Why coinage persists in a digital age
Electronic currency makes small gains, but US economy still runs on minted metal
Rummaging through his leather coin purse, Mirco Centellas plucks out a steady flow of nickels, dimes, and quarters, and pokes them into a hungry Washington parking meter.
At 5 cents for a meager three minutes, it takes a small mint to clock up enough time to run errands in the nation's capital.
But on this day, the D.C. resident considers himself lucky. "Usually I have to go buy a candy bar or something small to get some change," says Mr. Centellas, as he hurries to a lunch-hour appointment. "I'm always asking people if they have coins."
For many people, loose change is one of those ubiquitous commodities that seems to disappear when needed most or gathers in abundance on night stands. But for cash register operators and others who handle money in their jobs, coins represent a major chunk of the bottom line.
Despite advances in smart cards, debt cards, and other forms of digital money, experts note that coin circulation is increasing and more essential than ever to the functioning of the economy.
Last year, the US Mint stamped a record 27 billion individual coins - more than $135 million in pennies alone. That figure bests the previous record of 20.4 billion coins minted in 1999.
The increase stems in part from a strong retail economy that still relies heavily on coin transactions, says John Mitchell, deputy director of the Mint. The introduction last year of the golden dollar and the 1999 launch of the 50-state quarter program also contributed, he says.
"We've created demand for coinage that didn't exist," says Mr. Mitchell. Indeed, more than 700 million new Sacagawea dollar coins made their way into circulation last year, exceeding the Mint's original projection of 120 million in the first year.
Coins of all denominations, as of December, accounted for $29.8 billion of the $593 billion in total currency circulating throughout the economy, according to the Federal Reserve.
Some sectors of the economy simply wouldn't function without them. The nation's 35,000 coin-operated launderettes generated about $5 billion in sales last year, says Brian Wallace, executive director of the Coin Laundry Association in Grove, Ill. "That was almost exclusively in quarters," he said.
While profits were tidy, a quarter cash flow presents some obvious drawbacks, particularly the onerous task of collecting coins in buckets and counting the daily haul. "They weigh quite a bit, they're not easy to move," Mr. Wallace says.
In an attempt to lighten the load, about 1 to 2 percent of launderettes now use smart-card-operated machines, Wallace says, a trend that he expects to accelerate as old machines are replaced.
Electronic-cash alternatives, in fact, are making inroads throughout the economy, but still not to a great extent, notes Mark Webster, a partner in the financial services practice of PricewaterhouseCoopers, in Cleveland.
"Smart cards are largely a solution looking for a problem," says Mr. Webster. "Consumers have not yet widely accepted stored-value cards. There is no compelling need for it."
That doesn't mean there never will be widespread demand for such cards, he says. Public telephones, for instance, accept a wide range of alternative payments. "You rarely see people putting coins in pay phones anymore," he says. Likewise, on many college campuses, students purchase their cafeteria food, books, and even midnight grub at nearby pizza parlors using smart cards.
Merchants, in fact, favor digital money over coins, Webster says. "Coins are a pain in the neck. They're dirty, they're cumbersome, you never have the right coin to make change and they are a significant cost," he says, noting that businesses pay banks a fee for rolled coins.
Still, those small denominations can add up to big bucks. Municipal parking meters in Alexandria, Va., took in more than $1 million in nickels, dimes, and quarters last year. After collecting them from different zones each day, employees lug the coins to a bank for counting, says Douglas McCobb, deputy director of transportation and transit for the city.
Not all banks, however, take coins, notes John Hall, spokesman for the American Bankers Association in Washington. A coin counter is a very expensive piece of equipment, he says. "It takes a significant amount of time and labor to monitor it and make sure the machine doesn't jam. It can be very heavy and taxing on the tellers."
While not much can be done about their weight, coins are undergoing some of the most significant design changes in generations. The decade-long quarter program - with a new state rolling out its quarter ever 10 weeks - is "history you can hold in your hands," said Stephen Bobbitt of the American Numismatic Association in Colorado Springs, Colo.
With the exception of the Bicentennial quarter, the Washington 25-cent piece hasn't changed significantly since 1932, when it was launched as a one-year commemorative marking the 200th anniversary of Washington's birth, he explains. The new quarters are generating fresh interest in the $1.5 billion a year coin-collecting industry, he says.
Likewise, the introduction of the golden dollar has created a demand so high, "when people do get them, they are keeping them," Mr. Bobbitt says.
Indeed, after one year, the coin is still rarely seen in everyday use, partly because of hoarding. But the Mint is working with businesses and local governments to create new uses and demand for the golden dollar, which bears the image of the young American Indian guide who helped explorers Lewis and Clark journey across the Rockies. Already several major transit systems, including in New York City, have been outfitted for the golden dollar, while other cities, including Chicago, are retrofitting thousands of parking meters to accept the currency. And last month, the Mint announced that it will distribute 1.5 million coins to Safeway Inc.'s 1,500 grocery stores, which will offer the golden dollar as change. Mitchell, of the US Mint, says the first year of the golden dollar launch has been "wildly successful," with public awareness of the new currency reaching 90 percent. Success in the second year of the program will be measured when the coin shows up in cash registers on a regular basis, and people "receive more than they need to collect," he says.
Coins have proven their worth for several millenniums - at times in their own weight, says Mitchell. No one is making plans to eliminate any US coinage, including the penny, he says, noting the smallest denomination has a "rosy future."
In fact, some experts are predicting the eventual demise of the dollar note, which costs 3 to 4 cents to print and lasts only 18 months. Coins - which last indefinitely - are a kind of "time capsule," says Mitchell. They capture the significant individuals and ideas of a society. "What we have in our pockets today is going to last for literally thousands of years."
(c) Copyright 2001. The Christian Science Publishing Society