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By Louis Golino for Coin Week

Major print and broadcast media seldom focus on coins. But in the past two weeks the news media has devoted considerable attention to an issue that coin collectors are well aware of, namely, the oversupply of $1 coins. This includes both the presidential dollar coins created through a 2005 law, the Presidential $1 Coin Act, which have been issued since 2007, and the Native American dollar coins, which have been minted since 2009 and which are the successor to the Sacagawea dollars. The 2005 law also led to the creation of the first spouse $10 gold series. Both the presidential and first spouse programs have approximately five years to go unless ended early by Congress.

dollar coins 2 Coin Analyst Special Report: Congress May End Dollar Coin ProgramIn June the Board of Governors of the Federal Reserve issued its annual report on the $1 coin program. The report found that because few people want or use the coins, demand for them is extremely low. To this day, cashiers at some retail stores still do not realize the coins are legal tender, and because businesses have the right not to accept certain forms of payments such as bags of pennies, some do not even accept the coins. And vending machines and parking meters have for the most part still not been upgraded to accept dollar coins. In addition, most people save them if they receive them in change, which happens extremely infrequently. As a result, $1.25 billion worth of the coins are sitting in Federal Reserve vaults and based on current projections, by the end of the program there will be over $2 billion worth of unwanted coins.

Storing all those coins costs a lot of money beyond the 32 cents it costs to produce each coin. According to a recent report on ABC News, the rate at which the coins are made means the Mint spends $600,000 a day just minting them. Another $650,000 has been spent to build a facility in Dallas, Texas to store the coins, and shipping them there from Federal Reserve facilities in Baltimore, Maryland and other locations is estimated to cost another $3 million.

There is growing sentiment in Congress to end dollar coin programs because of the view held by many members of congress that the coins waste taxpayer money. Rep. Carolyn Maloney of NY, who sponsored the law that created the presidential coins, now says the Mint and the Treasury are mismanaging their inventories (http://www.nbcnewyork.com/news/local/Wasting-Money-Minting-Money-125612348.html).

But one critical point is almost always overlooked by those concerned about the costs involved in such programs, and that is that no taxpayer money is used to fund the U.S. Mint
(http://coinsblog.blogspot.com/2010/09/no-taxpayer-money-is-used-by-us-mint.html). Even the production of circulating coins is funded strictly through seigniorage, or the difference between a coin’s face value and the cost to make it. Although it is part of the federal government, the Mint is actually a public enterprise fund (http://www.usmint.gov/pressroom/index.cfm?action=pef)
that receives no annual appropriations.

The presidential coins are not even popular with collectors. Many consider their designs to be rather uninspired, and prior to their release many collectors proudly proclaimed they would not waste their time or money collecting them. Even the collector versions, made for proof and uncirculated coin sets, have not fared very well in the secondary market. Most of the four-coin proof sets of them sell today for less than they cost from the Mint when issued. When the coin for President Abraham Lincoln was issued last year, some people, including myself, thought they might do well, as the silver commemoratives did. But the Lincoln presidential dollars carry no special premium.

The 2 euro commemoratives issued by the countries of the Eurozone provide an interesting contrast with the presidential dollar coins, which are about the same size. Each Eurozone country issues regular 2 euros which have an observe side specific to each country and a reverse shared by all the countries, but they also issue circulating commemoratives of the same denomination in more limited numbers. These coins are popular among collectors in Europe and around the world partly because of the low mintages but also because they have interesting designs that commemorate a wide variety of people, events, and issues. I will be covering the 2 euro coins in more detail in forthcoming articles for this column.

As for the U.S. circulating dollar coins, virtually everyone agrees that there is only one way to get Americans to use them, and that is to do away with the paper dollar. Doing so would also save a lot of money since dollar coins, like other circulating coinage, lasts for decades, while paper bills have a much shorter life span. Many people seem reluctant to give up their paper dollars because they do not want to carry around dollar coins, but unless you have a lot of them in your pocket they are really not that heavy. They weigh about the same amount as a quarter, and most of us have no problem carrying quarters in our pockets or purses. I am sure we could make the adjustment if we had to.

