Is There Really A Coin Shortage Going On?
You may have noticed some signage around the Rockford area asking you to pay with a credit/debit card because there's a shortage of coins. But is it really a shortage?
That can be easily answered with a yes and a no.
Yes, there are plenty of businesses that don't have a large supply of coins on hand, but no, there's not an actual shortage of coins.
Does that clear it all up? I didn't think so.
Let's go to the guy who would know all about this sort of thing. Here's what Federal Reserve Chairman Jerome Powell had to say when he was asked about a coin shortage during two days of testimony before Congress:
What’s happened is that with the partial closure of the economy, the flow of coins through the economy has gotten all, it's kind of stopped. At places where you go to give your coins and get credit at the store, get cash, folding money, those have not been working. Stores are closed. The whole system of flow has kind of come to a stop. We’re well aware of this.
In reading more about this phenomenon, I learned a new term: velocity of circulation. What that basically means is how quickly a single unit of money changes hands in an economy over a specific period of time.
Businesses that primarily take coins, like laundromats, vending machines, car washes, etc., likely stopped operating during the pandemic. Those sorts of businesses are usually big drivers in getting coins back to banks to redistribute back into the economy. Since those places weren't getting their usual amount of coins, the flow of them back into the economy slowed way down.
Is this something to stress out about? Not really. The Federal Reserve Bank of San Francisco said in a statement that only a small portion of transactions are being affected. Credit and debit cards accounted for 51% of payments in 2018. Consumers used cash in only 26% of total payments, and most used cash for payments under $10.
Here's more on what's going on with America's change: