COVID-19 is putting the old adage, “Cash is king,” to the test as a strained economy combined with fewer spenders and more touchless forms of cash are causing businesses to experience a shortage to one form of hard currency: coins.
The U.S. Federal Reserve Bank, also known as “The Fed,” works closely with U.S. Mint to monitor and maintain certain levels of coin inventory and it has issued a number of statements on why the shortage is happening an what is being done to address it.
Businesses are also trying to mitigate the shortage as they go through an economic downturn which has made hard currency much less available.
Who Is Experiencing the Coin Shortage?
This week I saw a sign at a Starbucks an hour outside of dc and no idea about any coin shortage. pic.twitter.com/aPmLswRgNf
— Scott Talan (@talan) July 14, 2020
Businesses, banks and by extension, people are all experiencing a coin shortage as the COVID-19 pandemic rages on.
On June 11, the Fed sent out a notice stating that it would begin rationing coin allocations to businesses and issued another statement four days later that the rise in coin orders from banks was leading the coin inventory to dip below normal levels.
However, the shortage got so bad that several organizations (including the Food Marketing Institute, National Association of Convenience Stores, National Grocers Association and Society of Independent Gasoline Marketers of America) representing businesses around the country wrote a letter to Federal Reserve Chairman Jeremy Powell and U.S. Treasury Secretary Steve Mnuchin seeking relief.
They wrote, in part, “We were alarmed to hear that the system for distributing coins throughout the country is at the breaking point. The Federal Reserve’s announcement … came as a shock. Some of our member businesses are being told that they cannot get coins from their banks at all. This threatens the functioning of our member businesses and, by extension, the needs of their customers.”
The Fed responded by saying it heard the concerns and would work to address them.
Danie Soques, an economics professor at the University of North Carolina Wilmington told NBC News that people with lower incomes who tend not to have bank accounts are being hurt most by the coin shortage. “If you move to all-digital, they’re at a disadvantage,” he said.
What’s Causing the Coin Shortage?
Experts blame less printing at the U.S. Mint as the factories which produce coins must adopt stronger safety measures to reduce the spread of the disease as well as less spending throughout the U.S. economy, which has disrupted the normal flow of coin production.
There is also consumer fear that using hard currency might increase their risk of exposure to COVID-19. Even the World Health Organization has not definitely said money exchanging hands could be a way of transmitting the virus, an infectious disease expert from the University of Texas Health, Dr. Luis Ostrosky, told ABC-13 that it is possible. “They did find that in metals specifically, (coronavirus) can survive up to two days and in paper and currency, about 30 minutes,” he said.
According to the Federal Reserve, business and bank closures are largely responsible for causing the coin shortage, as the department noted in a press release:
Business and bank closures associated with the COVID-19 pandemic have significantly disrupted the supply chain and normal circulation patterns for U.S. coins. While there is an adequate overall amount of coins in the economy, the slowed pace of circulation has reduced available inventories in some areas of the country … As the economy recovers and businesses reopen, more coins will flow back into retail and banking channels and eventually into the Federal Reserve, which should allow for the rebuilding of coin inventories.
Changes in operation because of COVID-19 at the U.S. Mint has also contributed to shortages. Many production plants reduced the number of employees at its buildings. Businesses and banks across the country were also forewarned by U.S. Mint Director David J. Ryder to experience longer wait times when calling customer service, delayed shipping and the inability to accept credit cards over the phone (The U.S. Mint has asked requesters to make website orders instead).
What’s Being Done About It?
To address the issue, the Fed created a U.S. Coin Task Force to develop solutions to the problem, which are expected to be delivered in early August. Members of the task force include several banking executives, credit unions, money transport companies such as Loomis and Federal Reserve System executives. “The task force will meet for a series of virtual working sessions in July with the goal of sharing a set of recommendations at the beginning of August,” the Federal Reserve noted.
Michael White, a spokesperson for the U.S. Mint, told the New York Times in an emailed statement that many facilities returned to full production and staffing levels on June 15. He also said that the U.S. Mint is on track to ship roughly 200-350 million more coins than it usually does to address the lack of circulation.
Businesses are making some changes too.
NPR reported that many major shopping destinations that have been experiencing low inventories, such as Walmart, Kroger and gas stations, have started asking customers who can pay with cards to do so and creating card-only checkout lanes. They and other stores have also adopted the strategy of asking customers to round up to the nearest dollar for charitable causes.
A CVS representative told NPR that the company is “encouraging customers, if possible, to pay for their purchases using exact cash, credit/debit card or check.”