Featured Opinion/Editorial - United States Coinage Needs Overhaul Now!!!

United States Coinage Overhaul Is Needed Now!!!

The United States Coinage needs change (no pun intended) and here's three reasons why:

Our current circulating coinage is staid, impractical, and change makes good budgetary sense.

Have you ever wondered why our coinage looks like it does? Why each coin is a specific size, shape and composition? Do you know that the latest coinage act was over 45 years ago?

When the US Mint first started coining money in 1792 the composition and weight of a coin closely approximated it's value. Coins were made of gold, silver, and copper, and ranged in denomination from Half Cent to Eagle ($10 gold piece). Over time, adjustments were made in order to keep the intrinsic value of the coins near but still below their face value.

The Coinage Act of 1965 changed everything. Our coinage would no longer be made of precious metal, but made of base metal assuring that the cost of manufacturing the coins would be less than their face value. For the sake of continuity, the new coinage of 1965 would resemble the silver coinage that it replaced. Each denomination remained the same size and design of its predecessor, only the weights of each coin changed slightly. These coins were accepted readily in the marketplace and by the general public with very little resistance.

In 1982, the One Cent coin became a financial burden when it too started to cost more than face due to a rise in copper prices. It suffered the same fate when the composition was changed to a 95% zinc coin with a copper coating. This solved the problem, but only temporarily.

A little noticed fact of the manufacturing of money is the concept of seignorage, the amount of a coin's face value minus its cost to be made equals the profit made on coins. The profit is called seignorage and it is quite important to the federal government. Any seignorage derived from the manufacture of coinage is a direct profit to the government and thereby goes directly to our cost of government and in essence paying down the national debt.

This is not a big long, political tirade on budgets and budget politics, this is just simple math. If it costs more than face value to produce a coin, then we are losing money making them. We are also losing potential seignorage from them. We currently have 2 coins that fit this description and the costs of making them adds to our national debt every day, rather than helping to alleviate it. If this were the only problem facing our coinage, the remedy would be apparent but the coinage problem is much deeper than simply fixing two denominations.

The expense of the cent and nickel are not the only problems facing our coinage, the United States also has two coin denominations that fail to circulate:

The Half Dollar and One Dollar coins. Let's examine them one at a time.

During the first half of the 20th century, the Half Dollar coin was the workhorse of the American coinage. People used more Half Dollar coins than any other denomination. It was a very popular coin. Then in November 1963, President Kennedy was assassinated in Dallas. The decision was made so quickly that by the very next year, the Kennedy Half Dollar replaced the Franklin Half Dollar in the United States. No 1964 Franklins would be coined.

Millions of Kennedy Halves were produced, but very few if any circulated. The removal of silver from the coinage in 1965 was blamed for the lack of use, but even the eventual removal of all silver from the Half Dollar in 1971 failed to induce their circulation. The coin had become a memorial in the eyes of the American public and it is my opinion that this is why people continue to hoard them to this day. The hoarding has become so severe that for lack of another coin, the American public has since started to use (and now prefer) the Quarter Dollar as their denomination of choice even though a Half Dollar coin would mean less bulk in their pockets and purses.

As if the Half Dollar needed it, the vending industry has offered a final push towards extinction as a denomination. US vending machines don't accept half Dollar coins! Golden Dollars, yes. Susan B. ? Yes! Half dollars? Not on your life! The size of the coin is the likely offense and an adjustment could return this coin to it's once proud place in the public's pockets.

As for the One Dollar coin, they have never truly circulated since the inception of the United States coinage. Many times in US history the minting of standard silver dollars has gone years with no production. The late 1800s saw a more regular yearly minting of silver dollars but they were rarely used and so stockpiled that in 1904 the US Mint stopped making them. They briefly resumed production from 1921-1928, but then stopped until 1934. In 1935 the reserve had grown so large that they were never made again. There was so little demand for them that 40 years later in the early 1970s the Government Services Administration sold off the US Treasury's stockpile of silver One Dollar coins. Remarkably, there were bags of uncirculated coins dating all the way back to 1878. A true testament to the people's love (or lack thereof) for the denomination.

The Kennedy Half Dollar shows an example of how people can view our coins as memorials and the danger that idea poses. I would go as far as to say that the "memorial mindset" has taken over our coinage, and it is this mindset that has made our coinage design stagnant and staid within the short time span of 100 years.

