New pound coins in 2017

Started by andyg, March 18, 2014, 11:47:34 PM

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EWC

Quote from: Alan71 on October 15, 2017, 11:27:22 AM
That's half the trouble with the world today - no one wants to take responsibility for anything.

I think you have it completely upside down. 

Governments issued these things and should stand behind them.  All gvt banknotes back to 1694 here are still honoured and I see no reason why coins should be treated any differently.  Repudiating them is dishonest

Its just false to say things were in general different in the past,  I already that  pointed out, and I thought you accepted your error?  Its true that the pre-decimal stuff was eventually repudiated - but  everyone I knew at the time thought that was a swindle . 

Am curious about why anyone thinks any different today.  I'm afraid  just looks like Keynsian brainwashing of youth to me. 

I seem to think Manzikurt was there when I discussed pre-decimal half crowns being repudiated (with Dougie around 1975 or so) - I wonder what he now thinks on this?

Rob T

augsburger

What would have made sense would be to have a period of time where old one pound coins were accepted, but it wasn't acceptable to give them out as change. Say like a one or two week period. Then the shops could hand the coins into the banks, but people would know they had this amount of time to spend their coins.

The problem is if you can be given a pound coin on your last shop before the coins are taken out, then you have to go to bank to do this, when the shops are going to have to go to the bank anyway.

Figleaf

Blame accountants. They won't mind :)

A coin that is withdrawn but can still exchanged becomes what is known as a contingent liability: if someone offers it at some time, liquidity should be available to pay them. Therefore, such coins (but also banknotes, train tickets, government bonds etc) bind government liquidity. To finance that need for liquidity, doing nothing in particular, the government needs to raise cash, which costs British taxpayer's money.

This cost should be weighed against the value of the implied government promise of the item (coin in this case). That is a political decision and there is no moral argument against it. The only issue is the conditions for exchanging the old coins, not whether or not they should be honoured forever.

The extremes are clear. If politicians judge the cost of the contingent liability as negligible, they can set the exchange term at indefinite. If they think the cost is a pure waste of money, the exchange term should be relatively short, but long enough to give everyone a fair chance to redeem the old pieces, which implies that there must be sufficient points, distributed all over the country to effect the exchange.

Politicians will judge the equation differently. In countries that changed over to the euro, the exchange term varied from a good number of years to forever, often with banks receiving the old coins in the first years, the central bank only redeeming them in later years. In that perspective, the UK exchange term looks short.

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

Alan71

Not sure if it's short, Peter?  No time limit has been given for banks and as EWC managed to exchange some old 50p coins in more recent years, it would suggest it's indefinite? 

The policy clearly changed somewhere along the line.  Old banknotes were always redeemable at the Bank of England indefinitely, but until some point in the last 20 years, coins never were after the six-month changeover period.

Not my problem though.  I've spent the ones I don't want.  As I say though, if any shop dares to give me one after today (and preferably not today either) then they will soon be told where they can shove it!  :D

My elderly (95) great aunt was given two old pounds on Thursday.  My sister was taking her shopping so swapped them with her for new ones, but I thought that was quite bad of the shop to give an old lady (who doesn't get out that much) coins that she'd have had trouble exchanging after today.  Quite thoughtless I thought.

<k>

Various questions. For whose convenience is this being done? And can you please all the people all the time anyway?

When looking at the question of the weight-to-value ratio, with regard to Britain's coins, it was clear that that policy was to the advantage of the banks and retailers and transporters of coinage and not to the advantage of the public. As Alan71 pointed out, if a 2p coin weighs the same as two pennies, then you've lost part of the advantage of a higher denomination. After all, a 20p does not weigh the same as a 10p, so it's far preferable to receive four 20p coins in change than eight 10p coins.

But how long do people think is "reasonable" anyway? How many people would want to return a double florin to the bank or spend it in a shop? A 400-year-old man might be interested in returning his 1694 bank notes to the Bank of England, but only a fool would do that, as you'd get more for them as collector items.

As for the inbuilt inflation in the system, since the Great Depression politicians and economists have been terrified of deflation, therefore they tolerate a (hopefully) small amount of inflation annually. Deflation threatens to turn into a spiral, because people defer some of their purchases, waiting for prices potentially to fall further. Hence Ben "Helicopter" Bernanke, who had the idea of dropping EWC out of a helicopter to stop him asking awkward questions. No, got that wrong.  :-[  It was to try to prevent deflation during a depression by dropping banknotes out of a helicopter.
Visit the website of The Royal Mint Museum.

See: The Royal Mint Museum.

EWC

Quote from: <k> on October 15, 2017, 01:16:32 PM
As for the inbuilt inflation in the system, since the Great Depression politicians and economists have been terrified of deflation, therefore they tolerate a (hopefully) small amount of inflation annually.

Not tolerate -  they target 2%. 

