The reason there’s a shortage of coins right now
The COVID-19 pandemic has led to all sorts of shortages. First we couldn’t find toilet paper in stores. Then tomato plants became scarce, followed by garlic. Shortages of household supplies and food make sense, especially when you consider all the panic buying that has ensued in the pandemic, but the newest shortage is quite surprising.
As Federal Reserve Chairman Jerome Powell said during a recent hearing with the House Financial Services Committee, the U.S. is currently experiencing a shortage of coins. “What’s happened is, with the partial closure of the economy, the flow of coins through the economy has… kind of stopped,” he said (via CNBC). “The places where you’d go to give your coins and get credit… those have not been working.”
While a shortage of spare change might not seem like the biggest deal, banks are concerned about the problem. Rep. John Rose told Powell that the banks in his district in Tennessee have said they might run out of coins by the end of the week as the Federal Reserve is only able to fulfill a portion of their weekly order of coins. Even if they don’t run out of coins completely, they may be forced to round up or down because of the shortage of coins. “In a time when pennies are the difference between profitability and loss, it seems like it might be a bigger concern than the announcement from the Fed would indicate that it is,” Rose said (via CNN).
The Federal Reserve is working to fix the coin shortage
Powell said that the Federal Reserve is working to fix the problem, and that coins should begin circulating again soon as lockdown restrictions are lifted and the economy begins to reopen.
The Federal Reserve issued a statement last week saying they are working with the Mint to produce more coins. They also asked banks to only order as many coins as they need to meet customer demand. “Although the Federal Reserve is confident that the coin inventory issues will resolve once the economy opens more broadly and the coin supply chain returns to normal circulation patterns, we recognize that these measures alone will not be enough to resolve near‐term issues,” read the statement.
In order to ease the coin shortage, the Federal Reserve is also implementing the “strategic allocation of coin inventories,” which includes placing order limits of coins at financial institutions “based on historical order volume” as well as “current U.S. Mint production levels.”
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