Read the report and comprehend it. They tell exactly what they did, how they did it, and the results. Get what the report says and let it stick: The report says the sole beneficiary of the system, if switching was cost effective, is the
government. And guess what? The report even mentions it would cost you and I more money to make the switch.
Its easy for someone to say metal lasts longer, but there are a lot more considerations to be made such as how many coins are needed to be made to replace a single bill, increased life expectancy of bills (electronic purchases mean bills don't wear like they used to), and one thing this reports says which I appreciate is that the government is the sole benefactor and the people will likely incur more costs. In other words, this time they did the job with an eye to facts and legitimate data instead of politics.
Years ago I downloaded and digested the initial government report about the savings implementing the
Presidential dollar coin program (PDCP from here on out) would introduce. I did the math and posted results on this forum for people to help me find if and where I was making errors. Sorry I don't have a link b/c I never thought of bookmarking the multiple threads.
The "savings" from the initial PDCP report were overstated due to several factors the report failed to take into account and/or address.
1. They did not account for inflation and applied the value of the current dollar to the savings after the PDCP ended. When the typical rate of dollar devaluation was applied over the period of years of the PDCP, the value of saved money was quite a bit less that the report claimed.
2. The official PDCP report did not include hard facts that this recent study does include: increased costs of moving metal containing much less value per pound than transporting bills. In other words, its easier to move a million dollars in one dollar bills than it is to move a million one dollar coins - also a lot less expensive:
From the title page "Seven of 10 stakeholders GAO met with said that replacing the $1 note with a $1 coin would result in additional costs. For example, armored carriers told GAO that their transportation costs would increase because coins weigh more than notes."
However, also let it be know this current report did NOT factor the inevitable rise in costs to consumers in their figures.
3. The PDCP report was written without mentioning what this report does: The
government is the sole benefactor. The alleged "savings" in the PDCP were stated as being savings in taxpayer dollars. These are the hypothetical numbers put onto paper that do not save taxpayers anything at all. We don't get the money back. We don't ever see the money. And we all know how professional the government is at using a surplus of tax dollars correct?
in other words, the benefit of these programs is
not for the citizens, and taxpayers end up paying more in the long run.
From p. 1"These actions could
result in a benefit to government but may also entail broader societal costs to banks, retailers, and currency users, among others."
The savings would never be seen by consumers, and instead consumer costs rise from ramifications of businesses paying higher prices to replace a mailing currency with multiple heavy loads of metal. The businesses obviously pass the costs on to the consumers.
If you read how the data was collected on page 2, you will find a scientific method was followed with some common sense guidelines.
Page 5 reviews and explains seniorage is increased b/c people will not circulate coins as much as bills. The reality is that bills get carried in wallets, while coins end up in change jars at home (ask any Canadian how many Loonies and Twoonies they have). Hence more coins needed for each bill. Canada and UK stats are quoted to show they expected they would need to make 8 coins for every 5 bills they replaced or 1.6 coins per bill needed.
Two replacement scenarios were studied (p.8 and 9):
1. Gradual Replacementl: destroy unfit bills and replace with coins
2. Active Replacement: Destroy fit and unfit bills and replace with coins.
Both scenarios assumed (as happened in Canada and the UK) people would not circulate (use) the coins as much and this report actually used a lesser replacement rate of 1.5 coins per dollar to make their study. Remember Canadian and Brit coin to bill replacement figures were 1.6 coins per bill.
The result was:
"We found that the present value of the net loss incurred by the government over 30 years would be about $2.6 billion with gradual replacement and about $611 million with active replacement (see fig. 2).22"
The report then mentions the fact the coins do not circulate as well as bills (called inconvenience in layman's terms) , hence more needing to be produced. This seems to be what they base the losses on since this is the factor cited at this point in the report.
From the footnote on that page: "18-billion $1 coins would be needed to replace the 12-billion $1 notes in circulation in 2017."
Footnote 22 also mentions how, and contrary to the PDCP report, this report applies a varying rate of dollar value - in other words accounting for dollar devaluation - over the years so as to come up with the present figure.
Page 10 says they also included one time set up costs to convert to coins only in the scenarios (if I remember correctly, this was not mentioned in the PDCP report at all - hence reported savings were again higher), increased production costs of higher denomination bills when $1 are gone, and calculated benefits to the government as interest savings on avoided debt b/c of seniorage (cost to make a bill or coin as opposed to its face value).
Page 11 says bill life expectancy has increased, hence less bills need be made yearly = less cost. It also describes a mistake they were making in destroying good bills
, hence production costs actually lessened for bills once this was corrected.
Page 12: People are not using as many bills as before - hence longer life - hence not as many need replaced.
Not all is as simple as it seems.
My main problem with all of this, yet one more time, is why people would want this implemented when it costs the consumers more, the majority of consumers (as per this report also states) have shown an overwhelming preference to bills, and the end result - IF this change was beneficial to government (study shows its not) - - is that basically the government just gets more money to waste on unnecessary projects?
Yes! I want the government to have more money to run tests on the average number of chocolate chips implemented per cookie by Ugandan bakeries while I get to pay more for services, entertainment, and items I buy and use (see the list of stakeholders the report mentions)!
BTW - I enjoy and collect the Sac dollars in proof. I have some proof presidential $1.00 coins but don't actively collect them b/c the designs just did not appeal to me. I also have quite a few Loonies and Twoonies. So I am not anti-dollar coin. I am anti-dollar coin only though.
Oops - one more thing. If all of the dollar coins now being held were melted, it would cost each US person .06 cents (according to figures I posted for review on CCF - sorry no bookmark).
So melting them costs me .06. I realize the price of just one gallon of gasoline, and the car needs more than one, can change by more than .06 from week to week (or day to day!).
Posted 04/10/2019 1:06 pm
