There’s been talk recently about killing the Presidential Dollar Program. In fact, on July 19, 2011, Senators David Vitter and Jim DeMint introduced a bill to terminate the $1 Presidential Dollar Program. There is currently about a billion dollars worth of coins sitting in government vaults. Which translates to roughly a half a billion dollars in seigniorage (the difference between the ‘value’ of money versus the cost to produce it).
The trouble is, the seigniorage means nothing if the coins aren’t being ordered by banks, or otherwise making their way into circulation. So the Presidential Dollars are just hanging out in government vaults, waiting to be circulated. And, to add insult to injury, the Federal Reserve is planning to spend millions of dollars to built new vaults to store the coins! While the legislation proposed by a California Congresswoman to halt all further production of dollar coins (Both Presidential and Native American) seems a very drastic measure, there are some minor tweaks that could be made to rectify what seems to be an overwhelming, and to be quite honest, embarrassing problem.
I believe the reason other countries have such great success with their dollar coins, is that they had the good sense to remove paper dollars from their monetary systems. Seems simple enough. If you produce two things that are of equal value, yet you wish to encourage purchase of only one of them… you stop making the other.
Furthermore, simply slowing or decreasing production seems to be a more reasonable solution. Legislation requires 20% of dollar coin production be represented by the Native American dollars. Perhaps a less ambitious figure could be implemented. Also, the Federal Reserve is required to make each design of the Presidential dollars available to ALL financial institutions during an introductory period. It appears that at least 40% of those coins end up being redeposited. If production has exceeded demand (and I almost feel as though I may be demeaning the reader’s capacity for logic here), then that slows production. I realize it’s not as simple as that. Legislation must be drafted and enacted. However, in our current political and economic climate, I would hope this be pushed through on a rail cart!
Well, that is my two cents on the dollar.
Darla Rugar, for ICCoin.com