THE COVID-19 COIN SHORTAGE

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V23 2020 INDEX E-SYLUM ARCHIVE

The E-Sylum: Volume 23, Number 25, June 21, 2020, Article 11

JP Koning passed along this service update from the U.S. Federal Reserve. Thanks. -Editor

Temporary coin order allocation in all Reserve Bank offices and Federal Reserve coin distribution locations effective June 15, 2020

The COVID-19 pandemic has significantly disrupted the supply chain and normal circulation patterns for U.S. coin. In the past few months, coin deposits from depository institutions to the Federal Reserve have declined significantly and the U.S. Mint's production of coin also decreased due to measures put in place to protect its employees. Federal Reserve coin orders from depository institutions have begun to increase as regions reopen, resulting in the Federal Reserve's coin inventory being reduced to below normal levels. While the U.S. Mint is the issuing authority for coin, the Federal Reserve manages coin inventory and its distribution to depository institutions (including commercial banks, community banks, credit unions and thrifts) through Reserve Bank cash operations and offsite locations across the country operated by Federal Reserve vendors.

The Federal Reserve is working on several fronts to mitigate the effects of low coin inventories. This includes managing the allocation of existing Fed inventories, working with the Mint, as issuing authority, to minimize coin supply constraints and maximize coin production capacity, and encouraging depository institutions to order only the coin they need to meet near-term customer demand. Depository institutions also can help replenish inventories by removing barriers to consumer deposits of loose and rolled coins. 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.

Consequently, effective Monday, June 15, Reserve Banks and Federal Reserve coin distribution locations began allocating coin inventories. To ensure a fair and equitable distribution of existing coin inventory to all depository institutions, effective June 15, the Federal Reserve Banks and their coin distribution locations began to allocate available supplies of pennies, nickels, dimes, and quarters to depository institutions as a temporary measure. The temporary coin allocation methodology is based on historical order volume by coin denomination and depository institution endpoint, and current U.S. Mint production levels. Order limits are unique by coin denomination and are the same across all Federal Reserve coin distribution locations. Limits will be reviewed and potentially revised based on national receipt levels, inventories, and Mint production.

To read the complete article, see:
Strategic Allocation of Coin Inventories (https://www.frbservices.org/news/communications/061120-strategic-allocation-of-coin-inventories.html)

Here's a report from the Wall Street Journal. -Editor

Coins are in short supply in the U.S. and the central bank is working to fix the situation, Federal Reserve Chairman Jerome Powell said.

Speaking Wednesday before the House Financial Services Committee as part of broader testimony on the outlook for the economy and monetary policy, the Fed leader tied the coin shortage to the broader fate of the economy as businesses and consumers navigate the coronavirus pandemic.

“With the partial closure of the economy, the flow of coins through the economy has gotten all…it's kind of stopped,” Mr. Powell said. “We are well aware of this and are working with the Mint and we are working with the reserve banks. And as the economy reopens, we are seeing coins begin to move around again.

Some Fed officials have said the surge in demand for cash isn't surprising and mirrors other periods of stress, when households and others seek to hold more physical money in case of problems accessing banks or cash machines.

Coins would almost certainly be a minor consideration in all of this. But even as electronic payments dominate money usage and banking in the U.S., the use of physical money is still significant, and it can matter most to lower-income people and minorities, some of whom lack bank accounts. For some, the inability to make exact change could be a real issue.

“We feel like we are making progress” in fixing the situation, Mr. Powell added.

Thanks to Len Augsburger and others who forwarded the story. -Editor