Dr. Sol Taylor

Our Future Coins and Paper Money

By Dr. Sol Taylor
"Making Cents"
The Signal
Saturday, June 16, 2007

he European Union planned for decades for a uniform currency. They finally settled on a (now more than) 10-nation currency based on the new standard, the euro. This eliminated the high inflationary currency of countries such as Greece and Spain, where hundreds of drachmas or pesetas often equaled one U.S. dollar.
    Meanwhile, the United States has struggled for decades to reconcile the non-silver coinage (dimes, quarters and halves) with smaller denominations such as the cent and nickel, which have greater metallic value than dimes. In addition, our $1 bill still comprises more than 50 percent of the currency printed for general commerce, thus thwarting all efforts to make new $1 coins acceptable to the general public.
    Several attempts have been made since 1971 to make $1 coins generally useful, and all have failed. The Eisenhower dollars were too big for general acceptance. The Susan B. Anthony dollar coins were too much like our quarters and failed badly; most reside in Treasury Department vaults. The brassy Sacagawea dollar coins have not caught on, either. Now we have the collector series of presidential dollar coins — also doomed to failure as dollar-bill replacements.
    Here is how the future should shape up, based on my own observations and the printed views of various governmental experts, numismatists, economists and the general public:
    The coinage needs reforming. The euro is based on 100 euro cents, starting with a very small brass one-euro cent. This small coin has value in the countries that had hyperinflation such as Spain and Greece, but is of little use in strong-currency countries such as Germany and Austria.
    There is also a 2-euro cent which has wider use in all EU countries, and several intermediate denominations up to one euro and higher-value coins — some of which are strictly commemorative issues. Some European countries do not belong to the EU and still issue their own currency: Great Britain, Switzerland, the Scandinavian and Eastern European countries.
    Our current coinage needs a makeover on this order:
    First, the cent still can serve a purpose and can be made smaller, of a cheaper alloy, or both. Using aluminum the same size as now can produce more than 400 coins per pound, while the current and more expensive alloy produces about 175 coins per pound.
    If the dollar is eroded by inflation to about half its current value, the cent would become obsolete and could be eliminated from production; eventually it will fade from circulation. Our nickel needs to be smaller than now — perhaps the size of a cent, and of the same alloy as now. The dime can be larger and made of brass. The quarter does not need changing. The half dollar can be dropped all together, since it no longer is in widespread use. The Mint has not even make any for general circulation the past few years.
    As for dollar coins, the only way they will circulate is if the dollar bill is eliminated and the current supply in circulation is worn out, withdrawn and destroyed. Canada, Great Britain, Australia and several other countries have eliminated the $1 (or 1 pound) note and replaced it with a coin. In addition, a $2 coin is in wide use in Canada, Great Britain (2 pounds) and Australia. The two dollar bill, which sees very limited distribution and use, can be dropped. If needed, a $2 coin can be introduced into the system.
    Now to the higher end of the scale. It is past time to reintroduce the large bills of the past, namely the $500 and $1,000. Today's $500 is worth what $100 was in 1940 when the $500 bill actually circulated. Most people will not have wads of $100s available, but in many places such as Las Vegas and wholesale markets, such bills are found in bundles to facilitate commerce.
    Our oil payments to foreign countries (mostly Middle Eastern) are made in $100 bills shipped to banks in Germany and Switzerland, primarily. Such air shipments can be reduced by 80 percent by using $500 bills and even 90 percent by using $1,000 bills. The cost of printing such bills is about the same as printing $1 bills! And when the $1 bill is phased out, the Bureau of Engraving and Printing will have the human resources to switch to making plates and printing the bigger bills.
    How long will it take to bring about the changes? Who can say? But for now, the cent and nickel are costing more than face value to make, and the Mint has to make a decision shortly about these coins before they start buying new metal strips and running in the red. The Mint still makes a handsome profit (called "seignorage") for the other coins and collector products it makes.
    Several congressional bills have been written to make some changes, but so far, none has gotten very far. However, time is running short, and some of these changes will come to pass before long. Maybe all will make their way into general commerce. Wait and see.

    Dr. Sol Taylor of Sherman Oaks is president of the Society of Lincoln Cent Collectors and author of The Standard Guide to the Lincoln Cent. Click here for ordering information.