Coin shortage fears renewed as coronavirus surges

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Want to know when the pandemic is really easing? Watch the coin machine at your local supermarket.

One of the weirder social symptoms of the coronavirus shutdowns has been a coin shortage, which has pinched operations at some businesses and left coin collectors scrounging for material.

Things were improving over the fall, and signs asking customers to pay with exact change disappeared from some stores, but as the virus has surged and a new round of shutdowns kicks in, experts say the shortage will grow more acute once again.

“I see the same problems are going to start rising, because banks are being shut down, people are being told to stay home,” said Jay Zagorsky, senior lecturer at Boston University’s Questrom School of Business. “Once people start becoming fearful of using Coinstar, can’t get into their bank lobbies, stores are shut down so rolls of quarters are being locked up in rolls in managers’ offices. We’re going to go back into a coin shortage problem again.”

That means the coin shortage of 2020 is certain to bleed into 2021.

Those who haven’t been following the story might wonder what it’s all about.

According to experts, there’s never been an actual shortage of coins in existence. The U.S. Mint is pumping them out at rates unseen in decades this year.

But the coins that are out there are piling up in places, rather than being circulated. Consumers don’t want to spend 15 minutes standing at a sorting machine at the supermarket, and businesses can’t turn their coins in at shuttered bank lobbies.

“Money is being stranded,” Mr. Zagorsky said.

The Federal Reserve says in the initial days of the pandemic, coin deposits dropped by more than half. And the U.S. Mint had cut production as a virus safety precaution, so new coins were entering at a slower pace.

The Fed even imposed caps on coin orders, limiting the amount of metal any one firm could obtain.

Government agencies responded with a coin task force, recruiting folks from banks and credit unions, the armored car industry and Coinstar, which operates coin aggregating machines.

Among the task force’s moves was an attempt to get the public to dig into its coin jars and car cup holders and bring them in.

The U.S. Mint also increased production. It says it’s on track to mint 14 billion coins this year, compared to 11.7 billion in 2019.

“We have attained this level of production while prioritizing the health and well-being of our employees and implementing measures to reduce risk of their exposure to COVID-19 in the workplace,” said Todd Martin, the Mint’s chief of corporate communications.

Heading into December, there were signs things were improving.

Caps on penny, dime and quarter orders had ended, and while nickels are still limited, the cap has been raised multiple times, the Fed said.

But new closures shutdown orders have left folks wary again. Mr. Zagorsky said it won’t be as bad as last summer, but “we’re going to go back to a coin shortage problem again.”

Jim Gaherity, CEO of Coinstar, which is part of the task force, said coin redemptions by both consumers and cash businesses have improved but are still well below normal.

“The problem will persist until redemptions increase substantially from consumers,” he said.

Some analysts dispute using the term “shortage,” saying “disruption” is more accurate.

The U.S. Mint said there’s always been an “adequate amount of coins” afloat, but they aren’t circulating the way they once did, meaning some geographies or businesses may not have the supply they’re used to.

Whatever the right term, the coin issue is a real problem for those analysts refer to as the “unbanked” — those without credit cards or other cashless means of payment who have to rely on paper and coin.

One classic example is the low-income family trying to wash clothes at a laundromat where coins are, literally, the coin of the realm.

Casinos with coin machines have taken to pleading with employees and patrons alike to dig through their homes and bring in what they have.

The good news is that as people return to the market, the disruption should ease. When that happens will probably coincide with the slackening of the pandemic itself.

Shortages aren’t inherent, though. While Americans are suffering a scarcity, the U.K. is facing a glut, the BBC reported.

Indeed, demand for change is so low that the Royal Mint is sitting on a “coin mountain,” the BBC said, and announced plans this year to not produce any new two pence or two pound coins for at least a decade.

Cash is used in less than 30% of purchases in the U.K. now, the National Audit Office said. The auditors said the pandemic may have accelerated the change.

In the U.S., though, a majority of transactions were still based on cash as of 2019, a quarter of consumers don’t even have a credit card and 10% make all of their purchases in cash.

Mr. Zagorsky said the pandemic has been a good stress test for those who talk about moving to a cashless society.

“I use credit cards all the time, but I’m saying using cash a little bit, keeping cash as a backstop, is very useful,” he said. “There are some reasons why we want to have both a cash and a cashless comity running in parallel. I don’t think an all-cash society is good, I don’t think an all cashless society is good.”

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