I was writing a comment about dollar coins in another blog the other day and it got me thinking, why is it in modern times do coins of all nations have such trivial purchasing power?
I've mentioned before that the cent, nickel, and dime ought to be retired (and the $1, $2, $5, and $10 bills should be replaced with coins) but that's just our country but what about the rest of the world? Since the end of the gold and silver standards, coins have managed increasingly negligible purchasing power.
The Euro I think provides a most recent example of how this trend was continued rather than upended. When the Euro was finally adopted for circulation use, its value was approximately 1 to 1 with the U.S. dollar and the smallest denomination of the Euro was the 1 Eurocent coin. Certain European Union members quickly stopped producing the 1 and 2 Eurocent coins and having only the 5 Eurocent coin as their smallest denomination.
My question is, why did they adopt this particular system? By 1999 (hell, arguably by 1964), the U.S. cent had negligible purchasing power so why would the European Union bring into existence a coinage system with values so low? Why didn't they make the Euro 5 to 1 or even 10 to 1 with the U.S. dollar? That would have given their coins honest purchasing power, something that hasn't been the norm for decades around the world.
A cursory glance at my world coins guide shows the same trend (I do believe) everywhere around the world. The smallest coins cannot buy anything anywhere whereas when the United States was created, its ½ and 1 cent pieces could buy trivial things. Now you practically need a half-dollar to purchase the most trivial of things and that coin is rarely seen yet the production of smaller denominations continues to this day.
My Indonesian friend's currency is approximately 11,900 rupiah to the U.S. dollar (as of this posting) and her country's smallest denomination is the 50 rupiah coin which is slightly less than ½¢ in U.S. dollars.
By contrast, at the start of inflation record-keeping in 1913, the smallest U.S. denomination, the cent, had approximately 24¢ worth of purchasing power in 2014.
Therefore, for comparison, her country would probably do just fine with the smallest denomination being 1,000 rupiah.
The article I was commenting on was wondering about the future of coin collecting. I was reminded of my experiences with younger shoppers at my job and how they care only about the paper currency (my favorite declaration by one girl to her friend when offered the coin part of her change - "I don't want those. They're not real money."). I felt that younger people are not as interested in coins because coins themselves are more of a nuisance than a store of value.
When I was a kid in the 1980s, only quarters were appealing as they were the only denomination which added up significantly quickly enough to be worth the effort of holding on to. Dimes were tolerable but not particularly helpful. But nickels and cents were definitely not worth one's time.
Had dollar coins caught on in the 1980s as intended they would be the quarter for today's youth but they didn't so they have pockets full of change which cannot buy anything except in great numbers.
My parents lived in a time when nickels and dimes were the worthwhile denomination and my grandparents were children when cents and nickels added up like quarters did in the 1980s. I was thinking that if we had $5 and $10 coins, they would be respected by today's youth and that mystique could lead them into a lifetime of collecting. I wonder how the Great Recession would have impacted 2009's mintages if they consisted of $1, $2, $5, and $10 coins? Would they be the rarities for tomorrow's collectors with mintages in the very low millions or even high hundred thousands? Remember, the dimes which had for years been produced to the tune of about 1 billion coins per mint per year fell to 96½ and 49 million pieces for the Philadelphia and Denver mints respectively that year so I think it could've been possible for a modern-day rarity under such inflation-adjusted coinage.
But either way, it's a mystery to me that the world's mints continue to strike coins with no purchasing power. No one has taken the lead to try and make something old new again. I wonder why even the public has accepted this? One would think low-value coins would be a nuisance to businesses and consumers alike but they continue to be tolerated.
Argue as one might about the digitalization of our money, physical coin and currency will not disappear...there's always a use for them so why not make them capable of actually buying things?
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