Is There a Shortage of Coins Right Now?
Is There a Shortage of Coins Right Now?
Complete analysis of the 2020 US coin shortage, its economic causes, impacts, and long-term implications for monetary policy
Introduction
Yes, there really is a coin shortage in the United States. You may have heard about it on the news, or perhaps noticed signs at businesses requesting exact change. Even the Chair of the Federal Reserve, Jerome Powell, had to address the topic during congressional testimony.
But the situation is more complex than it might initially appear. Understanding this shortage provides insights into how our monetary system functions during economic disruptions and what it might mean for the future of physical currency in America.
Federal Reserve Response
The severity of this situation prompted unprecedented action from monetary authorities, highlighting vulnerabilities in our circulation-based currency system that many investors are addressing through alternative stores of value.
Table of Contents
The Reality of the Coin Shortage
An Important Distinction
So you could argue that there isn't actually a shortage in the total number of coins in the economy. More accurately, there is a shortage of coins available right now. That may seem like a distinction without a difference, but the point is that the problem has little to do with the raw amount of coins.
The issue is that coins aren't moving around (i.e. circulating) between people, businesses, and banks. This is precisely the function money is intended for as a medium of exchange. When currency stops flowing, the entire system experiences disruptions that affect commerce at every level.
Circulation vs. Total Supply
- Total coins: Sufficient quantity exists in the economy
- Available coins: Few accessible for daily transactions
- Hoarding effect: Coins accumulate in homes and businesses
- System breakdown: Normal flow interrupted by pandemic
Federal Response
- Increased production: US Mint ramped up coin manufacturing
- Temporary measure: Production alone can't solve circulation issues
- Distribution problems: Getting coins to where they're needed
- Economic uncertainty: Highlighting broader monetary system vulnerabilities
As a result, coins have been hard to come by—unless, perhaps, you already had a full jar of change at home. It also means that solving the problem is not as straightforward as telling the U.S. Mint to pump out a ton of new coins, although the mint has increased production as a temporary relief measure.
Investment Perspective
During periods of monetary system stress, many investors turn to precious metals as reliable stores of value that don't depend on circulation or government distribution systems.
Why Coins Aren't Circulating
Simply put, face-to-face commerce has slowed to a crawl during the pandemic. The normal flow of commerce and coins has been interrupted by the COVID situation, creating a cascade of effects throughout the monetary system.
Key Factors Disrupting Coin Flow
- Economic shutdowns: Prolonged closure of businesses nationwide
- Reduced shopping: General reluctance to shop in person even as businesses reopened
- Cash avoidance: People more reluctant to pay with or handle physical cash
- Behavioral changes: Shift toward digital and card-based payments
- Hoarding mentality: Consumers and businesses holding onto coins "just in case"
These factors combined to create an unprecedented disruption in the velocity of money—specifically, the physical circulation of coins that keeps the retail economy functioning smoothly.
Who is Most Affected
The lack of coins in circulation hurts two groups of Americans disproportionately, highlighting the uneven economic impact of monetary system disruptions:
Most Affected Groups
Small Business Owners
- Customer rejection: Forced to turn away customers without exact change
- Revenue loss: Unable to complete cash transactions
- Operational challenges: Difficulty making change for larger bills
- Recovery impact: Additional barriers during already difficult economic times
Economically Vulnerable Citizens
- Cash dependency: Still the most common payment method for everyday commerce
- Banking access: Significant portion lacks access to standard banking services
- Cash economy: Tens of millions work and live in almost entirely cash-based systems
- Economic exclusion: Digital payment shift leaves many behind
Cash is still by far the most common payment method for everyday commerce, and that is particularly true for the most vulnerable economic classes. In fact, a significant portion of the population doesn't even have access to standard banking services. These are the tens of millions of people who work and live in an almost entirely cash economy.
Monetary System Lessons
This crisis demonstrates the importance of diversified monetary strategies. While some struggle with coin shortages, others protect wealth through physical gold and silver holdings that maintain value independent of circulation or government distribution systems.
What Should You Do With Spare Change
The U.S. Mint has been encouraging people to spend their spare change rather than hoard it. Individual actions can collectively help restore normal circulation patterns and support struggling businesses.
Recommended Actions
- Pay with exact change: Use coins when possible to keep them circulating
- Bring coins to businesses: Some are requesting customers exchange accumulated coins
- Use electronic payments: Help small businesses by using debit/credit cards when available
- Support coin drives: Participate in community efforts to increase coin circulation
Community Impact
You should try to pay with exact change when possible. Some businesses are even requesting that customers bring in and exchange any coins they may have around the home. It will also help small businesses if you pay with a debit/credit card or some other electronic method, if those options are available to you.
These simple actions, when multiplied across millions of consumers, can significantly impact the restoration of normal coin circulation and help businesses that have been struggling with the shortage.
Long-Term Implications
Beyond the immediate disruption to everyday commerce, the shortage of coins brings up two interesting related developments: the "war on cash" and the possible elimination of the one-cent coin.
Penny Elimination
- Economic inefficiency: Penny production loses money and wastes resources
- International precedent: Other countries eliminated with no ill effects
- Limited impact: Even billions of pennies wouldn't fix circulation problems
- Congressional opportunity: Crisis could provide impetus for elimination
Cashless Society Acceleration
- Behavioral changes: Trend toward digital payments accelerating
- Health concerns: Fear of infection from handling physical money
- Infrastructure development: Businesses investing in electronic payment systems
- Generational shift: Younger consumers already prefer digital payments
Economic Exclusion Concerns
Eliminating cash would have a devastating impact on the lives of millions of people who rely on cash transactions every day. This highlights the importance of maintaining diverse monetary options, including physical assets like gold and silver that provide universal value recognition.
Except for nostalgic or collecting purposes, new production of the penny should probably be ditched. It loses money and wastes resources. Other countries have done so with no ill effects. In terms of the coin shortage, even billions of pennies wouldn't fix the problem.
A rare positive outcome of the current health crisis and the resulting economic shock would be if Congress used this as an impetus for finally getting rid of the cent.
The Push Toward Cashless Society
The implications for the "war on cash" are fairly clear. The trend toward a cashless society will accelerate. This has profound implications for personal financial freedom and economic policy.
Cashless Society Implications
You could even envision that, in the wake of COVID, the fear of spreading infections might cause people to avoid handling physical money. However, this acceleration toward cashless systems raises important considerations for personal financial strategy.
- Government oversight: Digital transactions create complete spending records
- System vulnerabilities: Electronic payments depend on functioning infrastructure
- Economic exclusion: Millions lack access to digital payment systems
- Monetary control: Central authorities gain unprecedented control over transactions
- Privacy erosion: Anonymous transactions become impossible
Diversification Strategy
As digital payment systems expand, many investors hedge against technological and systemic risks by holding physical gold and silver—assets that retain value independent of electronic systems and provide true financial privacy and autonomy.
Emboldening the war on cash would be a consequence of the pandemic itself, not the coin shortage per se, but one could certainly be used as a pretext for the other. This demonstrates how economic crises can accelerate existing policy trends, sometimes with unintended consequences for individual financial freedom.
Investment Perspective
The 2020 coin shortage revealed fundamental vulnerabilities in our monetary circulation system. While governments work to address these challenges, prudent investors consider how to protect wealth against both circulation disruptions and the broader trend toward cashless systems. Gold and silver prices often reflect these monetary system concerns, providing portfolio protection during periods of currency instability.