Powell Says Fed Working to Relieve Coin Shortage in U.S. Economy
Comment of the Day

June 17 2020

Commentary by Eoin Treacy

Powell Says Fed Working to Relieve Coin Shortage in U.S. Economy

This article by Matthew Boesler for Bloomberg may be of interest to subscribers. Here it is in full:

Federal Reserve Chair Jerome Powell took a question Wednesday about something that doesn’t come up very often in congressional hearings about monetary policy: coinage. Representative John Rose, the Tennessee Republican, asked Powell if he was aware of the shortage of coins caused by the pandemic that he was hearing about from banks in his district.

“With the partial closure of the economy, the flow of coins through the economy has gotten all -- it’s kind of stopped,” Powell said, during the hearing before the House Financial Services Committee.

“The places where you go to give your coins, and get credit at the store and get cash -- you know, folding money -- those have not been working. Stores have been closed. So the whole system has kind of, had come to a stop,” he said. “We’re well aware of this. We’re working with the Mint and we’re working with the reserve banks, and as the economy reopens, we’re seeing coins begin to move around again.” Powell said he believed the shortage would prove only temporary.

Eoin Treacy's view

Velocity of Money figures are notoriously hard to get a hold of. However it is reasonable to expect that with much of the global economy on lockdown the flow of liquidity around the system ground to a halt. Since central banks are in the business of ensuring there is sufficient liquidity in the system to promote growth, they have little choice than to flood the market during such times. There is an additional consideration that a long-term war on cash has been evident for some time and the coronavirus is an ideal excuse to dispense with cash even further.

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