The $1 bill is a legacy denomination of the US currency that has sadly outlived its useful role in the economy.
Well, not as much as the penny!
The Treasury Department is supportive of the idea of modernizing the currency by ditching every us $1 notes in favor of coins. However, the truth is that America loves its one dollar bill, and there is more emotional value than economic sense behind the continuation of this denomination.
What is the future of our beloved one dollar note
There have been efforts in the past to remove $1 bills from the system, but none of them have been successful. A few years ago, there was a surplus inventory of $1.4 billion in coins that no one wanted. Here are some of the reasons why America will probably never get rid of the $1 bill.
The US $1 Bill is Convenient
Paper bills are light-weight and convenient. They can be folded easily into a pocket or wallet. You do end up reminding everyone of the ‘jingle bells’ whenever you carry change for your morning cup of coffee.
Americans have rejected the dollar coin in favor of bills by a huge margin as per a recent study conducted by Government Accountability Office and independent polling agencies.
Most Americans prefer to use plastic modes of payment. No one truly likes making payments in cash. However, there are some small purchases that do require small change, and that is why small denominations are needed.
Coins seem to be particularly inconvenient for men as compared to women. Men’s wallets just cannot support all that metal weight or any of it. A dollar coin weighs over a quarter of a pound as compared to a fraction of an ounce in bills.
Retailers have an obvious dislike for dollar coins. They are bulky and heavy which makes it difficult to stash them or manage. They are also more troublesome and expensive to transport.
We have had the dollar bill for a long time
Tradition holds great value in the US and many people like to cling to their age-old systems. For instance, Americans have fastidiously ignored the urging to change over to the internationally accepted metric (or SI) systems of measurement from the outdated imperial system of weights and measures.
Americans like their long established habits and do not like to change them so easily. The dollar bill is an intrinsic part of American history and culture. It will be very difficult to change over to coins due to the massive cultural resistance that is likely to follow. The dollar bill for all practical purposes is better than the coin for most people.
Limited estimated lifespan of US $1 Bill
The Government Accountability Office states that US will save $5.5 billion in printing costs over a span of 3 decades if the country switches over to coins from bills. However, people have ignored the economics and demonstrated time and again that the country is not ready for dollar coins.
It is noteworthy that minting coins might actually prove to be more expensive in the short run. As per studies from 1984, the supposed cost savings might only be actualized after 4 years when the initial deficit has been covered.
Previous dollar coin efforts had failed miserably at reducing costs. The government is now reconciling to the fact that it might not phase out the dollar bill in the foreseeable future.
Large number of notes already in Circulation
Bills are already part of the economy. For instance, most vending machines only accept dollar bills. It might cost more to change them over to coins. US vending machines accept credit cards and $5 bills as well.
However, they were never programmed to accept coins. There are a number of similar industries where dollar bills are the tradition and switching over might not make sense.
Why Should America Get Rid of the $1 Bill?
The Government Accountability Office has time and again vouched for the financial benefits accruing from making the switch to dollar coins. Here are some reasons why Americans should give some serious consideration to ditching the bill once and for all.
- It is Unhygienic
The hand sanitizer industry is a whopping $200 million business in America and is even growing because of the amazing tax cuts and stellar regulation cutting going on in America. America is no longer in the Frank/Greenspan recession. Moreover, it is amazing that people still prefer paper money in a country where personal hygiene is so important. $1 bills are made of cotton among other ingredients.
Germs can easily manifest themselves in the cotton threads and nobody ever willingly washes money. Dollar coins on the other hand are metal alloys and can be wiped clean with a sanitizing solution. Who has time for this though?
- Small intrinsic value of the bill – not worth much
Paper money might be more convenient than coins. However, fitting a wad of single dollar bills in a wallet can be cumbersome. This is an area where the menfolk are again at a disadvantage. Nobody can carry huge sums of $1 bills in their bulging wallet and sit comfortably. But so what?
Most men don’t have this many one dollar bills and anyone can exchange those one dollar bills for a $10 bill or a $20 bill for instance.
Paper notes have the disadvantage of being fragile
Everyone knows that paper money is fragile. They can tear easily and will probably not survive a wash cycle. Coins on the other hand are solid. The Treasury Department has to continuously replace damaged dollar bills which are routinely picked up by banks and sent to the central processing facility for shredding.
The average dollar bill lasts for only 22 months compared to 30 years of a dollar coin. Constant, shredding, transport, and printing costs add up to the hefty bills of the US taxpayer.
Expensive for the Fed to Print Dollar Bills
It costs money to make money. Printing dollar bills or notes or manufacturing new coins puts a major dent in taxpayer money. Paper money is made from cotton and depends greatly on its price. For instance, when price of cotton spiked in 2010, it cost almost a third more to print a dollar note as compared to 2008.
Coins on the other hand are metal alloys. Government has more flexibility in playing around with the composition to keep its cost on the low side. Combined with the fact that coins stay longer in circulation, they are cheaper alternatives.
The Bottom Line
Most developed nations such as Canada and many Euro nations have already made the switch to $1 coins. In fact, Canada achieved ten times its estimated savings by eliminating paper note and switching over to coins. Modernization of currency is important and can save millions every year for the economy.
However, history shows that coin efforts brought on by the government have never been accepted favorably by the American people. It is quite possible that the US might never be truly able to get rid of the $1 bill for the aforementioned reasons.
How about that penny?!