Israel: Double shekels, twice as good

Started by Figleaf, July 07, 2007, 06:33:00 PM

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The introduction of the double shekel is actually very good news. The perfect coin series is 1-2-5. The euro has such a series: there are coins of 1, 2, 5, 10, 20, 50 cents and 1 and 2 euro and banknotes of 5, 10, 20, 50, 100, 200 and 500 to complete the series. In high inflation countries, though, the 1-5 series makes more sense. Israel has long stuck to a 1-5 series, but if it is now introducing a 2 shekel that means that the authorities now think that the times of high inflation are over. As an economist, I dislike inflation (and unemployment), so I consider this good news.

source: Haaretz

Two-shekel coin arriving soon

By Tal Levy

Meet the two-shekel coin, coming soon to a wallet near yours. The first small shipment of the new coin arrived at the Bank of Israel for technical inspections yesterday, and the coin will be minted for the general public in the last quarter of 2007.

The technical checks include evaluating weight and diameter. The central bank will also provide the coin for testing to companies that operate vending machines.

The process of issuing the new coin began in 2004. Before deciding to produce it, the Bank of Israel conducted surveys among the public and among businesses that commonly use cash, such as taxi companies and banks. It found widespread support for the new two-shekel coin.

The new coin is expected to save money for institutions and businesses that handle large amounts of cash. In addition, the cost of minting coins should drop.

According to the central bank, 95 percent of all the cash in circulation is in bills, with only five percent in coins. However, low-value coins are very popular: Over half of all coins, 51 percent, are 10-agorot pieces. One-shekel coins, which are in common use for vending machines or parking meters, represent 22 percent of all coins in circulation.

Israel has no mint of its own. Bills are flown in by air, while coins are shipped in containers by sea.

The Bank of Israel will make an official announcement about the coins on Sunday.
An unidentified coin is a piece of metal. An identified coin is a piece of history.


The 'shnekel' story
The NIS 2 coin, the infant of Israeli legal tender, is celebrating its sixth month of life in July.

The coin burst onto the scene in December 2007 to great fanfare. Israelis and tourists alike found themselves requesting change in two-shekel increments and reluctantly spending the NIS 2 piece whenever they were just two shekels short.

The coin was even designed with special notches around its edges to be easily recognized by the blind.

It also has a cultural following. On social networking Web site, a group was founded by two Israeli fans of the coin, with the mission to advocate using the name "shnekel" for the new coin - a snappy combination of the words shnayim (two) and shekel.

Mordechai Fein, head of the Bank of Israel's Currency Department, said the shnekel had been invented because "it is better for the public."

"Any transactions should be more efficient for the public and to all who use the coins," he said. "It will be easier for the public to carry fewer coins in their pocket."

NIS 2 coins are slowly making their way into the marketplace, but the bank believes patience is the key.

"It was launched in December 2007," Fein said. "The results until now [have been] so good - we've never had such results in a launch."

He called it a "high-quality release," with more than 15 million shnekels on the market after six months. By comparison, the NIS 1 coin, released in 1991, currently has 367 million coins in circulation.

However, there have been notable struggles in the young life of the shnekel. Israelis have found that their beloved shnekel is not usable in most parking meters, vending machines or laundry machines.

Twice a year, the Bank of Israel organizes meetings with the largest vendors and machine importers in the county. Over the past year, they have discussed calibrating machines for the NIS 2 coin.

"You can imagine that each calibration would cost money, and for each machine they need to pay between NIS 50 and NIS 100," Fein said. "These are [privately owned] machines. We have no authority to enforce people to update machines."

When the Bank of Israel in July 2007 asked how much time vendors needed to calibrate the country's 100,000-plus machines, "all of them said half a year is enough," he said. Some even implied that the process would be well under way in two months.

As things stand, that six-month window has passed. The vendors maintain that they didn't have enough time to calibrate machines, but have informed the Bank of Israel, without evidence of how or where it was done, that "more and more machines have been calibrated."

Blame for the delay in calibrating machines has been passed from the Bank of Israel to the machine-importers, and finally to the machine-owners.

Lior Lichtman, the head of the Bank of Israel's Issue Unit Currency Department, attributes the current problems to the vendors' unwillingness to invest the necessary money.

"They have their customers, too," he said. "The importers were ready with the software, the hardware, everything, but their customers don't want to pay."

One possible solution would be a subsidy to support the transition process. However, the bank stated that a subsidy was not a likely solution and had never been seriously discussed.

The shnekel is truly shrouded in mystery. The public doesn't even know where the coins come from - that is, where they are minted.

"We will not disclose where we mint the coins," said Fein.

Coins have not been minted in Israel since the 1950s, when they realized it wasn't beneficial to do so. Why the secret?

"Not everyone likes Israel," said Fein. "In the days of the intifada, the mints around the world that produced Israeli coins asked us not to disclose them because they faced demonstrations."

"We still have mints that aren't very happy to work with us," Lichtman said. "It's also for security."

So what's what fuss over the shnekel?

"Let me tell you a secret," said Fein. "The 10-shekel [coin] isn't usable in the parking meters. If you put one in the machine, it will swallow it... People ignore that the 10-shekel coin is not accepted in vending machines."

He said the shnekel has flourished, and will continue to flourish, in the confines of shops and grocery stores, adding: "Not everything in life is a vending machine."

Using the new two-shekel coin is not rocket science, but apparently consumers may find its presence daunting, Fein said.

"It's not magic," he said. "The public will learn how to use it. They will change habits."

"Everyone needs to understand that this process takes time, but after six months, we are very happy with the results," he added.

Source: Jeruzalem Post
An unidentified coin is a piece of metal. An identified coin is a piece of history.


Another example of issue of 2 units is that of Thailand.

2 Baht was introduced in 2005 whereas 1, 5 and 10 existed from much earlier period.


It was similar in France: They had 2 fr coins - until the nouveau franc pieces were introduced in 1960. Then, for almost 20 years, no "2.00" denomination. Finally (in 1979, I think) the 2 fr was made again, for another ~20 years.

Filling the "gap" makes sense in my opinion. Sure, you need to adapt vending machines for example, but all in all you save: money (because minting one 2.00 coin is likely to be less expensive than minting two 1.00 coins) and space ... in people's pockets. :)