The Dollar Coin Is Coming! Is It Good Or Bad For The Average American?

Recently, the federal government announced yet another revision of the dollar coin. This time, in order to entice collectors (and thus inflate circulation numbers), the coins will be issued depicting all of the presidents, starting with George Washington and followed every three months by another president. This would mean that my most desired coin, that of James K. Polk (obviously), will appear in the fall of 2009.

Gloria Eskridge, the associate director of sales and marketing for the United States Mint, says:

“This is about giving Americans a choice. There are times when a dollar coin is easier to use. Instead of carrying around a pocketful of quarters for public transportation, for instance, it’s more convenient to use the dollar coin.”

It makes a lot of financial sense for the United States Mint to switch to a dollar coin. While each coin would be more expensive to produce than a paper dollar, they would last a much longer time, meaning that the overall cost of having a dollar in circulation over a long period of time would be much lower.

The consumer, I fear, would face a pretty raw deal if a dollar coin went into mainstream acceptance. Vending machines would be much easier to access for people (for example, I often have pocket change; it’s much rarer for me to have a dollar bill) and thus frivolous small expenditures could become more prevalent. Vending machines wouldn’t require a dollar reader (one of the larger expenses on a machine) and thus would multiply, finding its way into niches not currently occupied. I noticed this in Great Britain recently, where there are far more vending machines (compared to the United States) due to the prevalence of the one pound coin. Remember, increased vending machine usage could increase taxable income for the United States government, which may be one reason why they’re trying to increase the popularity of the coin.

However, the only way to switch away from the dollar bill is to wholly replace it in transactions. This would require equipment upgrades in a lot of places: cash registers, vending machines, and so forth. Thus, the government is trying to push the transition gradually by trying different avenues of building general acceptance without simply locking out the printed dollar bill.

The paper dollar bill in the United States will go away soon enough and it won’t necessarily be a good thing for the average citizen’s finances. That’s part of the reason why I’m planning on using the dollar coin in educating my son on personal finance issues.

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18 thoughts on “The Dollar Coin Is Coming! Is It Good Or Bad For The Average American?

  1. Shane says:

    I doubt we see a switch anytime soon. Too many people will resist the change and as you say, the money needed to upgrade will cause quite the resistance.

    However, I see a switch to a dollar coin to be a great opportunity to save some money a bit quicker. I have no problem throwing change into a the silver bank in my office.

  2. Steve says:

    Now let’s get rid of the penny.

  3. kyle says:

    Up here in Canada we’ve got $1 coins as well as $2 coins. It’s very easy to fall into the “well it’s just change” trap and spend it foolishly, but it’s equally easy to not spend any change and throw it in a jar. I end up with anywhere from $500 – $1000 in change in a given year by following the latter strategy.

  4. Flexo says:

    They’ve been trying to switch to a dollar coin for years. The Sacagawea “golden” dollar was the latest attempt before the Presidential coin series. I truly think they’ve given up on the idea of replacing the dollar bill with a coin (the cost of retrofitting or replacing millions of vending machines and other devices makes it impractical) and are releasing new series to spur interest in collecting and for the Mint to make a profit on new products sold at a premium.

  5. Justin says:

    C’mon, Trent, give me some real analysis! Your middle paragraph is rife with unstated assumptions, inappropriate generalizations, and logical fallacies.

    You assume that, because you personally carry coins and not bills, so does the rest of America.

    Your assume that, because the bill reader is a significant part of the upfront cost of a vending machine, bill readers are the major factor preventing the widespread proliferation of vending machines in America.

    You again generalize the number of vending machines in Great Britain based on a visit there.

    You also observe that British vending machines don’t have bill readers and, assume that correlation implies causation. (This alone would get you an F in any high school debate class.)

    And you start the whole thing off by positing that the only thing keeping Americans from wasting their money at vending machines right now is that they aren’t carrying the right combination of coins and bills when they walk past. (At least that’s what I think the argument was…)

    And I’m not even going to even try to analyze the bit where you, based on the preceding logic, claim that the introduction of the dollar coin is a government plot to increase tax revenue by preying on the American public’s poor impulse control and insatiable need for Diet Coke.

    Maybe you’re argument is that coins are perceived as cheap and bills as valuable, so a dollar coin “psychologically devalues” the dollar by giving it more in common physically with the quarter than the five dollar bill. That I might buy. A government vending machine conspiracy? No chance.

