April 27, 2005

Congress Bets a Shiny New Dollar on 'Seignorage'

Well their at it again, after two failed attempts Congress is trying once more to get the 'dollar' coin off the ground --- but this time with a twist ...

In fact, although the coins would enter into general circulation, their biggest selling point is that people might hoard them.

The idea steals a page from the popular 50 State Quarters series, in which the engraving on the 25-cent piece rotates to honor all the states. That legislation was also the brainchild of Rep. Castle.

The subjects depicted on the dollar coins would be the U.S. presidents. The plan is to introduce four new ones a year beginning in 2007, honoring each of the nation's chief executives in the order of their service.

After the 50 State series launched in the late 1990s, the government discovered that an astonishing number of people were collecting each new quarter as it rolled out of the U.S. Mint, taking the pieces out of circulation.

It costs the Mint less than five cents for each 25-cent piece it produces. So in a process called seignorage, the government makes money whenever someone "buys" a coin then chooses not to spend it.

The Treasury estimates that it has earned about $5 billion in seignorage profits from the quarters so far.


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