first spouse 2 Coin Analyst Special Report: Congress May End Dollar Coin ProgramIn the meantime, the Mint is working with the Federal Reserve and the Congress to reduce the number of dollar coins made. In part this will be accomplished by changes to legislative requirements which currently mean that banks must order new issues in the series from Federal Reserve banks during a mandatory introductory period. When that period is over, financial institutions end up redepositing about 40% of the coins. In addition, another provision mandates that 20% of all dollar coins must be Native American dollars, which have a design most people find attractive. Those dollars are distributed through two main channels via the Mint. One is the Direct Ship program, which allows people to order $250 or more of the coins at face value with no shipping charge to increase the number in circulation. The other is retail Mint sales of rolls of the coins to collectors at a substantial premium. Although the Direct Ship program includes a requirement that the coins not be redeposited at banks, about 60% of the coins end up being redeposited anyway.

The Federal Reserve report (http://www.federalreserve.gov/boarddocs/rptcongress/dollarcoin/2011/dollarcoin2011.pdf) suggests ending both the introductory period for presidential dollar coins and the 20% requirement for Native American dollars. If both are ultimately implemented, the oversupply of dollar coins should be reduced substantially.

But even more radical changes may be on the horizon. Rep. Jackie Speier of California is currently circulating a “Dear Colleague” letter(http://speier.house.gov/images/pdf/speier_wasteful_presidential_coin_act.pdf) which recommends that the U.S. not produce any dollar coins. She plans to introduce legislation soon calling for the immediate halting of all dollar coin programs. Since the 2005 legislation that created the presidential dollars also created the first spouse gold coin program, some have speculated that that series would also end, if the bill became law. But it is not at all clear that the bill will gain enough support to pass, or that it would necessarily end the first spouse program. A law to end dollar coins is one thing, but unless the 2005 law is totally repealed, or is amended in a way that calls for ending the spouse program too, I am not sure the spouse program would end.

Moreover, there is hardly an oversupply of first spouse gold coins, quite the opposite in fact, and the Native American dollars are relatively popular with collectors. Members of Congress seem not to realize that the Mint is a self-funded entity, and they are criticizing the Mint for following their own legislative mandates. I think a far better approach than ending the production of dollar coins would be to drastically reduce the number made, perhaps minting only enough for annual coin sets, and/or to eliminate dollar bills. And the next time you hear someone talk about how we lose so much money making and storing dollar coins remind them that none of that is taxpayer money.

Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin World, Numismatic News, and a number of different coin web sites. He collects U.S. and European coins and is a member of the ANA, PCGS, NGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

 

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22 Comments

  1. JP says:

    I have a major issue with the “fact” or opinion that you state in your article that states, “…vending machines and parking meters have for the most part still not been upgraded to accept dollar coins.”

    The Dollar Coin Alliance states that 95% of vending machines will accept the dollar coin, and bulletin from a coin acceptor manufacturer states that the “new” dollar coins have the same electronic signature as the SBA which was first produced in 1979. That means that most coin acceptors were able to take the “new” styles of dollar coin well before they were even minted.

    [http://dollarcoinalliance.org/facts-about-the-dollar-coin/]
    [http://www.coinco.com/coin/news/sacagawea.asp]

  2. Louis Golino says:

    Thanks for the clarification, JP.

  3. Louis Golino says:

    JP: For vending machines, okay, though I have used plenty of machines that did not take them, but I don’t know about parking meters, as I regularly hear people say they can’t use them there. Is it your understanding that most meters take them?

    • JP says:

      I guess it depends. When Chicago privatized their parking meters they did configure them to take dollar coins as they removed individual meters and installed payboxes. Chicago currently has the 4th highest parking rates in the country so accepting dollar coins instead of just quarters was kinda necessary, but I wouldn’t expect every municipality to have made such changes.

      On that note though, I’d like to point out that unless a parking meter has been configured specifically to take a dollar bill in the first place your point isn’t even worth bringing up in this context. Before the Chicago pay boxes were installed they didn’t take dollar bills, only quarters [and reportedly dollar coins.] So the discontinuation of the dollar bill wouldn’t even factor into this conversation because a parking meter that didn’t take dollar bills in the first place wouldn’t be affected by it’s replacement with a coin.

      The current Chicago payboxes are not configured with bill acceptors because they don’t work well in our weather, so a Chicagoan wouldn’t be affected by a change in the dollar in this scenario. And other places that I’ve been in the country I haven’t noticed any other meters that have bill acceptors that I can recall. And I’ve only been using dollar coins for a short while and haven’t yet been in a scenario where I’ve tried to use one on a parking meter yet. My vending machine experiences have been mostly good.

