Since my fantasy of Congress instituting a deflationary policy and changing the mission of the Federal Reserve to kinda-sorta re-peg the dollar to gold at $42.22/tr.oz. ain't never gonna happen, I read half-heartedly and half-annoyed that a Congressman (and four co-sponsors) have proposed legislation eliminating the paper dollar in favor of a dollar coin in circulation. This comes on the heels of another move, made not too long prior, to simply terminate the Presidential Dollar program altogether because over a billion of these coins (and the Sacagawea and Susan B. Anthony designs) are currently sitting unused in warehouses (not to mention hundreds of millions of half dollars). I can't help but think that this change of heart came about because Congressman David Schweikert, the bill's originator (and also a Republican), realized that terminating the Presidential Dollar program would mean that the nation would be denied its Reagan dollar in 2016 and they certainly couldn't have that! :-)
The full text of the legislation is here (enjoy your bore fest)
One of the steps involved would be the sequestering (and I'm guessing eventual melt-down) of the remaining Susan B. Anthony Dollars. They won't be demonetized, but they won't be allowed to circulate anymore either. This would make our oldest circulating dollars effectively the Sacagawea ones which started in 2000 and I can only imagine the wear and tear of the Presidential Dollars will causes many millions of them to lose their edge lettering and thus their date, mintmark, and motto(s) which will only ultimately help collectors of the future...nothing like a marked reduction in supply to improve upon the value of any collection.
While it would be nice to see the dollar coin circulating and it should circulate since its value is approximately what 4¢ would buy you in 1913 (the quarter-dollar being about a cent), I am of course annoyed that inflation has been allowed to take things this far. I know the elimination of the cent will happen in my lifetime. I wouldn't be surprised to see it happen the year after the Presidential Dollar series ends. Congress could just order Lincoln put on the $1 coin and simulataneously get rid of the ever worthless cent. I do hope though, that Congress will also start putting an end to these multiple design per year coins. Pick a design and stick with it for a generation! Whatever happened to tradition in this country?
The idea is that the paper dollar would cease production no later than four years after the passage of this legislation (just in time for the end of the Presidential Dollar series I believe). The remaining paper dollars could circulate but their numbers would diminish and after a year, would be turned over to the Federal Reserve System as banks acquire them for destruction (much like bills over $100 are taken care of now). The legal tender status of $1 bills would not be denied, but their circulation would be effectively ended (though I'm sure they will continue to show up now and again in circulation). I can only imagine this will do wonders for the $2 bill, whose life has been severely limited throughout the paper money era. I wonder if strippers will be happy too, getting $2 bills instead of a fistful of $1s?
That being said, this legislation does not go far enough in my opinion. If inflation must be accepted rather than fought, then three things ought to be added to this legislation to fully modernize our coinage system:
1) Don't allow banks to order quarter-dollars. Instead, force them to order "fractional dollars". That way, half of their order will be quarter-dollars and the other half would be half-dollars. If Congress is annoyed at the money being wasted warehousing $1 coins, what about the hundreds of millions of half dollars also being warehoused?
2) While they are at it, eliminate the $2, $5, and $10 bills as well (8¢, 20¢, and 40¢ in 1913 purchasing power respectively) and replace them with $2½ (it's a traditional denomination), $5, and $10 coins...probably of a silver or billon silver alloy because I feel such high denomination coins would be subject to counterfeiting if made solely from base metals. I mean, right now the "golden dollars" have less than 6¢ worth of metal in them. I would not be surprised if they too become counterfeited once the $1 is eliminated. This is a problem England has been dealing with for some time now.
3) Eliminate the 1¢, 5¢, and 10¢ coins from circulation. The quarter dollar is the effective "penny" now. All coins below it have no significant purchasing power except in bulk and God be with you if you try paying for your groceries with a jar full of change! The last time I remember being able to use dimes in gumball machines was 1993 (and I barely remember being able to use nickels in 1982-3). I think you could buy Ramen noodles for a dime in 1998, but even that was when they were on sale. Rounding purchases to the nearest quarter-dollar would have little impact on anyone's life. And it doesn't have to be for individual prices. Stores can (and likely would) round an aggregate total. States wouldn't lose much in sales taxation since they get paid in bulk too (and with electronic transfers, you can still have your precious cents).
People would complain about the weight of "all those coins" but the fact is, you wouldn't carry that many coins in the first place since they'd be too valuable to allow to bulk up like that in the first place. You'd spend them long before they got heavy thus allowing the coins to do what they were meant to do in the first place...circulate. Yes, I would mourn the loss of the cent, nickel, and even the dime because the cents and nickels are the oldest coins you can readily find in circulation (1950s, '40s, and earlier) and because dimes are the most likely denomination to still have a silver one pop up on you every so often. But with inflation having ravaged the purchasing power of our money...what choice do we have? Holding on to ever more worthless coins is not something we should be proud of as a nation. Pretending like inflation hasn't happened doesn't make it any less so. It's pathetic to have such worthless bits of metal exchange hands every day. Give our coins some dignity and more importantly, purchasing power.
ADDENDUM: As far as political motivations go...how convenient that the dollar bill would be entirely phased out in 2016...just in time for the Reagan dollar and the ramped up production which would be necessary to replace the dollar bills in circulation. All speculation of course... :-)
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