I have to thank fellow blogger Bill Polley for this link. Joseph Sternberg of The Asian Wall Street Journal wrote an interesting column for the De Gustibus section of The Wall Street Journal. He shared his tendency to avoid carrying change and how, in Hong Kong, he found himself with a sizeable pile of coinage. Not having access to the change counting machines found in many U.S. grocery stores, he took his change to his bank. They were perplexed at first, but rose to the occasion. After counting the coins they deposited the proceeds to his account and returned him one U.S. cent.
The piece brought back memories for me. When I was at my former position with the Federal Reserve Bank of Chicago, I was told by someone that the Seventh District was the largest user of coin in the Federal Reserve System. I don't know if this is still the case, but I would often share this trivia with teachers and tour groups, giving them an opportunity to speculate on the reason.
People from the greater Chicago metro area often cited toll roads. I would then remind them that Chicago was not representative of the rest of the district - and had a lot more toll roads than other parts of the five-state area. Other reasons were related to the transit system and casinos. I then told them that I was told one reason was the penchant of Midwesterners to hoard coins rather than circulate them. And while I'm sure other folks in other parts of the country (and the world, apparently) share this same habit, Midwesterners do it as well as any and maybe better.
I often recounted the tale of the penny shortage in the late 1990s. There was a news story about a gentleman in Indianapolis who bought a brand-new, all-the-options pickup truck. Paid cash -- all pennies. The news story reported the cost of the truck was in excess of $25,000. You do the math. Now that's keeping the change. (The opportunity cost in lost interest must have been significant. And maybe liquidity preference is a factor.)
Anyone else have good stories to share about change hoarding?
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1 comment:
Tim,
My brother was always a big coin hoarder. When I was a teenager, I would go to his house in the summer for two weeks. I would take an entire year's worth of his coin and roll it for him. (I'm one of those sick people that actually enjoyed counting and rolling coin!) I would get 10% of the total amount when I took it to the bank for him. There are lots of coin hoarders out there! I can't believe that people in the midwest are bigger coin hoarders than in other parts of the country. It seems that if that is true, then there should be a correlation with how much midwesterners make use of electronic payments as compared to people in the rest of the country.
Hoarding coin can actually be a reasonably good saving tactic, at least if market interest rates are fairly low. Many people save their coin in a jar until the jar is full. Once the jar is full, they take it to a bank that has free coin counting. I know a couple who pay for most of their summer vacation using coin they have saved in this fashion. (Yes, they use cash for many transactions and they at times throw extra one's into the HUGE water jug.) It would be interesting to see whether coin hoarding goes down as market interest rates on savings accounts rise. Theory would tell us that people would hoard less coin as they choose to move money from M1 to M2, but I bet, in reality, people are just as lazy about their coin hoards at higher interest rates as they are at lower interest rates.
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