    • JP says:

      Also, here is an article dated 9 years ago that mentions 16 major U.S. cities adapting their meters to accept dollar coins. I assume that some other cities have made similar efforts in the last decade.

      Sixteen U.S. cities have already

      converted their municipal parking meters to accept the new dollar coins.

      “They are: New York; Dallas; Cincinnati; Albany, NY; Chicago; Fort Worth, Texas; Portland, Ore.; Wilmington, Del.; Philadelphia; Minneapolis; Pittsburgh; Toledo, Ohio; San Francisco; St. Paul, Minn.; New Orleans; and Baltimore, Md.”

      [http://articles.dailypilot.com/2002-07-14/news/export35026_1_dollar-coins-fletcher-jones-motorcars-newport-beach]

  4. James Clements says:

    I love the dollar coins, my kids always wanted them for their allowance, they work great in coin machines that take them, but I just can’t get them. If I could I’d always carry two or three and cut down on the quarters and dimes nickles I usually have for the vending machines, but I can’t find them! Sure, nobody uses them but it’s because nobody ever gives them out. Where can I get some? The banks don’t have them. It’s just another game by one party or the other, one side sabotages distribution and then says “the other party is pushing these coins that no-one wants, blah, blah, blah, lie, lie, lie”. I stopped at a rest stop and for the first time saw change machines that gave change in dollar coins. All the vending machines took dollar coins in addition to regular change. Worked really well. Someone needs to investigate what is stopping distribution, not just echo what some talking head blathers. Where are they trying to use them? Where are they trying to distribute them? Are they making any effort at all? I don’t know of anyone that would refuse them as a reasonable amount of change. You wouldn’t carry a lot with you just like you wouldn’t carry a lot of quarters, dimes, and nickles, but having a few around would be very convenient. Please, someone look into what is blocking distribution, because I’d really like to be able to get some!

    • Louis Golino says:

      James,
      Thanks for your comment. You have identified the heart of the issue: the distribution problems. More people would likely use them of they could them, yet most are just sitting around in Federal Reserve vaults. I can’t explain it either. During the first couple years they were available, I could get them at banks, but when I have asked more recently, they never have them. I’d suggest contacting the Mint and your member of congress for more info. and to express your views.

    • CaptainOverkill says:

      James, I believe the issue is businesses are refusing to use them. The main way in which coins are circulated, I find, is when people get coins as change from eating at McDonald’s, buying groceries from the supermarket, etc. If people got the coins as change, they would spend them. I don’t think most people get their coins from the banks, though I could be wrong.

      In short, until American businesses are forced to distribute the coins as change alongside quarters or nickels, the dollar coin probably has no future. Why they refuse to distribute the coins is an interesting question, and I would love to hear anyone’s thoughts on the topic.

    • Kberg says:

      Exactly, if americans did not have a problem with a quarter , a quarter USED to be a dollar coin!

  5. Paul Anderson says:

    If we finally come to our senses and stop making dollar bills, won’t we need a big supply of dollar coins to take their place? Since there’s a limit on how many the Mint could make on short notice, doesn’t it make sense to continuing to stockpile dollar coins for the day we get rid of the dollar bill?

  6. ppp says:

    Another advantage of the dollar coin is: it is non-usuary money, made, at a profit, by the US mint, which is a publicly-owned arms-length entity. Contrast that with most money in the US, which is banker credit (95% of the money supply) and paper money (4.9% of the money supply), which is made by the secretive privately-owned Federal Reserve. The usury money (banker credit and paper money) is printed by private corporations from nothing, and must be paid back (with interest!) off the backs of hardworking Americans. Now you know where the $14 trillion debt comes from. Which, by the way, can never be paid off, except through hyperinflation.

  7. Nicolas says:

    I am from Canada. The governement of Canada discontinued the one dollar bill in 1988 and introduced the one dollar coin in 1987. People were really against the coin in the beginning. However, the one dollar coin (we call it the loony) rapidly became popular and is widely used today. The goverment also decided to introduce a 2 dollar coin in 1996 (the printing of the 2 dollar bill being discontinued the same year). I agree that the one dollar bill must be discontinued before the coins become widely used. I would not go back to the bills and much prefer the coins. The goverment is now considering withdrawing the penny, which I also support.

