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The novel coronavirus pandemic of 2019 and 2020 has created very visible shortages of meat, produce and, most famously, toilet paper. One shortage you may not have been as aware of has come in the form of a coin shortage at banks and businesses. Here’s what you need to know about how COVID-19 has produced this coin shortage and what it could mean for you and your family in these unusual times.
How Does a Disease Disrupt the Money Supply?
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In all but eight of the 50 states, the
COVID crisis has resulted in lockdowns that forced most businesses to either close their doors entirely or to operate at limited capacity. These measures resulted in the mass unemployment and stunted economic growth we’re all familiar with, but they also effectively stopped the flow of physical money through the economy. While online transactions are typically conducted digitally, brick-and-mortar businesses rely much more heavily on cash and coins. When those businesses closed down, much of the physical currency in the United States stopped circulating.
At the same time, the United States Mint began producing fewer coins. Although it is a government agency, the Mint is fundamentally a manufacturer of currency. Like most manufacturers, the agency was forced to reduce its production in order to meet social distancing requirements in its workplace. As a result, the number of new coins coming out of the Mint has been sharply reduced.
The combination of reduced circulation and fewer newly minted coins is ultimately seen at banks, where most businesses go to get the coins they need to make change for their customers. Typically, banks can request as many coins as they need from the Federal Reserve, which will readily provide them. Because of the shortage, though, the Fed has placed limits on the amount of coinage banks can order. To make up the difference, banks have been keeping the coins they receive in deposits and creating new rolls themselves to meet the demands of their customers, but this may not allow them to meet rising demand as the economy reopens.
What Does This Mean for the Average American?
Although currency supply, bank policies and Federal Reserve coinage limits may seem very abstract, they could actually have substantial impacts on the lives of many Americans. The people most likely to be directly affected are small business owners, who often buy coin rolls several times a week to be able to make change for their customers. If the supply of coinage continues to be limited, small businesses will have an increasingly difficult time making appropriate change for cash transactions.
This impact on businesses could also begin to spread to workers who have already been hit hard by the economic effects of the COVID-19 pandemic. Restaurants and other cash-heavy businesses that can’t accept cash from their patrons may generate fewer or less generous tips for their employees as a result. While the effects may be confined to certain sectors of the economy, those sectors are also the ones that were already dealt the hardest blow when lockdowns went into effect.
As of now, the coin shortage is expected to be a temporary problem. As more states reopen their economies, coins that have been stuck in cash registers and consumers’ pockets for the past several months should begin circulating again. Some banks are also asking their customers to cash in change they have been saving up in order to increase the available coin supply. It is also quite likely that the Mint will move to respond to this shortage by increasing its production under new guidelines that take social distancing requirements into account
