Saturday, September 3, 2011

Dollar coins are goooood!

I got an chain-email today talking about refusing the new dollar coins. I am not going to ask you to reprint this if you agree, but If you receive said email, think about the following before you act.
The dollar coin is a great thing we could do to help our economy; the more people refuse them the more damage is done to the recovery of the economy.
Simple facts:
1. A strong economy is built by churn (or transactions). The more transactions the more churn, the stronger the economy.
2. People are far more likely to spend a coin than a bill. Coins go into machines and used ...for coffee... bills stagnate and are collected and traded in to get larger bills which are often just put into the bank.
3. Coins have a longer lifespan and the total cost of life is less. E.g. say it costs 3 cents to make a dollar coin but 1 cent to make a paper dollar. However, the coin will last 3.5 times as long while the dollar is removed from circulation, destroyed, reprinted etc, which actually brings a 1 dollar bill up to 3 cents for the lifespan. Take that into consideration of the dollar bill's 8 year lifespan and the coins 30 year lifespan. These particular numbers are not perfect, but they are a decent parallel.
4. Counterfeit coins, while they do exist, are not profitable for the criminals.
5. If a coin isn't spent, it is often stored away in a jar somehow. Most people, when they collect those jars of coins and trade them in, immediately spend the money they condensed. They have effectively removed currency from the system for a short while, and then caused a transaction.

The EU has proven this with the 1 and 2 Euro coins. The Euro is kicking the crap out of the dollar and this is actually one of the reasons. Yes there are a lot of reasons, but the ability of the currency to force itself to flow and create transactions is good for the economy and the currency.

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