THE USA GRIPS WITH COIN SHORTAGE. IS IT TRUE OR TEMPORARY?

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By Aiman Muskan, Kalindi College

One of the major changes that can be noticed nowadays is The Great American Coin Shortage. The main basis for that is worldwide Covid-19 pandemic; rolling coronavirus which not only resulted in business termination and crippled economic activity in the United States but also caused a significant drop in the circulation of coins. The 'U.S. Coin Task Force' established in the year 2020, which manufactures/mints the nation's coin supply, also decreased staffing in response to the pandemic. Many businessmen faced trouble accepting change and found themselves asking customers to help them acquire more coins or by paying via digital mode of payments.

The real explanation for the 2020 coin shortage was that production at the United States Mint decelerated as a result of the pandemic, with the “cumulative mintage” right down to just over 4 billion, as against the 5.07 billion in the previous year, that was May 2020. 


According to the data provided by the U.S. Mint, coin production for circulation has actually reduced during the last couple of years and also, because of COVID-19 restrictions, it has had some particularly slow months in the first half of 2020. In the latter part of 2020, the US Mint anticipated a rise in production by 1.2 Billion for the month of June and then a constant increase of 1.35 Billion coins per month for the remaining year– which adds up to a projected total of 14.2 billion coins produced in 2020.

Graph Source: statista.com

Another major reason for this shortage could be initially during the pandemic, very few coins were in circulation in the economy, due to worldwide lockdown and fewer people going out and purchasing. Then once the economy started coming back to normal, coin inventories of many businesses started getting exhausted.

Due to the ongoing discussions and interpretations made by the public on this issue, the Federal Reserve issued a statement clarifying the existence of coin shortage in the USA. The Federal Reserve stated that currently there is an adequate number of coins in the US Economy. Due to businesses and banks not operating owing to the pandemic closures, the normal circulation pattern of coins has been significantly affected. Consequently, the pace of circulation of coins has slackened and the available coin inventories have diminished in some parts of the country. The coin shortage is transient and the situation will bounce back to normal in a steady manner.

To ensure the distribution of the coin supply, a temporary cap was imposed in June 2020 on the depository institutions' orders placed with the Federal Reserve. These caps were reinstated in May 2021 as the coin circulation patterns were not restored to the pre-pandemic levels.

As the situation will become better and the economy will accelerate towards a recovery, the coin shortage situation will be normalised and more coins will be circulated in the economy, banking channels which will help in increasing the coin inventories.

References:

https://www.federalreserve.gov/

https://nationalinterest.org/

https://www.statista.com/



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