    I lived in the USA from 2004 to 2007 and disliked the one dollar bill. There is nothing more frustrating than having a wallet full of bills, going shopping and realizing ou only had 25 dollars in cash. THat being said, I was used to have bills that had a facial value of 5 dollars or more.

    I am a big fan of the presidential dollar coin. I wish they will continue that program and that vending machines in the US will soon accept the dollar coins.

  8. seventysomethingmarine says:

    With the Federal Reserve Syndicate in charge, you’re bound to be ripped off! owns the Fed’s ‘preferred shares’….That is a secret!

  9. Louis Golino says:

    On July 19 Sen. David Vitter of LA introduced S. 1385, “A Bill to Terminate the $1 Presidential Coin Program.” Meanwhile, a much more sensible approach has been proposed by Sen. Tom Coburn, which calls for eliminating the dollar coin program. I agree with Nicholas that it is a pain to carry around a wallet full of dollar bills, not to mention how ratty and unsanitary they can be. Every other major Western country uses the equivalent of $1 and $2 coins and only uses bills for $5 and high denominations. If you believe the dollar coin is a good idea, only you can never find any, I encourage you to contact your member of congress and make your voice heard. Go to http://www.house.gov or http://www.senate.gov to find your member’s web page and contact info. Faxing is a good way to go, as they receive so many e-mails.

  10. Louis Golino says:

    Sorry for the confusion above, in reference to Sen. Coburn, I meant to write he calls for eliminating the dollar bill, not the dollar coin!

  11. Agent047 says:

    Nobody wants the $1 coins because they have no intrinsic value. Made of worthless metal. They are garbage just like the paper backed by nothing federal reserve note. Want to make some easy money? Go to the bank and buy rolls of nickels. Exchange your paper for nickels and make money off the transaction. The nickel is unchanged since 1946. 75% copper and 25% nickel. Each nickel is actually worth almost 7 cents. They will be pulling them out of circulation end of this year or early 2012. The Gov. has already changed the quarter and dime in 1964. The penny was changed in 1982. The nickel will be changed to a zinc oxide-aluminum slug with Jefferson on the front as usual. Get them now while you can. Go to http://www.coinflation.com to check the metallic value of any U.S. Coin. Spread the word!

    • Kberg says:

      Nonsense, metal is rarely used as currency due to fluctuation, if silver dropped 20%, and you said Ill spend $100 tonight at agrocercy

  12. Toby Bo says:

    Paper $1 bills are valued by the underground economy.The underground economy does carry lots of money around in their pockets.Eliminating $1 bills is the first step for a cashless society so all transactions can be followed for taxation.The $100 bill is the currency of organized crime and should be replaced with a coin.Attacking the bottom while avoiding the top sounds like American history.America is held together with $1 bills better have plenty.

    • Kberg says:

      No, if you are going to meet a friend or want to buy a car, $100 or even $500 bills are necessary, why should one have to pay wire transfer and checking fees,practicality as well as if system failure

  13. Kberg says:

    In addition singapore has a bill that is worth 6-8k in a 10000 note

  14. Jo says:

    Much to my surprise, I’ve come to learn the Mint is now disallowing purchase of the Presidential Coins using a credit card. Huh? The new policy is inspired because there were customers charging the coins to airline-milege-earning credit cards and in some cases failing to circulate the coins, preferring to deposit them into their bank accounts. To disallow everyone from using a credit card because of a perceived abuse of the $1 Coin program seems like a gross overreaction. For me, it feels a bit discriminatory. What if I don’t care about frequent flier miles and have alternate types of credit cards as forms of payment which are not co-branded with an airline? Why can’t I use that? What if having to procure a money order or having to download a form to accompany my check presents a hardship? My 86 year old mother, for example, doesn’t have a printer and is too infirm to go out and buy a money order, but she like the coins. Plus, who writes checks anymore?? It’s my opinion the Mint blew this decision and I’d appreciate a reconsideration. Not every Mint customer flies commercial aircraft often enough to care much about mileage accrual and this no-credit-card policy is wide cast punitive net which has scooped up too many completely innocent people. I cannot concur, given the new forms of purchase policy, that distribution of the $1 Presidential coins is any priority at all.

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