FEDERAL RESERVE LOOKS OUT FOR OWN INTERESTS AT EXPENSE OF TAXPAYERS
The Federal Reserve released a staff working paper in an attempt to protect their own best interests and distract the public from the
billions in available savings from modernizing U.S. currency from the dollar bill to the dollar coin. Last year, the Fed recorded nearly
$2 billion from the dollar note (explaining its staunch opposition to a dollar coin), which would be directly returned to taxpayers if
Congress switched to the coin. Meanwhile, they are practically alone in their opposition to a dollar coin, as nearly every industrialized
economy in the world has transitioned its lowest denomination currency to a coin – in some instances generating as much as ten
times initially estimated savings. Contrary to the claims of the Fed – countless studies have repeatedly proved that the dollar coin
would save taxpayers billions. One recent study by a former Treasury Department economist estimated the savings of the dollar coin
to be as high as $13.8 billion.
This begs the question, why did the Federal Reserve feel compelled to spend seemingly hundreds of thousands of taxpayer dollars and
countless staff hours producing a report that contradicts dozens of previous studies and common sense? Further, how can they claim
to be a dispassionate observer in this debate, rather than a bureaucracy with nearly $2 billion a year in profits at stake in this
decision? Is this to protect their own interests at the expense of the American taxpayers and common sense?
The Federal Reserve Makes Billions in Profits, or Seigniorage, from the Production of the Dollar Bill.





The Fed recorded nearly $2 billion in profits from the dollar note last year. It has made annual profits of up to $4.2 billion per
year on the dollar note in the past.
The Federal Reserve System paid approximately $2 billion in salary to all of its employees last year, almost the same amount as
they profited on the dollar note.
Unlike most countries where all profits are returned to the general treasury, the American people have no idea what percentage
of profits from the sale of dollar notes were returned to the U.S. Treasury to reduce the deficit.
The United States is virtually the only developed country to still use paper currency with such low purchasing power; a dollar bill
today buys about what a quarter did in the 1970s.
GAO, using FRB economic models, issued reports in the 1990’s and 2000’s projecting savings ranging from $9.5 to $15.7 billion.
Starting in 2011, the FRB reported to GAO incredible increases in dollar note lifespan, from 18 months to 40, then to 56 months,
and now 70 months, a nearly 400% increase in just over 2 years. Even using these numbers, GAO continues to project $4.4
billion in taxpayer savings, and recommend that Congress act to replace the note.
American Taxpayers & Businesses Support Modernizing U.S. Currency to the Dollar Coin.



Public opinion polls show that Americans support replacing the dollar bill with the dollar coin by a two-to-one margin when
1
informed of the potential government savings.
Businesses have already made the necessary technology upgrades in anticipation of the change to the dollar coin.
o The transit and vending industries will save millions from a transition to the dollar coin. It’s estimated that jammed
dollar bills cost the vending industry hundreds of millions in annual repair costs and lost sales.
Coins also benefit the visually impaired, as it easier to distinguish between denominations by feel, size and weight, and help
prevent fraud and con artists taking advantage of the visually impaired. This is no small issue as there are over 6.6 million
Americans who have a visual disability, including over 2.7 million senior citizens and over 650,000 children.
The Dollar Coin Prevents Government and Environmental Waste.




