U.S. Federal Reserve report pans idea of coin dollar - Macleans.ca

U.S. Federal Reserve report pans idea of coin dollar


WASHINGTON – Loonie-loving Canadians might be bemused to learn that their American brethren suffered a setback last week in the long, unfulfilled quest to supplant the U.S. paper dollar with coins.

A U.S. Federal Reserve research paper panned the idea of eliminating that greenback in the latest phase of a debate that has continued, off and on, in the quarter-century since Canada ditched its own green buck.

That assessment was based on economic calculations.

“We believe that the $1 Federal Reserve note should remain in circulation and not be replaced with a $1 coin,” said the working paper, released last week by three members of the Fed’s board of governors.

“The real resource costs to produce $1 coins and private-sector costs to handle $1 coins exceed the costs to produce and handle $1 notes over 30 years, resulting in the all-$1-coin environment costing payment system participants significantly more than the current co-circulation environment.”

Americans have had dollar coins, with special releases since the 1970s, but as they remain unpopular with everyday users the government has stopped distributing them and U.S. wallets remain stuffed to this day with the green, stony gaze of George Washington.

Still, the idea of a dollar coin manages to stir some people’s passions.

In yet another time-honoured American tradition, competing industries have rallied around respective lobby groups to exert pressure on Capitol Hill.

On one side, it’s the paper industry. On the other, it’s the mining companies and vending-machine industry through their group, the Dollar Coin Alliance. The alliance offers a write-to-Congress function on its website where people enter their zip code and, presto, a letter supporting coin dollars instantly gets sent to their local representatives in the Senate and House.

The Dollar Coin Alliance was unimpressed with last week’s report.

“The United States is virtually the only developed country to still use paper currency with such low purchasing power; a dollar bill today buys about what a quarter did in the 1970s,” the group said.

It criticized the findings, saying they contradicted a string of reputable reports that touted billions in potential savings from a coin dollar. And it suggested the Fed might have an ulterior motive: fear of losing $2 billion per year if it’s no longer in charge of issuing dollars. Responsibility for issuing coins belongs to another body, the U.S. Mint.

“They are practically alone in their opposition to a dollar coin, as nearly every industrialized economy in the world has transitioned its lowest denomination currency to a coin,” said a statement from the alliance.

“This begs the question, why did the Federal Reserve feel compelled to spend seemingly hundreds of thousands of taxpayer dollars and countless staff hours producing a report that contradicts dozens of previous studies and common sense?”

It’s actually up to Congress whether paper bills should be phased out, and legislation to that effect has been sponsored by several lawmakers including Sen. John McCain.

“We are not the decision makers,” Fed spokeswoman Susan Stawick noted in an email. She added, however, that the body would be expected to weigh in on such a debate and said last week’s paper was an attempt to do just that.

The Government of Canada has also waded into the discussion.

In testimony before Congress, a senior official at the Royal Canadian Mint described the country’s long experience with coin dollars and its more recent move to multi-ply plated steel.

“Canadians have come to embrace the one-dollar coin, which they nicknamed the ‘loonie’ by virtue of its iconic bird design, and use it as they would any other coin,” Beverley Lepine, the mint’s chief operating officer, told a House of Representatives committee last year.

“In a June 2012 online poll conducted on the loonie’s 25th anniversary by the CBC, Canada’s public broadcaster, almost 70 per cent of Canadians identified the coin as a recognizable symbol of Canada and many of those consider it a national icon equal to the beaver and Maple Leaf.”

But the Federal Reserve report said the world has changed since Canada got its birdie-buck.

For starters, electronic payment systems have mushroomed at stores and vending machines. So past analyses on the long-term savings would, it said, have to be revised.

“Many other countries made their decisions to replace low-denomination notes with coins when electronic and other card payment substitutes for cash were less mature than today,” the paper said.

“Canada replaced its lowest denomination note with a coin in 1987, Australia in 1984, and the United Kingdom in 1983. At that time, the number of electronic point-of-sale (POS) devices in those countries was virtually nonexistent… Current conditions in the United States, however, differ from those in other countries at the time of their transition efforts.”

Also, paper money is now more sophisticated and lasts longer, the report said.

For those reasons, and others, the report concluded that the initial investment in more expensive, but longer-lasting, dollar coins would never be recouped to the point where it’s financially viable.

The Canadian government doesn’t sound convinced.

In any case, it certainly isn’t planning to stop mass-producing gold-coloured bucks — just like the one famously planted beneath an American hockey rink before a Canada-U.S. Olympic final, and later shown to the world by a triumphant Wayne Gretzky.

