    35%

89%                     Morocco                 53%
110%                    Thailand                83%
135%                    South Africa            135%
148%                    Oman                    46%
170%                    Brazil                  160%
178%                    Russia                  165%
180%                    Nigeria                 179%
183%                    Colombia                74%
191%                    Kazakhstan              65%
198%                    Israel                  79%
208%                    Kenya                   173%
224%                    Mexico                  85%
234%                    Chile                   104%
243%                    Indonesia               240%
250%                    South Korea             69%
280%                    Iraq                    140%
287%                    India                   263%
318%                    Algeria                 44%
329%                    Iceland                 18%
350%                    Pakistan                107%
355%                    Ukraine                -13%
359%                    Turkey                  228%
362%                    Bolivia                 195%
369%                    Egypt                   213%
372%                    Afghanistan             166%
413%                    Myanmar                 365%
441%                    Angola                  114%
442%                    Mozambique              33%
522%                    DR Congo                145%
621%                    Sudan                   167%
904%                    Argentina               135%


I felt that the authors biased the results somewhat by converting to USD. If the currency is dropping against the USD, the results might look different if recalculated in native currency. I recalculated the United Kingdom using Pounds sterling instead of equivalent USD.The CIC of Britain went up by 70.77% while the GDP went up by 49.74% when I used pounds sterling.

Without trying to recalculate all 42 cases, there seems to be a rush to create cash at a fast rate. You can have more cash in circulation while reducing the amount of cash used in transactions, as the higher denominations are more likely to be stored in a home safe.

It is not clear if Sweden and Norway are either on the vanguard or they are the exceptions to the norm. Because the citizens of those countries have very high trust levels in their commercial banking. They have the highest penetration (over 50% of the population) of the same phone app that allows easy transfers of money from bank account to bank account with instant response. As mass transit, churches and street beggars accept electronic transfers, many people no longer carry cash. The largest denomination banknote (the 1000kr) has been reduced by 93% in Sweden, and no new notes of 1000kr denomination have been produced for Norway since 2005.

A friend came back from a 10 day trip to Norway and he noted that not only did he not withdraw and use any Norwegian banknotes, he never saw anyone pay for anything in cash the whole time he was there.

Denmark has been increasing cashless transaction, but so far most of the 1000kr banknotes are sitting at home in safes. Japan has not grown much by percentage, but cash was already at record highs in Japan in 2006. Japanese society is very distrustful of banks.

Edited by PacoMartin
02/11/2019 11:57 am
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 Posted 02/11/2019  11:53 am  Show Profile   Bookmark this reply Add Earle42 to your friends list Get a Link to this Reply
@Celticknot
It has been beaten to death on the past on this forum, but the data and facts I could find (and I did a LOT of work/math into this) all point to getting rid of the bill following the same pattern it did in Canada with the Loony. Making only the dollar coin and getting rid of the $ 1bill WILL cost the average Joe (that's you and me) more money for everything. It all starts b/c banks end up with much higher costs (and every business dealing with large amounts of cash like vending machine owners) and pass those costs along to the consumers.

Bringing this home, I used to roll search halves. Four boxes took a lot of effort to move around. In fact I used a small dolly. I could easily hand carry the equivalent amount of cash (if even in ones) with no effort.

Try having to pay the shipping costs for $1 million metal coins vs. $1 million paper bills - I was enlightened to this from a Canadian bank manager when the US first started the Presidential dollar coin series.

I was in Canada getting rolls to search (lived near the border). The bank manager told me that she could not believe the US was going to be "dumb enough" to not learn from the mistake Canada had made by getting rid of the dollar bill and using only dollar coins.

While the hypothetical, on-paper savings of taxpayer dollars by switching to only coins can be touted by politicians, as it always seems to go, the switch in Canada ended up costing the non-hypothetical people in real life a lot more out of their own pockets. You can guarantee those alleged saved tax dollars went to some other government spending so the consumers really got no benefit whatsoever and were stuck with higher prices, heavy pockets (pocket weight also shown here in the past as a reality for those who had to go through it), and huge amounts of change b/c banks do not like it when people ask for bills for coin up there).

History would repeat itself here. So if we want higher prices, we get rid of the dollar bill and make some politicians have a hypothetical star in their cap.

That is all I will write here on the subject as its all been said before and is here on CCF. The subject and data/math can be found in the CCF archives.


- When I value " being right" more than what IS right, I am then right...a fool.
- How much squash could a Sasquatch squash if a Sasquatch would squash squash?
- Real men play Fizzbin.
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 Posted 02/11/2019  12:19 pm  Show Profile   Bookmark this reply Add Sharkman to your friends list Get a Link to this Reply
Whatever extra it costs to make dollar bills over coins, I am personally willing to pay the imperceptible increase in my taxes for the convenience of dollar bills. I never carry coins. I've got enough in my pockets I have to carry that I don't want more pocket weight, and I hate rattling when I walk.
Banks hate coins. More and more are refusing to take unrolled coins. They have a powerful lobby.
With the exception of the Morgan dollar and perhaps the gold dollar in the 19th Century American West, I am unaware of the American people ever accepting and using a dollar coin.
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