Perhaps you bought something recently and were told that the merchant could not make change because of a shortage of coins. The merchant may have been told by his or her bank that the bank has imposed a limit on the coins that it will dispense to its business customers because it has been subjected to limits imposed by its source—the Federal Reserve. Could this be a secret plot to get rid of coins? Is the folding money in our wallets next?
The coin shortage is another casualty of the COVID-19 crisis, much like toilet paper. And, like toilet paper, it is in the process of being corrected. The pandemic has affected coins in two basic ways. First, there were COVID-caused production disruptions at the Bureau of the Mint that curtailed new supply, and this was coupled with limited inventories on hand at the Mint and Federal Reserve (“Fed”). The Mint is in the Treasury Department and supplies coins to the Fed, which in turn distributes them to commercial banks. From there they get supplied to businesses and individuals. Second, the lockdown effectively immobilized many of the coins that had been circulating and kept them from being recirculated through banks. They were just sitting in cash drawers and coin pockets. Next, once the word was leaking out that coins were in short supply, those who were able to get the coins that were still available grabbed and hoarded them. Haven’t we seen this with toilet paper?
The situation is being relieved with the reopening of the economy and the accompanying re-entry into circulation of immobilized coins. Also, the Mint has ramped up production, and, thus, coins in circulation will expand from that source, too. Once coin hoarders are convinced that coin availability has again become ample, they will further augment supplies in circulation by drawing down their hoards.
Interestingly, there were no similar problems for the other type of cash—notes (“paper money”). The demand for new notes soared as the pandemic took hold. But supplies from the Bureau of Engraving and Printing—also a part of the Treasury Department—were not similarly disrupted. Moreover, the Federal Reserve—the issuing authority—had huge amounts of currency in inventory. Together they comfortably met the demand and no widespread shortages were reported. Indeed, from early March to the end of June, $140 billion in currency was supplied! The Fed has had a longstanding objective of fully meeting the demand for currency, especially in crises, and maintains large inventories in its vaults just for that purpose.
Thus, there is no secret agenda of getting rid of coins or other forms of cash. Nonetheless, the Fed and many others are looking into whether, in our digital age, there may be more convenient and efficient ways of conducting transactions that traditionally have been handled by cash. Privacy concerns will need to be balanced against other considerations, such as doing away with the medium favored by criminal and terrorist organizations. Increasingly, we have been using electronic methods of making other transactions, such as from our smartphones, debit cards, and the Internet. Get ready for a full-fledged public debate on this subject.
Check out Chapter 2 of my new book—Capitalism Versus Socialism: What Does the Bible Have to Say?—for more on how market systems effectively respond to economic shocks.