Will The Penny Become A Casualty of COVID-19?
“National Coin Shortage: If possible, please use exact change for your transactions or use a credit/debit card.” A familiar sight these days as you step up to the counter to pay for your latte, fuel, or other purchases. Who would have ever thought that a side-effect of the coronavirus would be a shortage of coins? Actually, it’s not technically a shortage but rather a disruption. But let’s stick with shortage because that’s what it seems like to you and me.
Believe it or not, there is a FAQ question on the Federal Reserve’s website called “Why do U.S. coins seem to be in short supply?” They state that business and bank closures associated with the COVID-19 pandemic have significantly disrupted (there’s that word again) the supply chain and normal circulation patterns for U.S. coins. So there you have it, the end of the article. Well, not quite yet.
In non-pandemic times, the U.S. Mint produces around one billion coins every month, give or take a few million or so. In 2019 the U.S. Mint produced about 7 billion pennies (they call them cents), 1.1 billion nickles, 2.2 billion dimes, 1.7 billion quarters, 3.4 million half-dollars, and 3 million Native American Dollars. Two U.S. Mints produce all the coins, the Philadelphia Mint and the Denver Mint. The Kennedy half-dollar and Native American Dollars are not produced for circulation; they are made only for, here’s a big word, “numismatic products.” According to Wikipedia, numismatics is the study or collection of currency, including coins, tokens, paper money, and related objects.
Because of the pandemic, the U.S. Mint has been working at a limited capacity for their employees’ safety. This means they weren’t achieving that one billion per month average. Additionally, it is believed that because many Americans are staying home and ordering online and using their credit/debit cards rather than in-person, many coins have remained in those piggy banks, old 5-gallon water jugs, or like me, sprawled out across the top of my desk. People might simply be afraid of receiving contaminated coins, as well.
Let’s dive a bit deeper into this national coin crisis. Businesses that might normally be open and accepting change like coffee shops, bakeries, and other places that sell goods have closed, restricted their hours of operation, or even restricted payment methods. Plus, people have been avoiding banks, thus not converting their coins into cash. This, combined with the fact that fewer businesses are depositing coins at the bank, for reasons stated above, has caused a significant reduction or, dare I say… shortage of the number of coins that the banks are sending back to the Federal Reserve for redistribution across the country. Really there are enough coins out there, so, no shortage, they just aren’t circulating at the speed they were before, a disruption.
When businesses started to reopen, banks began ordering more coins, which the Federal Reserve didn’t have stockpiled because, while they do have a coin contingency for disruptions, who would have thought to plan for a pandemic that shut down the nation for several months. Thus, are we back to a shortage, or is it still a disruption? I am getting confused.
Alas, the Federal Reserve, has stated that since mid-June, the U.S. Mint has been operating at full capacity minting 1.6 billion coins in June and is on track to mint 1.65 million coins per month for the remainder of the year. Way to go U.S. Mint! But, you might be asking yourself, if there are enough coins out there just not circulating, why do we need more coins? Coins are continually being sent back to the Federal Reserve Bank, where they are “sorted for fitness.” The badly worn or bent coins get sent back to the U.S. Mint, which melts them down and makes them into new coins. The life-cycle of our currency is interesting but we’ll reserve that story for another time.
The Federal Reserve is also rationing coins, which means banks can only order a certain amount from the Federal Reserve Bank, and they are being asked only to request what they need for immediate demand.
Banks, businesses, and large retail chains have taken the matter into their own hands by trying to incentivize customers to bring in their spare change. Some banks are offering additional cash for your rolled coins, and some stores are giving change back through loyalty cards or encouraging customers to leave their change to be donated to the next customer who may need it. There are even some programs that will round up your purchase to the nearest dollar and donate the difference to a charity, while others are merely just rounding payments to the nearest dollar.
You might be asking yourself, right about now, “What does all of this have to do with pennies?” Well, here it goes. For decades now, there has been debate over the future of coins, more precisely the penny. One side argues that the penny should be eliminated and prices just get rounded down to the nearest nickel. If you remember way back at the beginning of this article, the U.S. Mint produced about 7 billion pennies in 2019, which is nearly 60% of all coins produced in that year. The Federal Reserve always orders more pennies than any other coin. If more pennies are ordered, then we must be using more pennies, so why get rid of them? Remember when I told you about my spare change sprawled across my desk, guess what most of that change is? Yep, pennies. So maybe we need more pennies because people aren’t using them, they are just collecting dust in people’s homes, or scattered across parking lots all over our nation. It’s good luck to find a penny, you know. Maybe people just aren’t carrying them around anymore, and that’s why the Federal Reserve need to make so many every year.
Okay, wrap your brain around this one. In May of 2019, an article posted in CoinNews.net reported that the U.S. Mint disclosed in its 2018 Annual Report that for the 13th straight year, the unit cost to produce both pennies and nickels has remained above their face values. That’s right; the cost to make, administer, and distribute a penny is 2.06 cents, and the cost for a nickel is 7.53 cents. Insert an image of my mind blowing up here. It costs more money to produce pennies and nickles than they are worth. It costs the U.S. Mint 145 million dollars to produce 70 million dollars worth of pennies. I don’t know if I am thumbs up or thumbs down on the fate of the penny. From a cost standpoint, save the cost of producing the penny and give it to our schools. From a nostalgia standpoint, and still, to this day, I look at the dates of my pennies to see if there might be a “good” one in there—something I used to spend time doing with my grandfather.
Have no fear dimes and quarters are doing fine; it cost the U.S. Mint 3.73 cents to make a dime and 8.7 cents to make a quarter.
I’ll leave it up to you, should the penny stay or go? Will the pandemic be the cause of our coins going the way of the Dodo? Or should we keep the penny because it has always been there and because we need something to give us luck by tossing into a fountain or finding on the ground? Something for me to think about as I go through all the coins on my desk, looking for the ones with the “good” dates and reminiscing about my grandfather and our coin adventures.