“Although a bank note may be less costly to produce than a coin, the average life of a coin is about 20 to 30 years, resulting in considerable savings over a larger time horizon,” a Finance Department official said in an email.

“There are no plans to revisit that decision.”

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U.S. Federal Reserve report pans idea of coin dollar

  1. Based on first hand experience of making the “Goldie” dollar coin available at our business since the year 2000, we put together on a video what we know to be the deceptive practices of the composite of the “deficit maker person”. We had thought that this person had examined his or her conscience a bit; but based on this latest fed reserve report … this person &/or group of people have not. Congress needs to exert its Constitutional Authority properly … based on the better facts. To see a deeper analysis about this “deficit maker person” go to king koin USA deficit reduction. It is fair to compare the feds with the fox in disguise watching over the hen house. This type of sabotaging of a worthwhile stewardship process needs to have the proper light shown on it … so it can be corrected!

    • US, Canada, Japan and most of Europe is running a huge currency and debt ponzi fraud scam. The idea is to create currency and debt that dilutes the currency for less value, as to fund bailouts, corruptions and excessive governments.

      In 2006 these governments went bankrupt and started to create no-value electronic counterfeit money to buy governemtn debts no legitimate lenders were buying. Because return rates are lower than real inflation+taxes, no one savvy buys government debt any more, governemtn just “prints it”. So in 2007, since business and operation banks couldn’t “print” money it caused a credit crisis of 2007 and the unemployment wave accelerated. This then caused the 2008 crash and after real inflation is factored in, the market indexes are a long way from a value recovery even though they are near dollar recovery. Yep, todays dollars do not have the same value as 2006 dollars.

      Huge fraud no one wants to talk about, a mass denial as corrupt politicians don’t want to fact the fact that a trillion for NSA/CIA/military on the credit card and other government bloats are no longer sustainable.

      Gold, oil, food didn’t go up, the value of money went down. http://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y

  2. Make it out of plastic or aluminum as its future value is quickly dimishing. Not reported in the news much as it isn’t part of the back room political agenda to disclose the truth, but ever since Bernanke has printed (electronic counterfiet) no value dilutive money for Bush/Obama insatiable need for debt, the value of the USD has been depreciating fast.


    Debt is NEVER free or cheap, its just a mater of who and how it is paid for. In this case, less value money each year as USD drops and CAD has dropped too. Many naive to media/governemtn propaganda thing the CAD rose to the USD since 2003/4, the reality is the USD has dropped further and faster up until 2 years ago.

    And people with less value money will spend more and get less goods and services. This is why it was a jobless recovery, the hidden currency inflation means people are paying more for less stuff, and less stuff is less jobs to produce it.

    Yes, I just said US debt fraud economics caused the debt depression of 2007-20xx and unemployed a lot of people causing it, its also why corrupt governments can’t fix the problem as the fraud of QE continues. And it is fraud, as it be like you or I using photocopied money to pay our bills.

  3. There’s a far bigger difference between dollar coins and paper dollars than those discussed in this article; and a far dirtier story line, of underhand anti-coin activism at the Federal Reserve. Why do you think the 1979 Susan B. Anthony dollar was so similar to a quarter that its production soon had to be halted? Ex-Mint chairman Philip Diehl’s testimony as to the Fed creating “barriers” to distribution is at http://financialservices.house.gov/uploadedfiles/hhrg-112-ba19-wstate-pdiehl-20121129.pdf.

    Whenever the Treasury mints a $1 coin, it gains $1 minus the production cost–just as the Federal Reserve now garnishes $1 in assets for every $1 bill it issues, minus the printing cost. The transfer of these face-value profits in issuing all $1 denominations, from the Federal Reserve to the Treasury, will result in gains VASTLY in excess of those reported by the GAO, which are taken as true by the proponents of S. 1105. In other words, the case for the change to a $1 coin is FAR stronger than that which is being made by the bill’s sponsors and advocates. In particular, there will be prompt multi-billion dollar gains, rather than the predicted start-up losses.

    The difference is the subject of a lawsuit seeking findings of misrepresentation against the Treasury and GAO, now pending in the Ninth Circuit. See the articles “How The One Dollar Coin Can Cure The Economy” at http://www.opednews.com/articles/How-The-One-Dollar-Coin-Ca-by-Clifford-Johnson-130515-443.html, and “Federal Court Affirms Sweeping ‘Bully Pulpit’ Government Right to Lie,” at http://www.opednews.com/articles/Federal-Court-Affirms-Swee-by-Clifford-Johnson-130221-478.html.