Friday, July 8, 2011

Coinstar and the U.S. Mint

Part of an Economix explanation of the U.S. Treasury producing less paper money and coins in 2010 (h/t Mark Thoma):
In 1992, three Stanford University graduate students convinced four Bay Area supermarkets to let them install a new machine designed to count spare change. The concept was rather brilliant, like a slot machine with a guaranteed payout. There’s nothing quite like the sound and sight of money — your money — being counted. And as the company grew, the technology began to change the basic physics of change.
Americans keep vast quantities of coins around the house. “Keep” is maybe the wrong word. Coins gather in the folds of couches and drawer bottoms and coat pockets. They are collected in jars, popped into piggy banks, socked away. And until Coinstar came along, that money mostly just sat there. In keeping with the law of entropy, it was easy to turn bills into coins and difficult to turn coins back into useable money.
And that is exactly what Coinstar made easy.
By the early 2000s, the company’s machines were annually collecting more coins than the U.S. Mint was producing. And the company was putting those coins back into circulation, meeting a growing share of market demand, reducing the need to mint new coins.
There’s another important difference between bills and coins: Coin production tracks the American economy much more closely, because the demand for coins is almost entirely domestic, while the demand for paper currency comes mostly from overseas. (Moreover, the demand for paper currency can rise during a financial crisis, as it did in 2008, because people sought to withdraw their money from the banks.)
That's pretty interesting.  I've never used Coinstar, but have at times counted out a lot of change and cashed it in at the bank.  One time, I made 3 trips with exactly $25 in pennies, because they would charge for counting more than that.  Yes, I have issues.

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