Tuesday, March 8, 2011

One Way to Reduce the Deficit: Do Away with the Dollar Bill

While I was working up in Rochester, NY, I went to Canada a few times with friends (we were only about a 90 minute drive from the border). I always found it interesting that there are no $1 bills in Canada because they have $1 and $2 coins instead. Before you dismiss this as simply a random observation, it turns out doing away with the $1 bill is actually a good investment for the federal government. According to a GAO report, converting to a $1 coin could actually save the government $5.5 billion over 30 years. During a time when people are extremely worried about the debt, this could offer an average savings of $184 million a year.

Over the years, there have been several attempts in the US to popularize the gold dollar coin. Since 2000, for instance, there have been gold coins with Sacagawea on them. When these first came out, I remember it being a big deal when vending machines were updated to accept the coin. The excitement surrounding the new coins has definitely warn off, however, and the only time I really run into them now is when I've bought stamps from the machines at post offices and got the gold dollars as change.

Based upon what I've read, it appears as though the only way dollar coins will really catch on is if the government phases out the dollar bill. Change isn't always easy (pun intended), but countries like Canada and the UK have proven that people will get used to the new currency rather quickly. So there you have it ladies and gentlemen, one way of reducing our deficit would be to simply do away with the dollar bill.

1 comment:

  1. It's a good investment if the metals market remains stable. But I don't know that you can change the minds of americans on this. It's kind of ingrained. If we are going to save money with our fiat currency why not just get rid of it all together and use plastic or iphone apps or devices like Mobil Gas's express pay function. Tap to transfer money. That would be a saving in production of currency not backed by anything.