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Coins: use them or invest in them?


Only crooks and poor people use cash.

Did that statement get your attention?

It gets mine.

I read a story called “The End of Cash?” in the Dec. 31, 2012, issue of Barron’s, a popular financial weekly.

While it wasn’t quite put that bluntly, the article pointed out that for people earning $60,000 a year or more, only 2 percent of point-of-sale payments are made by using cash.

Have you eliminated your use of cash to that degree? I sure haven’t. Between my daily lunches at the Crystal Cafe and gasoline purchases at the corner gas station, that really keeps my cash use elevated.

But I live in a small town. I walk by the bank during my lunch hour five times a week. That’s the advantage of a two-block downtown. Perhaps somewhere deep in the data is a breakdown between urban and rural cash use, but that information was not part of the story.

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And for goodness sake, I’m a coin collector. I want to see change so I can see what’s circulating out there. The only way to get change is to pay for things with cash.

The poor have no such incentive. They simply do not have access to bank accounts. Crooks want to keep their dealings out of sight of the Feds or other law-enforcement agencies.

I guess a future story can be about crooks, poor people and coin collectors keeping the Mint in business.

Doesn’t that make our ongoing discussion about future coin compositions seem rather pointless?

You might think so, but even the trend lines in the article did not indicate the eventual demise of cash transactions, only that they will fall to just 10 percent of all transactions in 30 years from 29 percent now.

That sounds ominous, but the economy in 30 years is going to be two to three times the $16 trillion it is now. Ten percent of $32 trillion or $48 trillion will still require a lot of coins – if we have the sense to reform the present structure into one that will continue to be useful to the public and profitable to the government.

But if we retain a system based entirely on coins with denominations of 25 cents or less, what sane person will want to use quarters in 30 years’ time when inflation has reduced their purchasing power by half to two-thirds?

That’s probably why people with incomes of over $60,000 have already abandoned the possibility of even using a quarter in 98 percent of their transactions. They find their credit and debit cards are much more convenient.

Convenience has always been the driver of coin use. When it no longer is convenient, coins will no longer be used.

However, many of those very same people who don’t use coins in their everyday transactions are the ones who have been investing billions of dollars to purchase gold and silver American Eagle bullion coins in the past five years.

So we have a situation where the spending of coins is dropping while spending on coins is growing. Very interesting.

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One Response to Coins: use them or invest in them?

  1. phritzg says:

    My non-use of cash is for an entirely different reason. Simply put, we have no-annual-fee credit cards which pay from 1% to 5% dividends on everything we buy using them (depending on category of the expenditure). We never pay less than the full balance every month without fail. This brings in an extra $200-250 every year. That is a strong incentive for not using cash.

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