Why are there dates printed on coins? It seems like the only reason is for coin collectors. Furthermore, wouldn’t you think the government to be against hording of money? How do they benefit from coin colectors? I would imagine it to be a cash flow books-balancing nightmare!
If you print money or mint coins, and people don’t circulate it, it’s essentially the same as just selling them at face value.
Heinlein’s For Us, the Living is the book for you. I nearly fell asleep through the long commentary on 1930’s economics, but he laments about the exact problem of people hoarding money.
As for the dates, I always figured that they were a way for the mint to judge how sturdy the metal compositions in their coins are. They pull out and destroy the bills and coins that have become too worn to use. If they find that a particular batch used in the 1980’s had half the lifespan, they would know to adjust the recipe.
I was under the impression that hoarding money was actually good for the government, because it lowers inflation. Inflation happens when money is added to the system, so if you take money away…
Basically, the government prints money that it doesn’t have to back up any more. Please correct me if I’m wrong.
Dates on coins are almost as old as civilization, although not universal until the Nineteenth Century. Keep in mind how mints worked in ancient times: you brought in bullion, and the mint (usually run by the king, but sometimes run privately) made it into coins of standard weight and fineness. In return for this service, the mint would keep a percentage of the bullion as “seigniorage”.
A mint was only as good as its reputation. If its coins didn’t contain the amount and grade of specie promised, merchants would stop accepting them, so nobody would bring their bullion in for coinage, and the mint would stop getting seigniorage. A despotic ruler could force his subjects to accept inferior coin, and could ban private mints and the use of foreign coins in commerce, but this was not conducive to long-term prosperity.
Hence mint marks and dates on coins. If the coinage was good, you knew who deserved the credit. If it was bad, you knew who should lose their head. And if standards for weight and fineness changed, as they often did, you knew whether you had old coins or new.
Today, of course, coins are fiat money produced by governments. The date is mostly a relic of a bygone era, although I suppose it helps the Fed track how long coins remain in circulation and to budget for replacement.
The federal reserve can manipulate the money supply via open market operations (look it up). Furthermore, if the economy is in recession, loosening the money supply (and lowering interest rates) can help.
But hoarding money, on the whole, helps governmental finances: the technical term is Seigniorage.
Dates on coins do not necessarily signify the year in which the coin was coined. In Germany, for example, the dates mark the year to which the series to which the coin belongs was assigned. When Euro cash was introduced in 2002, mints all across Europe had begun to produce coins several years in advance to provide for a sufficient supply. All of the German coins of the initial circulation bear the number 2002, although most of them had been coined (and even distributed) in previous years. Similarly, if a mint gets order to procuce a given number of coins of the 2006 series, but this series was not completed in 2006, they will continue to produce coins with that number in 2007. It is more of an administrative thing I guess.
Currency (the physical stuff) is a very small percentage of the amount of money being used in the world. Currency is made on-demand (or close to it) as the banks need it, simply as a convenience for the people who haven’t switched over to checks or debit cards for all cash transactions. When economists talk about regulating the money supply, they aren’t talking about counting how many dollar bills Aunt Greta has stuffed in her mattress.
I forget the exact logic, but a coin that is never spent represents additional profit to the government over the seignorage they arlready got when they made it. So they do have a vested interest in encouraging collectors of both stamps and coins.
It’s easier to understand in the case of stamps. When the government sells you a stamp, they have to do something in return–transport a letter. If you buy the stamp and don’t make them transport the letter, they’re happy.
With respect to cash and coin, the government expands the money supply by selling securities (usually government bonds) on the open market, gaining bonds in return for coin and bills that it produces at very little cost. The government is limited in its ability to do so, however, by the fact that the cash and coin circulate and create inflation. Too much inflation, and people vote out the government. But if you take the coins and don’t spend them, they can produce more without inflationary effect–Happy Land.
well, according to
this story, you can carry 1.9 million dollars worth of dimes in your pocket–if it has the right date.
A shortage of pennies causes increased hoarding? I think you have it backwards. People don’t hoard pennies because they want to have them. They hoard pennies because it’s not worth the effort it takes to spend them.
Coins dated 1780 are still being minted today. The Maria Theresa thaler honors the only empress ever to actually rule over (the combination of) Austria, Hungary, and Bohemia. For centuries, many traders and merchants of North Africa and Arabia have preferred this coin, and some have gone so far as to accept no other specie. Since many of these entrepreneurs were not actually conversant in the details of Hindu-Arabic numerals, they simply recognized the “1780” as part of the design and would have assumed any thalers dated 1781 or later to be counterfeits.
With all due respect, there is no mechanism by which cash and coins lead to inflation, while higher checking account balances do not.
With all due respect, you may want to review your economics texts.
Here’s another benefit of creating a hundred dollar bill (for example). The US trades these pieces of paper (that cost maybe 1-2 cents to produce) for $100 of goods imported from abroad. As long as that bill circulates in foreign lands, it’s equivalent to them lending us $100 of goods - at zero percent interest.
Similarly, when a bank exchanges its balances for currency, it is also giving the US government a zero percent interest loan. Neat!
Who said that they don’t? I was talking about cash and coin because they’re the topic of this thread. Having coins taken out of circulation is one way that the government can create money without it having any inflationary consequences. Creating money is profitable for the government. That’s all.
No thank you; I already understand the topic at issue perfectly well.