    This post singlehandedly wiped out my trust in your opinion that had been building up over the few months I’ve been reading your blog. You haven’t lost me as a reader, but you’re back to square one. If you’ve got some real supporting evidence for any of these logical leaps, I’m happy to hear it.

  6. Trent says:

    First of all, Justin, I make it as clear as I possibly can that I don’t know the answer to any of these questions. All that is certain is that the federal government is pushing the dollar coin and surrounding this push with marketing speak. That’s why I put caveats like “I fear that..” and such throughout this post.

    As for your other criticisms, it’s fairly easy to find out what the traditional factors are for vending machine distribution: high population density, limited space, a preference for shopping on foot or by bicycle, and low rates of vandalism and petty crime tend to attract lots of vending machines. Petty crime is a major limitation when the costs of vending machines is high, so areas where coin operated machines are preferable to bill operated machines (because coin machines are vastly cheaper to construct and maintain) enable more vending machine usage.

    As for your talk of ‘conspiracy,’ there is no conspiracy. Fundamental economics lead any government to wish to increase their GDP, and one easy way to do that is to find ways to get each person in the nation to spend more money and thus have more money to tax.

    Connecting the two is obvious: if there is potential to decrease the cost of making money (which you don’t argue with) along with the potential to increase taxable income, you have a very clear explanation of why the government would want to push coin usage.

  7. Dave says:

    I thought it was interesting that you compared the U.S. to Britain, as I come from there and lived there for over forty years.

    The changeover time for pound coins from pound notes was pretty instantaneous. You paid notes into the bank and got coins back.

    What amuses me is the tiny amounts that U.S. currency allows for. The lowest bill in the U.K. is five pounds, which is close to $10 these days. There are two pounds and one pound coins (equivalent to $4 and $2) and coins worth a number of pennies – the smallest coin is a penny, or two cents. Although there used to be a half penny coin (worth about a cent), it vanished some time ago and there appears to be no problem with increased costs.

    I’d like to see U.S. currency reduced to the nickel, the dime, the quarter, and the dollar coin. Sales tax and “XXX.9″ gas prices will probably never allow the penny to go, but if enough people could accept rounding it might happen. Because V.A.T. is the same across the U.K. it is factored into prices (all products for general consumers must by law only quote a price including V.A.T.).

    And because the vast amount of prices ending in cents (and giving me change of up to four pennies) I have to empty my pockets constantly of change. I have over $100 which I must take to my bank (who’ll count it for free).

    But I think a dollar coin would encourage savings (each day you dump your dollar coins in a jar).

    I guess that if you live for a while you tend to have old-fashioned idea of the worth of your currency. A pound was always a large amount to me, and could be spent in several different places, but when you look at it as $2 you spend it much faster.

  8. Kjell says:

    I live in Sweden and during the past 35 years they’ve gotten rid of no less than 5 coins (1, 2, 5, 10 and 25 öre) and the lowest one in use now is 50 öre (about 7 US cents). A 10-crown ($1.40) coin was introduced in 1991 and I believe most people are very happy with that.

    There have been no problems at all in removing the lower denominations because every purchase is rounded off to the nearest multiple of the lowest value coin.

    The point I’m trying to make is that the prices themselves do not control what bills or coins should be used (we have our fair share of X.99 prices…)

  9. Matt Brubeck says:

    When I lived in Canada (where 1- and 2-dollar coins are used extensively), I didn’t see any of the effects you predicted – at least, no more than here in the States.

  10. Jaime Barragan says:

    For me, the concept of a dollar coin sounds like inflation.
    Good blog,

    Jaime

  11. Damien says:

    The reason people have hated the recent dollar coins is because they have been the same size as a quarter. (Susan B, Sacajawea). They hated the Eisenhower dollar because it was too big and heavy.

    Quit making the penny and the half-dollar and paper dollar. Make a new Dollar coing the size of the current half-dollar.

    Tell the vending industry to suck it long and hard. (and update the machines)

  12. Margaret says:

    Hated the idea of the loonies when they came out, but the change happened quickly (I can hardly remember now, but I am pretty sure the banks just stopped issuing the bills, so it wasn’t really a question of whether you accepted it or not), we got used to it, and now it doesn’t bother me. I’m like the one who saves coins — finding a twoonie or two in the jar is pretty exciting, and it sure adds up quickly. I don’t think the fact that your money is in bill or coin form is what makes the difference in how much you spend. Either you are the kind of person who watches your dollars, or you are not. If I am going to fritter away my money in ones and twos, having a bill vs a coin is not going to stop me. I understand that coins vs bills is a HUGE cost savings in terms of minting money. I guess the one area where it costs me is that our preschoolers like to gather up our change and put it in their piggy banks — not so good when they find the big money! Also, I used to like those comics with Scrooge McDuck counting his gold coins. I kind of feel like him when I am stacking up my loonies and twoonies.

