Author Topic: Honour thy coins  (Read 2174 times)

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Offline Figleaf

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Honour thy coins
« on: September 06, 2009, 12:28:48 PM »
Real economic change -- in your pocket
By Kevin Voigt, CNN, September 2, 2009
 
(CNN) -- As times get tough, people look for change. Not just new presidents and prime ministers, but change they can count on -- or, at least, count. And they're willing to turn over couch cushions to find it.

As the financial crisis thrust billion-dollar figures onto the front pages, it also has cast a spotlight on how we perceive and use the smallest of currencies -- namely, metal coins.

In Thailand, the Treasury Department has found that coin exchange for paper currency has doubled in the first half of the year. In Argentina, the year began with a drought of coins as people began to hoard pesos.

While most Christmas gift-giving slumped, retailers in the U.S. and the U.K. saw a rise in piggy bank sales -- U.K. retailer Debenhams reported a 150 percent increase in sales during the holiday season.

Priya Raghubir is not surprised. As a researcher at New York University, she studies how coins and small denominations of cash alter people's spending habits -- research inspired partly by her son's delight in getting change after a 7-Eleven purchase on a trip to Hong Kong

"Yet my son refused to cash in a $100 bill he'd been given as a present," she said. She was curious if the same was true for adults.

Her research suggests, indeed, adults spend like children. She found that if two groups are given an equivalent amount of cash -- say a $1 bill versus four quarters, or a $100 bill versus five $20 bills -- the latter group will always spend more cash.  Watch why people gravitate toward small change during a recession

The phenomena crosses borders. When homemakers in China received a week's pay from researchers in large bills vs. small, the ones with smaller bills spent it faster.

The research suggests one way to loosen consumer spending is to increase the supply of small bills or change.

"It suggests that if central banks changed to smaller denominations, people would spend it faster," Raghubir said. Also, if governments gave tax rebates in the form of money orders or traveler's checks that can be cashed at locations other than banks, spending might increase, she added.

There's a lot of spare change out of circulation -- in the United States alone, at least $10 billion sitting unused in piggy banks and coffee cups, according to Coinstar -- a U.S. business which operates and markets change counting machines primarily in the U.S., Canada, the U.K. and Ireland.

Unlike most companies, Coinstar has been able to grow through the credit crisis. "In 2006 we had 13,000 (coin changing) kiosks in place, and in 2008 we had 18,000," said Mike Skinner, president of Coinstar's change business. "We plan to add 1000 or 1500 more this year."

More people are using that change to make purchases at the stores where coin change machines are located -- 55 percent of change ends up being spent immediately on purchases, up nearly 10 percent from 2003, Skinner said. "They tend (to use redeemed change) to upgrade their purchases, like stepping up to a steak rather than a roast, or buying a nicer bottle of wine," he said.

Company research suggests coins are becoming more important to cash-strapped consumers -- a survey late last year found that 42 percent of people aged 18 to 34 are cashing in more change than the previous year. Almost four in 10 survey respondents said they value loose change more than before the credit crisis.

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

Offline <k>

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Re: Honour thy coins
« Reply #1 on: August 08, 2018, 01:03:38 AM »
This was written in the early days of aftermath of the 2008 economic / financial crisis. But has growth truly returned since then? How does the situation in 2009 compare now with how people use coins in change?

Offline Figleaf

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Re: Honour thy coins
« Reply #2 on: August 08, 2018, 09:53:46 AM »
This was written in the early days of aftermath of the 2008 economic / financial crisis. But has growth truly returned since then?

World economic growth is back on track since 2012. Its structure is better now: emerging countries are growing faster than developed countries. If they didn't, they wouldn't catch up. The picture in individual countries may be quite different. We all remember basket cases like Iran, Russia, Turkey, Venezuela and Zimbabwe, each for their own reasons. There are also spectacular recovery cases, such as Greece, Ireland and Spain or world growth would not have been stable.

There are other indicators to judge increase in wealth by. The graph below was taken from this article.

If you still ask if growth has truly returned after six years of recovery and you are far from the only one, that is because growth has been increasingly unevenly divided. This is measured by the Gini coefficient. The graphs here are worth studying. This effect was described in a boring but very important book by Thomas Piketty. While economists generally acknowledge that Piketty is right, most politicians either acclaimed the book and did nothing about its conclusions or ignored the book altogether. We are still on our way to social and wealth instability, with eyes wide open and in spite of the return of world economic growth.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline Figleaf

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Re: Honour thy coins
« Reply #3 on: August 08, 2018, 10:02:35 AM »
How does the situation in 2009 compare now with how people use coins in change?

I have no firm data to answer that one. It is hard to imagine that human attitudes and habits change much over a period of less than ten years, so I would be surprised if the underlying data of the research have changed much. That said, I have the uneasy feeling that the data were not well interpreted.

To me, it is logical that if you travel to Hong Kong, you take an interest in the coins. That has nothing to do with economic growth. When economic times are worse, you start thinking about using loose change you have lying around. That easily explains the succes of Coinstar in bad times and the sale of piggy banks. It does not follow that people suddenly have a love affair with coins.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.