Monday, December 3, 2012

Why the dollar coin is a dumb idea

Apparently the proposal to replace the dollar bill with a coin is floating around again. This is a dumb idea. Why?

Right now, there are two classes of cash:
  1. Heavy, worthless money: change. Stuff it in your pocket and then into a jar at home where it accumulates until you get bored and take it to the bank. This exercise ties up little value.
  2. Lightweight money with meaningful value: bills.
That is, when you make a cash transaction, you go just one place to get value (i.e., bills from your wallet) and receive bills plus essentially worthless cruft in exchange. Bills go back in the wallet, the change goes somewhere else to accumulate.

If you substitute a coin for the dollar bill, now you have heavy money with value to deal with. Not only can the heavy money no longer be simply tossed aside to accumulate, you must now deal with two places (wallet and pocket) to get cash to offer in payment.

I’ve been to Canada, and it’s a complete pain in the neck to cart around a pocketful of heavy yet valuable money and dig though both wallet and pocket when making payment. Let’s not make the same mistake.

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