(Photo courtesy cnbcfm.com)
2020 has thrown us yet another curveball – The US is facing a coin shortage because the coronavirus has effectively stopped the flow of physical currency.
Federal Reserve Chairman Jerome Powell explains: “What’s happened is, with the partial closure of the economy, the flow of coins through the economy has … kind of stopped. A whole system of flow has kind of come to a stop,” he said.
Powell is right on the money. The spread of Covid-19 across the US over the past few months has led to a rise in contactless payments as more Americans shelter in place and shop online using PayPal or credit cards.
Plus, state-imposed business closures slowed that rate at which physical cash and coinage exchanged hands. Companies that generate a significant portion of their revenues in physical cash (such as restaurants and convenience stores) would normally deposit their earnings at local banks. This is what usually helps restock banks’ coin supply that they can then re-allocate back into local circulation, but it stopped when those businesses closed.
But don’t panic, Powell said he expects the problem to only be temporary, given the establishments that traditionally deposit their cash into banks are beginning to reopen, which makes cents.
Until the shortage is resolved, however, the Fed is taking the unusual step of limiting the amount of quarters, dimes, nickels, and pennies sent to banks “to ensure a fair and equitable distribution of coin inventory.”