The US Faces a Coin Shortage

Digital Payments Reduce Circulation

The US is facing a shortage of coins in circulation as an unexpected result of the ongoing pandemic. Many people are avoiding in-person shopping and ordering products online instead. When they do go to stores, consumers are still using digital payments instead of cash to reduce the risk of spreading infections by touching physical money. This means that coins are sitting in people’s homes or in stores’ cash registers instead of circulating.

Additionally, some people are hoarding cash at home as a way to hedge against economic uncertainty. This has also contributed to the coin shortage, creating somewhat of a self-fulfilling prophecy.

The Federal Reserve Responds

US mints shut down temporarily as a result of the pandemic, which added to the coin crunch. Mints are now operating at full capacity after implementing social distancing measures and other practices to keep workers safe.

The Federal Reserve rationed coin supplies for banks for a period of time, but now it is shipping out more coins than usual to make up for the shortfall. For example, it is now sending out about 1.35 billion coins per month when it normally distributes about 1 billion coins.

Zooming Out

The coin shortage has sparked debates about physical currency’s role in the modern US economy. For example, some people have advocated for phasing out the penny because its purchasing power is now so low that the cost of producing pennies outweighs their value.

On the other hand, coins are still a vital part of the economy. Laundromats, vending machines, parking meters, and other crucial services require payment in coins. Additionally, coins are particularly important in low-income communities—especially for people who have less access to digital payments. For the moment, economists expect the coin supply chain to get back on track relatively quickly, especially with an influx of coins from the Federal Reserve.

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