Beginning with the Lincoln cent in 1909 and continuing to the present day, we have replaced our designs with tributes to great Americans. The list is like a Hall of Fame roll call of great Americans; Washington, Jefferson, Roosevelt, Franklin, Eisenhower, Susan B. Anthony, even a "likeness" of Sacagawea have appeared on our coins. The problem is that eventually, you run out of denominations before you run out of deserving people. I would opine that commemorative coinage exists for exactly this purpose. Spotlight every American who deserves it. Don't place emphasis on one over another by permanent status on a coin.

Memorials exist for remembrance. We want a specific memory to be permanent. That we never forget the event or the people for which we celebrate is the purpose of creating such tributes. Coinage, although a lovely tribute, is a bit too small as a venue to commemorate everyone who deserves it.

The current economic climate also encourages us to change and redesign our coinage. Budget battles blanket the headlines recently and politicians are looking for ways to make our government run more efficiently and at a lower cost to taxpayers. Currently it costs over a cent to produce our one cent coin and over five cents to produce our current five cent coin.

While most budget cuts involve political battles that some are not willing to wage, the coinage redesign is not an uphill battle, in fact, it could be a very popular program if handled in the appropriate way. It doesn't become a political liability, but rather a political benefit due to the potential popularity of such a program. A program that politicians can promote on a bi-partisan basis without fear of repercussion.

Canada has now decided to discontinue the Cent. Economically they could not sustain cent production at its current cost of manufacture. Many are unsure what the economic impacts that such a change will make. Some fear an inflationary consequence, but most admit that they don't really know what will happen.

We can watch and learn from their mistakes if we are willing to subsidize our coinage production until we decide, but given the innovations that Canada has demonstrated in the past and our complete unwillingness to follow their lead, you would understand if I was a bit skeptical of those possibilities.

Coinage overhaul should happen now. It makes little sense to remain as we are. We cannot continue to manufacture coinage at a loss when we are looking desperately for ways to cut deficits, and we can't continue to promote a coinage system where 2 of 6 denominations cost more to make than their face value and 2 of the others don't circulate. Let's lobby for a coinage overhaul. Let's make our coins make cents again!

 

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What is truly sad is we have, for almost all intents and purposes, a coinage system of one denomination. Seriously, when most people go home at night, they will pick out the quarters and throw the rest into a jar. My new washer and dryer broke, and while we were waiting for it to get fixed had to do laundry for our baby. I went to a laundromat, (hadn't been there in a couple decades), and it was $7 but only accepted quarters! Standing there, putting quarter after quarter in, made me realize just how pathetic and gutless our politicians are.

Change the entire thing all at once. The vending industry, (as if they are the only constituency here), will just have to change their machines once. Have a $2, 1, .50, .25, .10 and .05 denomination, but make them make sense in order of size. Put the stupid numbers on the coins, and get rid of reeding and other relics of our old system. Does anyone stop and look at our coins? They are the most messed up system in the world. Not one of them has the denomination in numbers on it. It takes me quite a while to explain to foreigners what a "dime" is.

 

Well you see we used to be literate and most Americans could read. But that is changing and that is why the dollar coin DOES have a numeral on the back. I'm sure as the literacy rate continues to decline we will eventually have to have numbers on the rest of them as well.

MAybe when the mint posts a loss this year and has to ask for an appropriation instead of dumping money INTO the general fund they will get their act together and make some changes.

 

The government will change the coinage as necessary the study on replacement coinage should be completed in December 2012 and you can bet they will alter the composition of the cent and nickel soon after. But does it really matter the savings we will get? The savings although large to us are a grain of sand to the government. And although we could save a lot more cutting a few billion in useless foreign aid, etc and leave the coinage alone if they wanted too. Even after changing the coinage I'm willing to bet the government just spends the millions we save anyway and doesn't do anything productive with the money.

 

So we need to be THAT American and pretend the rest of the world who may not speak English shouldn't count? I go to Thailand fairly often, and even if I don't read Thai I can easily distinguish their coins. Same is true of the rest of the world, they assume that sometimes maybe non-natives need to use their coinage system.

 

Btw Mike, are you sending this in to NN, CW, The Numismatist, or some other publication? I think you should.

Btw, I happen to agree with Conder about lack of literacy, so I am not suggesting sending it to a regular newspaper whose readers may only read the first sentence or two. Its really sad when the WSJ is written at a high school graduate level, and is the highest level of writing of any newspaper in the US. Most are written at a 8th grade reading level.

 

thanks Medora, I offered it to CW and they declined. I have also offered it to the Tribune and the Times publications. There wasn't a lot of enthusiasm for it, so I decided to post it here and on our Facebook page for The Coin Show.

