Tags: Coronavirus | coin | shortage | cashless | conspiracy

Coin Shortage or Cashless Conspiracy?

Coin Shortage or Cashless Conspiracy?

(Wrangel | Dreamstime.com)

By    |   Friday, 24 July 2020 05:11 PM

First toilet paper, now small change.

As the seriousness of COVID-19 became clear, Americans stocked up on toilet paper before heading into quarantine. The resulting shortage of that particular product was one of the more peculiar side effects of the pandemic.

Now months later another, a perhaps more serious shortage is at hand.

In June, Federal Reserve Chairman Jerome Powell informed that Congress America’s coin supply had dwindled due to COVID. Since then, the question I am most often asked “is the coin shortage real?” This is usually followed by “or is this the federal government’s sneaky way to get rid of cash and force us to use electronic transactions so the surveillance state can monitor us all the time? The answer is neither.

The amount of coins in the economy hasn’t changed. It is the flow of those coins that has.

Businesses make and receive change when customers pay in cash. Then these businesses deposit coins at their banks. There, the worn-out ones are culled and the rest are wrapped in rolls that businesses use when they run low.

Customers throw their coins in a jar and cash them in at their bank or use a coin aggregator machine at the grocery store.

When banks run low, they order more from the Federal Reserve, and when the Fed’s inventory runs low, they place orders for more from the United States Mint.

This is the normal circulation of coins. COVID has disrupted it.

Many businesses are closed; coins are sitting in their cash registers. Most of those who have re-opened are avoiding handling cash as a means of stopping the spread of COVID. Instead the vast majority of transactions are now done with electronic payments like credit and debit cards.

Customers have also been impacted. Trips to the bank and grocery stores are less frequent and cashing in accumulated coins a less important errand. And, as is customary in times of economic crisis, others are hoarding cash as a precaution for a “rainy day.”

Operations at the United States Mint have not gone unchanged by the pandemic either. On top of the suppliers (and thus supply) reacting to COVID, the Mint has had to sanitize its manufacturing plants, adapt to newly complicated logistics, and reduced staff due to social distancing. And its manufacturing plants have been forced to close from time to time due to a few employees testing positive for the virus. This has all in turn shrunk its manufacturing capacity: Production is currently down while demand is up.

The United States Mint exists to make enough circulating coins to facilitate economic transactions. This shortage illustrates just how important coins, and more broadly cash, are to the world’s largest economy, even in the modern age of electronic transactions. It also shows on a less observed level how some Americans are more vulnerable not just to the virus but its shockwaves than others. For example, particularly hard hit during the pandemic are the working class and the unbanked, two population segments that rely heavily on cash.

There is much to fear from governments waging war on cash: During its “bail in” (versus a bail out) the cash-strapped government of Cyprus confiscated 40% of all savings accounts beyond what was insured. Further, negative interest rate policies have been used to force citizens to spend their wealth to stimulate their economies and to be effective, require that cash be eliminated. And governments, like China, have used electronic transactions as a means to monitor spending habits and collect data on their citizens.

However, our nation’s coin shortage is merely temporary. It is an unintended consequence of COVID and our government’s response to it. As the economy opens more, usage patterns will normalize, and as the United States Mint’s production catches up, coin supply will increase just like toilet paper has.

Ed Moy served as the 38th Director of the United States Mint from 2006-2011.

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The amount of coins in the economy hasn’t changed. It is the flow of those coins that has.
coin, shortage, cashless, conspiracy
Friday, 24 July 2020 05:11 PM
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