US Government Stockpiles $1 Coins as American's Won't Use Them

According to the BBC News, the US Government keeps producing the new $1 coin, and yet there are stockpiles of over $1.1 billion of these, because the coin is unpopular.

The hoard of coins is so big apparently, that the US Federal Reserve is running out of space to store them.

At the current rate of production, there will be $2 billion of these by the year 2016, so why keep producing them, and why are they not in general circulation?

In a nutshell, Americans just don't like the $1 coin, in fact they don't like carrying coins at all, period!

I have experienced this cultural difference first hand, having been through the withdrawal of the One Pound coin in the UK, which forced people to carry more coins around with them, the smallest denomination note now being the £5 note, which is worth approximately $8.

It affects men mostly, since us men are not accustomed to carrying purses like women, and so we are now required to walk around with a pocket full of coins, which is not only uncomfortable, it also wears holes in the pockets of your trousers or jeans.

In the USA, where I lived for the last 15 years, most people use coins very little, using mostly Quarters to feed vending machines or for making calls on public phones, although even this use is reducing as most people now carry cell phones, and practically all vending machines accept paper money.

This eliminates the need to have a pocket full of coins, you just hand over paper money when making a purchase, and if you receive coins back, they get put into a purse, ash tray in the car, a pot in the house, or if it's a small amount of change, put into a charity box at the counter where the purchase is made.

Americans don't want to carry coins around, and I don't blame them!

I got out of the habit of carrying coins around when I was living there, and now that I am back in the UK I still don't carry coins around, my change from cash purchases being left either in the car or in my desk drawer at work in case I need to make small purchases.

So why is it that the Federal Reserve continues to mint $1 coins, when most of these are not in circulation?

A law was passed by Congress in 2007 to create a set of $1 coins, to commemorate dead US Presidents. This law was passed, despite the fact that Americans never did like the $1 coin when it had been issued in the past, and using coins for regular purchases is not a way of life in the USA.

Since minting of these coins began, the US Government has spent more than $30 million to promote them, but without much success.

This is another example of an unsound financial decision made by the Bush administration, destined to help drag the US economy down even further.

The fact is, that apart from not wanting to carry large denomination coins, many places of business that are not familiar with the coin refuse to accept them, not being sure if they are genuine or not, and customers feel awkward offering when they make a purchase, in case they are rejected.

On top of this, many banks still view the coins as collectors items, and do not stock them. Security companies will also not carry them in their armored carriers, and realistically it's going to be a steep uphill battle if these coins are to ever get into circulation.

And so in effect there is a vicious cycle being created, added to by the lack of popularity for carrying coins in the first place.

The only way to get the coins into circulation is really to do what the UK, Australia, Canada and Japan have done, and that is to phase out the paper currency, forcing people to use the $1 coin.

The USA at this time is the only remaining country in the G8 that still circulates paper money in it's base currency.

This would help save the US Treasury around half a million dollars a year in printing costs, since coins are expected to last 40 years and paper money only 10 years, but if you factor in the cost of modifications to millions of vending machines around the country, this would be a humongous task, and extremely costly.

You wonder whether introducing a more durable paper currency, as was tried in Australia some years ago, would be a more viable option.

It would take an act of Congress to halt the production of these unused coins, although you can be sure that the Republicans would find a way to oppose this, as they have been doing with so many other reforms that the President has been trying to put into place lately.

And so until the minting of coins is halted, or the $1 bill is forcibly taken out of circulation to force the public to use the $1 coin, it seems that the mountain of money will just continue to grow.

Sources:

BBC News