I was given a suggestion (or two) of things that would be welcomed at CW and encouraged to submit more pieces by the editor, Beth Deisher. I felt that the timing of this really meant publishing it now and if not in the mainstream press, then I would shout it out from every hill top that I know.

I believe that this particular forum would likely appreciate the discussion.

 

I think it is inevitable that eventually all change will disappear, to be replaced digitally. I say that regretfully as I enjoy coins. I do have several large containers of "change" coins from the years and I often pick through one to get quarters for machines and a few cents so I don't have to break something larger. Eliminating the cent or five cent piece can create a problem, when a purchase is .02-.03 over the nearest 5 cent piece. Electronic cards can be any resolution one may wish, although the "conspiracy" groups would realize that the "Gubermint" could be seeing their spending habits, and they might have to pay true taxes. I bought some computer parts recently, and I could either wait 6-8 weeks for a check rebate processing or have a Amexp. card with a slightly reduced amount in much less time ( was about 10 days). I had no trouble using them at any store taking Amexp cards.
Jim

 

I'll echo Jim's sentiments that the future of coins, or money in all forms, may be endangered. I see it in practice every time I'm on a checkout line at the store. The favored form of completing a transaction is debit/credit card. I don't see that many folks paying with cash anymore. The goobers could save even more money if they forced us to change over to a cashless society and made everybody use some form of 'plastic' to carry out our everyday commerce. It's ridiculous, when you see the guy ahead of you on line, swiping a card to pay for a pack of gum but it may be in the future for all of us.

 

I agree, whether we like it or not. When I was on a US Treasury panel, topics came up like how to ensure all taxes were collected, (income, sales, etc). One of the main suggestions was the elimination of currency and forcing everyone to have to use electronic money.

Once this is accomplished, then unreported income is easy to trace, use tax not paid on out of state purchases can be charged, etc. All revenue agents I have ever talked to, either at the Federal or State level, are vey excited about this prospect. Be very wary of this idea boys and girls. Once we lose anonymity of currency, we lose what little is left of our privacy.

Chris

 

Yeah, that is scary Chris......

Big Brother 'round the bend.

And I think we just hijacked Mike's thread.

 

My deepest apologies Mike.

 

Aw heck Chris. He'll forgive us.

I think...........

 

Well said. It's a shame that our bullion coins are more beautiful than our circulation coins. As far as changing denominations, well I don't see that happening anytime soon.

 

I think that the thread was pretty much dead anyways... no worries, my friends

 

It's time for a "change".

Nix the cent.

Don't make a steel one, or a plastic one, just get rid of it.

 

I like the idea you expressed about our half dollar coins becoming memorials instead of being used in commerce. It rings true, I have seen looks of concern in peoples faces when I spend common Kennedy left overs from roll searching. One person asked me why I was spending my coin collection and assured me that Kennedy half dollars were rare and worth more than face value.

I sort of feel the same way about this idea of yours as I do when I hear someone talking about scrapping our constitution and making a new one. Not that they do not make many compelling arguments about doing so, but I cannot imagine them creating anything long lasting, or fair to all, or not riddled with loopholes that would further feather their mansion/nests.

l

 

many states have adopted new constitutions. My state (Illinois) adopted its current constitution in 1971.

 

Not that I am old enough to have lived through this but I would guess half dollars fell out of popularity starting from debasement of the metal. The reason is people wanted to hoard the one year only 90% silver Kennedy specimens. When the 40% silver coins were minted people were aware that it was the only general circulation piece left that contained any silver, so they kept hoarding them even though these coins only contained 40% silver from 1965-1970. Perhaps by the time 1971 came around it was no longer worth it to carry these large monstrous half dollars since they didn't buy enough to make them worth the effort or headache of carrying around. In 1971, it cost roughly 35-40 cents for a slice of pizza. So when the buying power of large coins fade and they make holes in your pockets, cause change pursues to burst and not close, so does their circulation and popularity fade (especially when they contain valuable metal like silver).

 

I grew up during that time and I will say that the fifty cent piece went from 'popular use' to 'no use' practically over night. I like your theory for how the use of them went out of fashion. I will add that the introduction of the Kennedy half dollar kicked the hoarding frenzy up a notch. The mint produced more Kennedy's in the first year of production than the entire series run of Franklin's, and yet, as a kid I couldn't find them. If the banks got 'em they'd be sold out in a day. That hoarding of the Kennedy half's combined with the hoarding of silver in general, contributed to the half dollar demise in pocket change. And people just lost practice spending 'em.......