Thursday, June 18, 2020

Coin Shortage

See Coronavirus pandemic poses new challenge to US economy: a coin shortage
The pandemic has "significantly disrupted the supply chain and normal circulation patterns" of pennies, nickels, dimes and quarters, the Federal Reserve district banks said recently.

I think coins are very interesting. Federal Reserve Notes are a liability to the Federal Reserve (called "Federal Reserve Notes Outstanding"), but coins are not - they are a liability of the US Treasury.  So when you look at total Currency in Circulation, you have to subtract the coins to get the liability of the Fed.  See https://aftermath2022.blogspot.com/2013/12/what-is-treasury-currency-outstanding.html

Note that Federal Reserve Notes in Fed vaults have no value, but they do in US Government vaults.  On the flip side, coins in US Government vaults have no value, but they do have value in Fed vaults.

There was talk a few years ago about issuing a trillion-dollar coin, which is ridiculous, but the US Government could issue high-value coins, like 1-ounce gold coins with a face value of $10,000.  The Treasury Department would earn the seigniorage on these.  Note that this would still add to the national debt, because they would be a liability of Treasury.

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