I’ve seen notices in a lot of stores that mention the shortage of coins in the U.S. All the coins have to have gone somewhere. Where did they go, or more so, how does this work?
In: Economics
The purpose of actual, physical currency in the economy is to “circulate.” I give the store money for food, the store gives the employees money for work, the employees come to MY store and give me money for whatever I make, etc. The same coin will be used thousands of times over its lifecycle. That means it matters not just how much money there is in the system, but also how long people hold onto it before they spend it.
COVID-19 has significantly reduced the rate of cash transactions. This means that most individuals actually have *more* coins than they usually do, probably sitting on a dresser somewhere. However, as these coins sit in people’s houses, places that need a lot of coins, like a coffee shop that does a lot of cash business in small amounts, are having a harder time finding them. These issues affect paper money too, but it’s much faster to print that than it is to mint coins.
[US] People holding onto coins are spending less of them as a precaution against transmitting the pandemic virus. Banks aren’t accepting deposits of many coins from customers to discourage branch visits where they aren’t necessary.
And production/distribution may have been impacted to some extent earlier in the year to protect workers. Keep in mind the Mint produces a little over ten billion coins annually to fit demand.
They’re literally sitting in jars, pockets, dresser tops and pockets in homes, and in car coin trays and center consoles. And in the safes of shut down businesses to a lesser extent.
They’re just not circulating. Fewer visits to coin-op everythings (car washes, laundromats, etc.), fewer trips to stores and restaurants and bars, etc. Fewer opportunities to spend and receive coins in cash transactions, so they circulate less. Less circulation means less coins out and about, but the coins still exist – they’re just sitting around going unusued.
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