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A case for Redenomination of the U.S. Dollar

"When I was your age, I could get penny candy, a bottle of pop for a nickel and a burger for ten cents"... Wouldn't it be nice to get back to the days our parents and grandparents talk about?

Have you noticed that these days these prices are about a factor of ten times as much?

Of course this is all natural, but what about the future?

100 Billion Zimbabwe Dollars bought 3 eggs on the date of it's release
Will prices in a couple hundred years be a miniature version of Zimbabwe?

Will we stop talking about eliminating pennies, and start talking about eliminating nickels, dimes and quarters - change altogether?

Today so many of us don't even carry cash for day to day transactions for it to matter much, however a study by the Federal Reserve out this month shows that ATM withdrawals has nonetheless increased over the past three years (Federal Reserve System, 2010).

Finally, the U.S. mint has tried many times and failed to get people to carry dollar coins as pocket change. Why do they try? While coins cost more in initial production, they last longer and are more cost efficient (Hagenbaugh, 2008).

Saving a potential of $500 million a year, Chicago Federal Reserve economist François Velde commented to USA Today, "Until Congress decides to stop the dollar bill, these efforts are going to be difficult to succeed."

My proposal is a redenomination  of the dollar. 

Set a begin target date of mid-2015 with an end date of mid-2017. Use odd years so it's not an election year.

Set a target redenomination of 10 to one (for an example).

- Old U.S. dollars (real currency) that people want to spend would need to be spent or converted to 2015 (or newer) series currency at the 10:1 rate by the mid-2017 deadline.

- After mid-2017, old currency could still be converted at the bank until an unknown date but spending could not be guaranteed.

- In this example, $1.00 old currency would be 10¢ in new currency.

- HOWEVER, the "Dollar Store" and "Dollar Menu" would now be the "10¢ Store" and "10¢ Menu". Woolworth's has been restored.

- Minimum wage fights about "$10/hour" would now be about "$1/hour"

Yes, your wages and spending power would be the same, and you might feel both cheated and more powerful. Who wouldn't like buying a 10¢ burger, but when your paycheck comes in with one less decimal point (hey, you could have at least rounded UP that penny!) it will equalize quickly.

Or will it? Will business do what business do and adjust their prices to 9-to-1? Will burgers be a quarter?

I don't know.

I do know the government would save a significant amount of money on printing paper money. Would it cost much more to redenominate? I don't know. That's above my pay grade.

I also believe more and more transactions would move to debit and credit cards. That's less hard cash changing hands, but that's still more money saved printing money in the first place.

I think we'd all win in the end, and it would be nice to see some antique signage pulled out.

What do you think?

References:

Hagenbaugh, B. (Oct. 20, 2008) USA Today. U.S. Mint tries to get consumers to use dollar coins. http://www.usatoday.com/money/advertising/2008-10-19-dollar-coins-mint-ads_N.htm
Hoy, A. (1990) Coca-Cola: The First Hundred Years. Publisher: Coca-Cola Company. ISBN: 9991400370. VIA: CNBC. Coca Cola 5¢ Sign. The Evolution of an American Icon. http://www.cnbc.com/id/33401930/The_Evolution_of_an_American_Icon?slide=6

Federal Reserve System (2010). 2010 Federal Reserve Payments Study. http://www.frbservices.org/files/communications/pdf/press/2010_payments_study.pdf

Gnerre, S. (2009). Inside So Cal - South Bay History. 1958 Photo of 19¢ Hamburger Stand. Hamburger Handout.  http://www.insidesocal.com/history/2009/08/hamburger-handout.html 

Wikipedia (2010). Zimbabwean Dollar. http://en.wikipedia.org/wiki/Zimbabwean_dollar

 

 

Comments

Anonymous said…
Thanks for some quality points there. I am kind of new to online , so I printed this off to put in my file, any better way to go about keeping track of it then printing?
12/29/2010 6:14 PM
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