It has long been known that the Unites States Treasury has pushed to remove the the cent to save costs. This year Canada is minting it’s last cent for that very reason. Now the question comes up; Could the United States save money by removing the $1 bill? This however, does not mean eliminating the $1 denomination, but to replace the paper bill with a $1 coin.
One of the benefits: such a coin would save taxpayers $4.4 billion over 30 years. This is mostly due to the fact that coinage is much more resilient. A single coin has a lifetime of 30 years while paper currency is only expected to survive for 4-5 years on average. Reducing the need to refresh circulating currency saves much on labor costs and materials.
Of course, equipment to produce the coin would need to be setup, but the benefits in the long run far outweigh the initial costs. On the receiving end, operators of vending machines would also need to make changes to their machines, but they applaud the proposed change due to the fact that coinage is more reliable, reducing repair costs and recovering lost sales.
The mint has produced $1 coins, such as the Sacagewea and Presidential dollars but the public view them as a novelty and hoarding becomes a problem. Philip Diehl, former director of the Mint, said
“We’ve never bitten the bullet to remove the $1 bill as every other Western economy has done. If you did, it would have the same success the Canadians have had.”
Canada is experiencing tremendous success with the “Loonie”, their version of the $1 coin. In fact the success was so strong that a $2 coin called the “Toonie” was created. “It’s really a matter of just getting used to it,” said Diehl.
One challenge will be to avoid the current production cost situation with the cent and nickel. Currently the penny costs 2 cents to make and the nickel costs 11 cents to mint, due to the rising costs of copper and nickel. The Mint is exploring new metal compositions and testing for hardness, resistance to wear, availability of raw materials and costs. It’s 18 month research is due to be reported in mid-December. Richard Peterson, the Mint’s acting director, hinted that “several promising alternatives” were found.