ST. GEORGE — Signs requiring exact change or debit card use have cropped up at various restaurants and retailers throughout Washington and Iron counties in the wake of a nationwide coin shortage driven by a circulation disruption — one that was triggered by COVID-19.
The impact of COVID-19 has resulted in the disruption of the billions of coins used in day-to-day transactions each year. That impact has not been lost on the retailers and restaurants across Southern Utah, where signs are popping up in to-go windows and businesses throughout the region.
Those sentiments were echoed in a statement asking for the public’s help to stem the shortage by “using exact change when making purchases, taking your coins to financial institutions or turning them in for cash at coin recycling kiosks” to get the coins moving again, U.S. Mint Director David J. Ryder said in a news release.
According to Ryder, the shortage “is not a coin supply problem. It’s a circulation problem.”
Put simply, while there is an adequate amount of coins in the economy, the slower pace of circulation has reduced the supply that is readily available where needed.
In short, the flow of coins from government to banks, banks to businesses, businesses to customers, and customers to banks has all but stopped, interrupting almost every link in the circulation chain, not only in the U.S. but in other countries as well.
Where have all of the coins gone
For some, the coin shortage issue may seem perplexing, since coins are circulated, and not consumed. Under normal circumstances, a majority of the coin supply is returned to circulation on a daily basis, but that all changed with the onset of the pandemic.
It began with a significant reduction in retail sales activity and a drop in the number of coins deposited by third-party coin processors, both of which account for replacing the bulk of coins in circulation.
Then, the mint implemented measures to mitigate the spread of the virus and protect its employees by making temporary staff cuts.
With that in mind, coins have a life expectancy of about 30 years, but each year coins are lost or discarded. Some are dropped down the drain by mistake, or so worn out they are no longer useful. To offset the loss, and to keep up with increased demand, about 12 billion new coins are issued annually.
Since the mint was operating with fewer employees, production fell, so by the beginning of May, the number of coins produced dropped by about 1 billion.
At the same time, the National Institute of Health announced in March that the virus “was detectable for up to four hours on copper” and other metals. Then, the Centers for Disease Control and Prevention recommended stores utilize touchless payment options. Moreover, the Federal Reserve told Reuters that bills form Asia were being quarantined prior to their circulation, which led to a surge in contactless payment methods — meaning no cash or coins.
There is also the vast stockpile of coins held by the public that typically represents a steady flow of coins that are returned to the banking system. But with the surge in debit card use, along with an economy that came to a halt, that channel of circulation also dropped significantly.
With those conditions still present, businesses began reopening in June, and the number of coin orders started to rise, but the mint was still operating at lower production levels.
Complicating matters further, that same month, the Federal Reserve, the agency that manages the circulation of the coins, reported a drop in coin inventory levels with fewer coins in circulation from the public.
To address the deficit, the mint has been operating with all hands on deck since mid-June, minting nearly 1.6 billion coins during that month alone, and is on track to produce 1.65 billion coins per month for the remainder of the year. By comparison, in 2019, the mint produced an average of 1 billion coins per month.
The employees at the mint “are working as hard as we possibly can to get newly produced coins into the economy,” Ryder wrote. In fact, the agency is on track to mint more coins this year than they have produced in nearly 20 years.
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