The COVID-19 global pandemic caused an initial panic leaving store shelves empty of face masks and toilet paper. Hand sanitizer, cleaning supplies, paper towels, and meat quickly followed quickly in what was becoming routine for life during COVID-19. And now, there’s a coin shortage.
Got change? Many financial institutions, retailers, and private citizens don’t.
Although we are increasingly becoming a cashless society, coins play an integral role in day-to-day commerce. A dearth in their supply can severely impact small businesses that are already struggling to survive. There’s more than just pocket change at stake here, and if things don’t improve soon, the effect on the economy can be critical and long-lasting.
Here’s what you need to know about the most recent shortage caused by COVID-19.
What triggered the coin shortage?
The coins in your wallet are stricken in the U.S. Mint. The Federal Reserve distributes these coins to financial institutions across the country. From there, the coins are purchased by retailers or private citizens, enter the economy and begin circulating. With the pandemic upending the economy and the Mint operating at partial capacity, this chain was disrupted for months at a time.
“The COVID‐19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin,” according to a statement issued by the Federal Reserve. “In the past few months, coin deposits from depository institutions to the Federal Reserve have declined significantly. The U.S. Mint’s production of coins also decreased due to measures put in place to protect its employees.”
Federal Reserve Chairman Jerome Powell added that the massive shift to online or contactless transactions has further disrupted the flow of coins through the economy.
Even now, as large segments of the country reopen, the supply of coins is failing to keep pace with demand. More consumers are choosing to shop online. Consumers shopping in physical stores are wary of handling germ-infested dollars and coins. Because of this many consumers are opting for contactless payment instead.
The response to the shortage
To help mitigate the fallout of the coin shortage, the Federal Reserve began to ration its coin distribution on June 15, giving banks and credit unions only part of their requested orders. The total number of rationed coins each bank or credit union will receive is determined by the institution’s history of coin orders and the capacity of the U.S. Mint to fulfill the request. The Reserve has also encouraged banks and credit unions to order only the amount of coins they need to meet short-term member demand.
The Federal Reserve is working together with the Mint to ramp up the production of new coins and to lift supply allocations in the near future.
The impact of the coin shortage on the economy
The severity of the coin shortage first came to light in mid-June. At that time, Tennessee banks were notified that they’d only receive a small portion of their weekly coin order from the Federal Reserve.
In a virtual hearing on June 17, Rep. John Rose of Tennessee told Powell that the banks in his district, having received only part of their weekly coin order, would likely run out of change by the end of the week, or might need to round up or down if they run low.
“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.
The shortage can have devastating effects for retailers who receive incomplete coin orders from their financial institution, Rose said. Without the means to provide adequate change for their customers, small business owners might start rounding up or down, leading to significant losses in revenue and customers.
A temporary shortage
The Federal Reserve believes the coin shortage is only temporary and that it will resolve itself in the near future.
“As the economy reopens, we’re seeing coins begin to move around again,” Powell said.
However, the dearth of available coins is still a reality in all sectors of the economy. You may feel the impact of the shortage when paying cash at brick and mortar stores; the clerk may not be able to provide you with exact change.
Your Turn: Have you felt the impact of the coin shortage? Tell us about it in the comments.
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