State quarters: Does collecting them affect the economy?

[LazarusLong42]

*Originally posted by sailor *
**I never understood why people accumulate change at home. I just get rid of it as it comes in. **

I accumulate change because I use change for exactly one thing: laundry. For that matter, I use cash for exactly two things: fast food purchases, and other purchases of five dollars or less. So I never carry change with me, and it starts to accumulate on my nightstand (onto which it gets emptied from my pockets if I’ve made any cash purchases during the day).

I’ve no specific reason to accumulate change, but I just do

LL

[toadspittle]

[QUOTE]
*Originally posted by ArchiveGuy *
**

As for the Quarters, I’m saving two of each (the P & D issues), which means I’ll withhold $25 from circulation over the span of 10 years. Doesn’t seem like much in the grand scheme of things… **

This is the answer to how the government makes a profit from the quarters:

1. You exchange $25 in old quarters for $25 in new, “collectible,” quarters.

2. You NEVER spend those new quarters.

3. The government has just made $25 (minus the $5 production costs).

Of course, if you ever decide you want to spend those coins again, the govt’s profit goes away.

[Doctor_Jackson]

Or, keeping it real simple, the bank takes worn notes to the Fed, who exchange 'em for nice crisp/ shiny stuff.

Aha! (<—the exclamation, not the poster.) That I understand! However, since the Mint will produce 3 billion of those new quarters, are you saying that the banks will turn in 3 billion “old” coins? If not, surely they don’t “give” them to the bank!

PunditLisa - Imagine that you are having a garage sale at your house and you need lots of small bills and coins to make change. You would go to a bank where you have an account and ask for a certain sum of cash in various denominations. You would “pay” for the change by writing a check drawn on your account, with larger denomination bills (ie - two 10’s for a 20), or some combination of the two. Transactions between banks and the Fed work the much the same way. Banks order currency and coin to be delivered from the Fed. Banks “pay” for this by sending excess cash of other denominations, debiting their Fed account, or (most common) a combination.

It’s really a little more complicated than that, but the general idea holds true.

[wolfman]

Another way that makes it easier to think about, is to pretend that it is still based on a Gold or Silver standard. Say the government has a pile of gold in Fort Knox. They decide they want to buy your land, so they scrape off a little piece and give it to you in exchange for your land, and you both are happy, having something of value. They get tired of scraping off little chunks of gold for each purchase, so they decide that instead they will give you a little piece of paper that is redeemable for a small piece of gold, so once a year you gather up all your little slips of paper and take them to Fort Knox, and get a whole bar of gold. You are still both happy, because you have gold, or a piece of paper that is directly exchangeable for gold.
The case of collectors is if the little pieces of paper begin to have a value not associated with the fact that it is redeemable for gold. If it is taken out of circulation forever, then it never gets redeemed for the gold. So the Government has the land it bought from you, and it never loses the gold that it attempted to pay you.
It gets a little more strange in todays economy since the dollar doesn’t represent a quantity of physical goods, but instead an abstract and vague intrinsic value that you have faith in the goverment to be able to be able to support.