Stephen Searle forwarded this piece from National Public Radio about how the economy is driving the U.S. Mint to produce fewer coins this year - a whopping 70% drop from 2008 to the lowest level in half a century. -Editor The Federal Reserve was busy last year pumping $700 billion into the U.S. economy — expanding the country's money supply by nearly 10 percent. But that doesn't mean there are a lot more dollar bills circulating. In fact production statistics at the Bureau of Engraving and Printing have remained stable. And coin production has dropped precipitously.
The U.S. Mint will make 3 billion coins in 2009 — a 70 percent decline from the 10 billion produced in 2008. It will be the smallest run in 50 years, and the retail economy is to blame.
"The Mint's mission is primarily to make coins to fulfill the demands of commerce," says Ed Moy, director of the Mint. "The demands of commerce haven't been doing too well the past six months."
Moy says there's something else going on, too — it appears more people are cashing in the coins they've saved at those counting machines near the grocery checkout counter.
"So in addition to low economic activity, there's an increased number of coins coming back into the banking system, which means that the banks need less coins from the Mint," says Moy. Moy says no workers will be laid off. Instead they'll catch up on routine maintenance that has been delayed and undergo extra training. Laying off such specialized workers wouldn't make sense, he says, because they'll be needed again when the economy improves.
To read the complete article, see: Mint To Press Fewer Coins As Economy Slows (http://www.npr.org/templates/story/story.php?storyId=104002765)
Another E-Sylum reader forwarded this somewhat related NPR piece. -Editor As the recession deepened, Rick Alfaro of Sacramento noticed that more people were using coins in his office vending machine — and clogging it up.
Alfaro's theory was that people were feeling pinched and that using coins, as opposed to dollar bills, made them feel they were spending less. He asked the worker who stocks the machine, and the answer came back that he was right. People are "kind of scrimping a little bit and digging in their car" for loose change, Alfaro says.
For Alfaro it was just a hunch, but it turns out that economists have researched the phenomenon, which they call the Denomination Effect. Priya Raghubir and Joydeep Srivastava did a series of experiments in the U.S. and China that showed people were much more willing to spend the same sum of money if they had smaller denominations instead of one large bill.
"We've done some studies with four quarters and a dollar, and we found that people were much less likely to spend the $1 note that they were given than the four quarters they were given," Raghubir says.
If we want to get consumers going again, Raghubir says, we should hand out lots of change.
Likewise, she says the IRS should stop sending tax rebates as lump sums. "You could send us travelers checks," Raghubir advises. "Send it in twenties, the way we get cash."
To read the complete article, see: Why We Spend Coins Faster Than Bills (www.npr.org/templates/story/story.php?storyId=104063298)
Wayne Homren, Editor
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