    All in all, I think the coins are fine and I don’t see any real disadvantage in having them. I also note that you rarely saw a $2 bill when I was young, but we use twoonies all the time now. So maybe we are more efficient.

  13. Tom says:

    Some things I suggested were:

    Get rid of the penny.

    Redesign the half dollar coin to a size between the quarter dollar and the nickel, and with a reeded edge, so as not to be confused with the penny, nickel or quarter. Promote the use of the new half dollars, and encourge cashiers to set up cash regesters 5c, 10c, 25c, 50c and $1.

    Eliminate the $1 bill in favor of a coin.

    Redesign, colorize, and promote the $2 bill. Then eventually replace the $2 bill with a bimetallic (silver ring/gold center) $2 coin similar the Canada’s $2 coin.

    Eventually replace the $5 bill with a (gold ring/ silver center) bimetalic coin, even though a $5 coin would probably force the $2 denomination into oblivion again.

    Issue new $200 bills featuring President Theodore Roosevelt on the obverse, and an image of Mount Rushmore on the reverse.

    Reissue the $500 bill, featuring an upgraded version of the same design as on the old $500 bill. (President William McKinley’s portrait on the obverse, and the oval and huge 500 on the reverse)

    Reissue the $1,000 bill featuring an upgraded version of the same design as on the old $1,000 bill. (President Grover Cleveland’s portrait on the obverse, and the fancy text “The United States of America” and “One Thousand Dollars” on the reverse.

    Due to inflation, and the fact a $100 bill back in 1969, when the $500, $1,000, $5,000, and $10,000 bills were removed from circulation, was about $500 today, we should get at least new $200, and $500 bills. However, I still believe that inflation justifies new $1,000 bills being issued as well. If the Euro countries can get along with 200, and 500 euro notes (and 500 Euro notes sometimes become worth more than $500 USD, which is why we should also have a $1,000 bill) without worries of counterfeiters, drug dealers, money launderers and such, why can’t the U.S. have larger denominations as well? When I buy large and expensive items, I hate carrying around all of those $100 bills, and $200, $500, and $1,000 bills would be easier to keep track of how much money you have, and would be less noticible to muggers, than a bulging wad of $100 bills. And I hate using checks, debit and credit cards. Plus, every time there is someone in line at the store, in front of me, if they use credit or debit cards, its about a 97% chance that the machine screws up and I have to wait forever for the machine to get fixed. This crap could be avoided if we got people into carrying large denominations Federal Reserve notes as they did in the past, which I would be all for.

    Also, if we are still using cash by the year 2020, I believe that the $5,000 and $10,000 bills should be reissued as well as a $2,000 bill.

    (The U.S. Treasury has never issued $200, or $2,000 bills, but if these moves I suggest end up happening, I think these two denominations should be issued)

  14. Corey Bolick says:

    i think we should reissued the $500, $1,000, $10,000, and $100,000 bills. i also think that we should issue a $1,000,000 bills so if we win the power ball then we can receive 1,000,000 dollar bills instead of a check.

  15. Kim says:

    I like the loonies and twoonies we have; most people were complaining at first about the initial extra weight in their pocket (me included), but the solution to that was to dump it into a jar at home – less money in my pocket when I leave the house is less I have to spend – help cut down on impulse buying.. I love the change :)

  16. William A KIng says:

    I, as the owner operator of a vending service would like you all to be aware. The dollar coin has been planned for by the vending industry for years 10-15 to be exact.We started getting coin mechs which are ready to take a dollar coin in the early 90s.The new dollar coins are NOT as you all proposed the same size as a quarter , they are larger.My coin counter counts them and sorts them as a fifty cent piece,which to me states its larger than a quarter and smaller than a 50 cent piece.Furthermore all new dollar bill acceptors(dba) take 1,s 2,s and 5,s. When the paper dollar goes away(and it will) we as an industry are prepared as we have had 15 years notice and all mfg companies of vending equipment have been getting ready for this transition,I hope this clarifies any misunderstanding ,B

