Archives for January 29th, 2007

I think I know why not. (source)

The euro isn’t even a month old but there’s already some grumbling about it. Among the stranger complainers is this: 1eurobanknote.org, a site that wants to ditch €1 and €2 coins for banknotes. They’ve put up a long rant about it, in English, here. The basic idea is this:

Paying by coins will be considered as payment by „change“, everybody will try to get rid of them, feeling that the two most valuable coins 1€ and 2€ are „only“ change. That is the exact excuse for the unjustified price increases. Issuing both bancnotes of 1€ and 2€ would give back the honour and dignity to the basic units of our money.

There are so many problems with this that I don’t know where to begin. To start with, it ignores the fact that many, no, most Europeans have been perfectly comfortable with the idea of high-value coins for a long time. Germany’s Deutschmarks started with the ten-mark bill — except for those really rare, really awesome five-mark beauties. But the Germans primarily used a 5-mark coin, the equivalent of €2.50. The French had 10-franc coins, the equivalent of €1.52, before taking the euro. The Dutch 5-Guilder coin was worth more than 2 euros. The Spanish also minted coins worth about three euros. Ditto for Austria and their 50-schilling piece. Among the big economies, only Italy failed to mint coins worth more than 50 cents.

But this site seems to suggest that because some Slovenes are having trouble with the idea that coins can be valuable, then the ECB should accommodate them. Ahh, the spirit of Europe.

The petition, despite being an online one, already has about 2,388 signatures, including names like D4rt3r and Tomaž F. It’s certain to impress.

But the other problem (and the reason why there are no 1 or 2 euro bills) is that it’s expensive. That’s why the U.S. government has been trying for a long time now to ditch the one-dollar bill. The Government Accountability Office (GAO) estimated in this report (pdf) that replacing one-dollar bills with coins would save the U.S. government $522 million a year. The report explains:

“Because $1 notes last only about 18 months before having to be replaced, the government has to produce about 5 billion of them per year to maintain the pool of 7.5 billion $1 notes now in circulation. At a per unit production cost of $0.035, this costs $175.0 million, and it also costs the Federal Reserve about $49.7 million to process the $1 notes each year — for a combined production and processing cost of $224.7 million.”

Coins, on the other hand, are more expensive to produce but can last for up to 30 years. That’s why the U.S. will give dollar coins yet another try this year. And why the ECB will ignore attempts like this to go back to paper.

(Via Miami Dreams)