1
A recent report by a former Treasury Department economist has estimated the savings of the coin to be at least $13.8 billion.
A single dollar coin stays in circulation for more than 30 years and would replace up to 17 one dollar bills during its lifetime.
The wasteful dollar note ends up in landfills, amounting to over 7 million pounds of trash annually, while the more efficient
dollar coin remains in circulation for more than 30 years before it is recycled and used again.
The majority of the $4 billion one dollar notes printed by the United States are printed just to replace the 3 billion dollar bills
that are pulled from circulation each year.
http://www.dollarcoinalliance.org/2013/03/01/poll-americans-favor-the-dollar-coin/
The Truth About the Dollar Coin
In their report, the Federal Reserve plans to make several inaccurate claims about the viability of the dollar coin and the
efficiency of the dollar note.
FED CLAIM
Switching to a dollar coin is a tax
on the American people.
Americans do not support the
dollar coin.
There is a significant “Utility Loss”
due to the public’s preference for
the dollar note and
inconvenience of the dollar coin.
Businesses are opposed to the
coin, because they will lose
money.
The use of cash is declining with
increasing use of electronic
payments, making this debate
irrelevant.
The lifespan of the dollar note has
increased to 70 months.
Counterfeiting will be an issue
with the dollar coin.
The dollar coin is too heavy and
Americans don’t like carrying
change.
Dollar bills are not wasteful.
2
FACT
Both notes and coins create profit or “seigniorage.” The idea of seigniorage as a tax is a red
herring. The government is not levying any fee against anyone. The only difference for
2
taxpayers is they will use dollar coins rather than dollar bills. The GAO reiterated in its 2012
report that seigniorage is a benefit to the government arguing, “excluding the interest savings
3
related to seigniorage omits a monetary benefit to the government.”
4
The American people support the dollar coin. Polling consistently shows that Americans
support replacing the dollar bill with the dollar coin by a two-to-one margin when informed of
the potential government savings. As demonstrated by the experience of other nations, it is
important to quickly transition from the note to the coin, as the GAO recommends.
This is a clear case of relying on an economic theory instead of reality. Unless the Fed can
explain why Americans are so radically different than Canadians, Europeans, Australians and
the rest of the major developed economic world in this one way -- how they physically carry
small value currency -- they are using a theory to mask reality.
Small businesses in retail sales could reap savings on the magnitude of $100 million or more per
year, while industries that rely on high volumes of low-denomination payments, such as transit
5
agencies and vending machine operators, can save roughly $9 million annually. Many
businesses anticipated the eventual transition to a dollar coin and have already made the
necessary adjustments. Likewise, many businesses want dollar coins but can’t get them – the
Fed only allows orders of dollar coins four times a year.
The demand for dollar instruments in circulation is growing. According to the Federal Reserve
itself, we set a record level of one-dollar notes in circulation of $10.3 billion at the end of 2012.
In fact, the rise of electronic payments is not replacing hard currency; they are replacing the use
6
and need for checks.
The 70-month life expectancy is a goal the Federal Reserve has set but never achieved. Since
2011, the Fed claims the lifespan of the dollar note has jumped from 18 months to 40, then to
56 months, and now 70 months. In reality, not enough time has passed to know if these new
lifespans are accurate and the increased lifespan obviously lowers GAO’s calculations of
estimated savings from the dollar coin, which benefits the Fed. Yet, according to numerous
Federal Reserve Banks (Chicago, New York, Richmond, for example), the current average
lifespan of a dollar note is still closer to 22 months.
According to the U.S. Secret Service, counterfeiting of U.S. coins is currently minimal, and there
are already nearly four billion dollar coins in circulation.
Four quarters are approximately 3X heavier than one dollar coin, thus it will actually reduce the
weight of currency carried in pockets and purses. The dollar coin is lighter than many objects
7
we carry every day (i.e., car keys, iPhones, Altoids).
A single dollar coin stays in circulation for more than 30 years and would replace up to 17 onedollar bills. The wasteful dollar note stays in circulation for only a few years, after which it is
shredded and sent to landfills amounting to over 7 million pounds of trash annually.
http://www.dollarcoinalliance.org/wp-content/uploads/2013/07/TimeForChange.pdf
http://www.gao.gov/assets/590/588549.pdf
4
http://www.dollarcoinalliance.org/2013/03/01/poll-americans-favor-the-dollar-coin/
5
http://www.dollarcoinalliance.org/wp-content/uploads/2013/07/TimeForChange.pdf
6
http://www.dollarcoinalliance.org/2013/06/06/dollar-coin-fact-check-demand-for-cash-remains-consistent-even-as-electronic-payments-rise/
7
http://www.dollarcoinalliance.org/what-weighs-more/
3