The Chairman of the Federal Reserve, Jerome Powell, told the House Financial Committee in Congress that ‘with the partial closure of the economy, the flow of coins through the economy has gotten… It’s kind of stopped.’
In April 2020 there were $47.8 billion worth of coins in circulation in the US, up from $47.4 billion a year earlier, showing that this issue is not a shortage of coins themselves, but their circulation. With banks and shops closed, people have not been paying with cash, whilst the Fed’s system of producing and distributing coins has been disrupted, meaning that banks have been holding fewer coins.
Consequently, retailers have been forced to limit or even refuse to give out change. Kroger Co, a supermarket chain with nearly 3,000 stores, is one example, temporarily refusing to give coins out as change. Customers can either round up their bills to the nearest dollar and give the excess to charity or get their change stored on loyalty cards. Retailers around the country are taking similar measures, putting up posters asking customers for exact change or payment by card.
The Fed is responsible for coin distribution and one of its first actions in June, when the problem became apparent, was to implement quotas based on historic order volumes by denomination and the depository institution endpoint to protect its coin inventories. As a result, banks and other distributors of coins have received less than what they ordered or even less than their usual allotments.
Another action is that the United States Mint has upped coin production. Circulating coin production has decreased in recent years, down from 16 billion in 2016 to 11.9 billion in 2019. And because of COVID-19 restrictions for Mint workers, the first half of this year has been particularly slow. In the second half, however, the US Mint expects to produce up to 1.6 billion coins per month for the rest of the year, adding up to projected total of 14.2 billion coins for 2020.
The Mint has also issued a statement to the public, asking for its help in paying at shops with exact change and returning spare change to circulation by depositing it at banks.
In this statement, it noted that in 2019 it contributed 17% of newly-minted circulating coins to the supply chain, with the remainder coming from third-party coin processors and retail activity. Hence the need for the public to help in improving the coin supply issue.
‘For millions of Americans, cash is the only form of payment and cash transactions rely on coins to make change. We ask that the American public start spending their coins, depositing them, or exchanging them for currency at financial institutions or taking them to a coin redemption kiosk. The coin supply problem can be solved with each of us doing our part,’ it said.
Meanwhile earlier this month, the Federal Reserve set up the US Coin Task Force – a time-limited, limited-scope convention of industry leaders to ‘work together to identify, implement, and promote actions to reduce the consequence and duration of COVID-19 related disruptions to normal coin circulation’.
In addition to the Federal Reserve and US Mint, task force members represent all major participants in the coin supply chain, including representatives from armoured carriers, the American Bankers Association, the Independent Community Bankers Association, the National Association of Federal Credit Unions, coin aggregator representatives and the retail trade industry.
It has already convened and will complete a first set of recommendations shortly, at which point it will share its progress and evaluate the benefits of continuing the task force.
In addition, coin industry partners are encouraged to use social media to promote the circulation of coin, using the hashtag #getcoinmoving.
‘The coin circulation issue is national in scale. While the task force will be focused on identifying actionable steps that supply chain partners can take to address the issue, it is clear that it will take all of our collective efforts to get coin moving again’, the Fed commented.