  17. Tom says:

    Wlliam A Klng:

    Do you have an idea when the $1 bill will be phased out? I’m curious to know, because I know of a guy who is a dollar coin nut and says certain higher banks (not sure if it was the Federal Reserve banks or not) told him that there is a “secret plan” going on where they will start to phase out the $1 bill and the penny, around this year, and all circulating $1 bills should be gone anywhere from 2010 to 2015 (I’m hoping for 2010) Do you know anything about this? (Obviously, the penny will not be phased out until at least 2010, since there is a redesign of the penny planned for 2009, for Lincoln’s 200th birthday ad the 100th year of the Lincoln penny)

    Also, if you are a vendor, could ou try to get the vending industry to lobby to get the $2 bill redesigned to look like the colorized higher denominations? I feel that if the $2 bill was redesigned, more people may realize that $2 bills are still being printed, and are NOT not rare collectibles, thus less hoarding may occur. I suggested to the Treasury, time and time again, to redesign the $2 bill at the same time as the new $5 bill, so that vendors could have reprogramed their machines to take redesigned $2 bills while reprograming them to take the new $5 bills. Have you ever talked to Jim Benfield, the exeutive director of a vending and mass transit lobbyists, supporting the dollar coin, and a redesign of the $2 bill (possibly with a Louisiana Purchase theme on the reverse, and an enlarged portait of president Thomas Jefferson on the front. So, do you know if you could help me out on getting the $2 bill reesigned to the “NexGen” design?

    And after a while, I suggest the vending industry to lobby for a bimtallc U.S. $2 coin, similar to the Canadian $2 coin (silver ring around a golden center) I was told that, any vending machines that were manufactured for Canada that take Candian $2 coins, are the same as the ones manufactured for the U.S., and thus, the machines that can take Canadian $2 coins, can be programed to take new U.S. $2 coins, should the U.S. issue them, which I hope they do. (There was a proposal for a U.S. circulating $2 coin begning as soon as 2009, that is being considered, by a man named Daniel Carr)

    Can you help me on these issues? Please let me know, as I have been writing to the Treasury and Congress for many years urging a redesign of the $2 bill. I know that vending machines would have to be reprogramed to take new $2 bills, thus costing vendors money, but as I said, maybe the $2 will circulate better, if redesigned, and it will most likely circulate alot better with the $1 bill phased out, since people will prefer two $2 bills (or coins) over four $1 coins. If vending machines need to be reprogramed if the coin metal compostions change, I’d say to go for a $2 bill redesign around then, so that vendors can program their mahines for both, the new metal coins, and the redesigned $2 bills. Redesigned $2 bills would be better, since many people (especially foreigners), may think tha the current $2 bill is fake, if it were the old style $2 bills, so I suggest a matching NexGen $2 bill for the U.S. and a phase-out for the $1 bill and penny.

    Tom

  18. Tom says:

    Okay, I worded this badly, so I’ll word it again.

    :::And after a while, I suggest the vending industry to lobby for a bimetallc U.S. $2 coin, similar to the Canadian $2 coin (silver ring around a golden center) I was told that, any vending machines that were manufactured for Canada that take Candian $2 coins, are the same as the ones manufactured for the U.S., and thus, the machines that can take Canadian $2 coins, can be programed to take new U.S. $2 coins, should the U.S. issue them, which I hope they do. (There was a proposal for a U.S. circulating $2 coin begning as soon as 2009, that is being considered by Congress and the Treasury, proposed by a man named Daniel Carr)

    :::If vending machines need to be reprogramed if the coin metal compostions change, I’d say to go for a $2 bill redesign around then, so that vendors can program their mahines for both, the new metal coins, and the redesigned $2 bills. Redesigned $2 bills would be better, since many people (especially foreigners), may think tha the current $2 bill is fake, if it were the old style $2 bills, so I suggest a matching NexGen $2 bill for the U.S. and a phase-out for the $1 bill and penny.

    Actually, I think that the $2 bill should be redesigned and issued anywhere from late 2008 to early 2009. Just my idea for if we want to get people used to new design $2 bills. And if most vending machines are programed for redesigned $2 bills, and people are spending $2 bills more than they have been, people will likely use them in vending machines that accept redesigned $2 bills. (I wish the government would push and promote redesigned $2 bills along side the new Presidential $1 coins)

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