Many Americans are posting pictures and stories about stores that are refusing cash or not providing change due to a coin shortage. This has provided much consternation in an already tense and frustrating year. Is the coin shortage real? If so, what caused it?
The coin shortage is real but it is more accurately described as a “disruption of the supply channels of circulating coinage.” In July 23 press release, the US Mint described the situation:
In normal circumstances, retail transactions and coin recyclers return a significant amount of coins to circulation on a daily basis. However, precautions taken to slow the spread of the virus have resulted in reduced retail sales activity and significantly decreased deposits from third-party coin processors, resulting in increased orders for newly minted coins produced by the United States Mint (Mint). Third-party coin processors and retail activity account for the majority of coins put into circulation each year.
Simply put, there is an adequate amount of coins in the economy, but the slowed pace of circulation has meant that sufficient quantities of coins are sometimes not readily available where needed.https://www.usmint.gov/news/press-releases/statement-on-circulating-coins
Part of the problem is that people hoard coins. When most of us get coins in change, those pieces of money go into a cache in our vehicle a jar in our home. Those coins are taken out of circulation until we decide to trade them in for cash or we need to scrounge in the seats for snack money.
The situation was also complicated by the fact that the Mint was forced to reduce production of coins in the spring during the onset of the pandemic. At that time, safety measures included “temporarily reducing the number of employees per shift in order to enhance social distancing,” which resulted in decreased production. By mid-June, however, the Mint was back at full production capacity and is on track to exceed last year’s monthly production for the remainder of 2020. More coins are coming.
In the meantime, the Mint has some recommendations to help alleviate the shortage. The obvious answer is to use exact change for your transactions. Alternatively, you could pay with plastic or some other sort of electronic payment. This will help to avoid removing more coins from circulation.
Second, this is a great time to cash in that Mason jar full of assorted change that is sitting on your dresser. You know what I’m talking about. The place where you dump all your loose change when you empty your pockets or purse at the end of the day. If Americans start putting all their loose change back into circulation, the shortage will disappear faster than Bernie Sanders’s presidential hopes.
The entire episode is a lesson in the butterfly effect and the fragility of the modern economic system when a shock is introduced. The effect of the pandemic goes far beyond public health and has interrupted many disparate aspects of modern life from watching sports to finding toilet paper and now a lack of loose change.
As crises go, the coin shortage is not a horrible one, but it is inconvenient. For low-income Americans who rely heavily on cash and who may already be on the edge of financial ruin due to the COVID economic crisis, it may be more than an inconvenience.
In the spirit canned food drives and charitable donations, it would be a great time to empty out the Mason jars, compartments in your car, and couch cushions and trade in your pennies, nickels, dimes, and quarters for some folding money. It’s not like most of us are doing much else right now anyway.
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