Currency Change Needed

For about 115 years the penny has been our lowest denomination. My issue is that the quarter has less buying power today than a cent did 100 years ago. Why do we still use them.? The 1910 dollar bill had more purchasing power than a $20 bill has today. Why do we hang on to the past? How much cash is in use today vs. 115 years ago? Based on the population increase you might think we need more but the fact is that we need considerably less with the advent of debit & credit cards along with online banking.

I can make a case that change will be more efficient and save tax dollars. The plan would be that the quarter would the lowest denomination of coin and exist along with the ½ dollar, dollar, and 5-dollar coins. Cash purchases would be rounded to the nearest $.25 increment while debit, credit & electronic purchases would remain as is. Paper money only lasts for a few years at best while coins can last a hundred years or more. The largest number of paper notes are the dollar bill and replacing them with coinage will save money.

I know what you will say, “We tried the dollar coin and it did not work”. The reason is simple. We did not have the fortitude to replace the paper note, it was an optional approach.

I was reminded of our broken currency system on a recent trip to La Paz, Bolivia. Their smallest coin denomination is the equivalent of 15 US cents.

Chapter 48

Our currency, does it need a revamp?

Penny’s (one cent coins) make absolutely no sense in today’s economy. The small cent was introduced in 1856, almost 160 years ago. I cannot find reliable inflation stats prior to 1914, but assuming there was zero inflation from 1856 to 1914 a dime would still have had less purchasing power in 1985 than a penny in 1856 (or 1914). Both pennies and nickels are useless and a waste of money. Another glaring deficiency is in our use of paper currency, specifically the dollar. Using the above inflation stats the purchasing power of today’s dollar as compared to the 1914 dollar is just over 8 cents! To further compound the issue for the tax payer is that paper money is more expensive to produce. Yes, the initial cost of production for paper vs. metal is lower, but when the life of the currency is factored (coins last 20 – 40 times as long as paper) the ongoing cost is many times higher with paper. We should have abolished the dollar bill many years ago. Our limited efforts with a dollar coin have been laughable. The way you make it work is to introduce the $1 coin with a deadline on the use of the paper. I might be so bold as to suggest that we take one additional step and replace the $5 bill also with a coin. After all, in terms of 1914 purchasing power the $5 coin would only represent 42 cents.