On the c. 2 trillion UK debt that would save them what -  in the order of 40 billion a year?

But at the present they "tolerate" about 3%.  So 60 billion?

You actually believe that is just some kind of accident?

As to acting honourably with coin exchange, I think Peter is right in the short tern

It could be seen as setting off the cost of acting honourably against the cost of undermining rationality through the education system.  And the latter might seem cost free, as you pay teachers any which way.

But eventually such birds come home to roost.  Can anyone name a past empire when that did not happen?  Or - is history bunk?

<k>

You're not wrong. I've pointed out this site before: Surplus Energy Economics.
Visit the website of The Royal Mint Museum.

See: The Royal Mint Museum.

Figleaf

Its not inflation that counts but the difference between inflation and total return, known as real return. The real return can be negative. If the total return on your investment or portfolio is 17% and inflation is 20%, your real return is -3%. The issuer of the financial instrument pays with less purchasing power than the purchasing power he took out of the market.

If inflation is 1% and the total return of gilts is 2% the government is not "saving money" because of inflation, but paying above inflation. In fact, the higher the inflation, the higher the chance that the real return is negative. Today, inflation is very low and real returns are quite positive.

Indeed, central banks target inflation. Imagine inflation as a balloon on a fountain. Perhaps in theory, the balloon should not move, but in practice, there are so many outside influences, ranging from wind to water pressure, that the balloon continually "dances" on top of the fountain. If you would control water pressure, you might stabilise the balloon somewhat by trying to compensate for the balloon's movement, but you'd soon find out that it is a futile exercise. You'd achieve more by observing the balloon and reacting only when something important happens.

"Controlling" inflation (the balloon) with the money supply (the fountain) is a similar situation. You can aim for a certain level, but shouldn't hope to achieve it, except by accident and for a short while. That's what financial traders call "uncertainty", which is destabilising, therefore undesirable. Central banks will announce a target inflation, so that the financial sector knows what the central bankers are aiming at. That target is a (secondary) tool to stabilise the financial economy, which is a benefit for everyone.

The target is always positive. That's not only out of fear of deflation, but also because inflation figures are systematically too high. One effect is that officials are always behind updating the goods and services whose price they measure (the basket), because it is not possible to predict the future. Over a period of only a few years, a phone went from a government issued single type to a Nokia to an iPhone. Another effect is known as the hedonism factor. A 1970 car had to have minor maintenance every 5 000 km and major maintenance every 10 000 km. A 2010 car would have major maintenance every 30 000 km only. The improvement is part of the price increase, but it's not inflation. The total of basket and hedonism effect is a subject of research and differs from one country to another. Normal values found range from 1 to 3%.

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

FosseWay

Quote from: <k>But how long do people think is "reasonable" anyway? How many people would want to return a double florin to the bank or spend it in a shop? A 400-year-old man might be interested in returning his 1694 bank notes to the Bank of England, but only a fool would do that, as you'd get more for them as collector items.

That works the other way round too.

Irish coins are redeemable at face at the Central Bank of Ireland, all the way back to 1928. Given that in most cases the specifications of predecimal and early decimal Irish coins are the same as those of the UK, it would be hard for bank staff to weed out non-Irish coins except by going through them, which is obviously time-consuming if someone turns up with loads of bags of them.

But in practice they probably wouldn't be that bothered, especially for low-denomination coins, because the metal value in e.g. a predecimal penny is likely to exceed its face value. So the CBI is no doubt quite happy to pay significantly below the odds for perfectly good metal, and the customers who think they're pulling a fast one are satisfied too.

As to whether it's acceptable to refuse to honour obsolete coinage at central banks, for me it is a question of clarity and transparency. If it is written into a country's legal code that coins will become invalid for commerce x months after an announcement, and then irredeemable at the central bank x years after that, then I don't see what the problem is. I don't see why the state (and by extension society) should have to pander to the whims of the unobservant. On the other hand, if either the law or custom and practice have dictated one policy in the past and it then changes without warning, decent publicity and/or a reasonable explanation, then I think that is unreasonable.

It's also not beyond the wit of humanity to limit one's exposure to the risk of being left with unusable coinage. Sure, if you are unlucky enough to receive an old pound in change just before the deadline and can neither spend it again nor feel it's worthwhile to redeem it elsewhere, you may have to simply write it off as a loss. But people who complain they've got pocketfuls left at the deadline have only themselves to blame. I've never understood the mentality that leads people to accumulate large piles of current coinage. I have a small compartment in my wallet for coins. I spend them roughly as I get them, even when in the UK or eurozone (where there are appreciable numbers of coins in use - in Sweden coins are so worthless and cash use so rare, it's less of an issue).

chrisild

Quote from: FosseWay on October 20, 2017, 09:28:49 PM
If it is written into a country's legal code that coins will become invalid for commerce x months after an announcement, and then irredeemable at the central bank x years after that, then I don't see what the problem is. I don't see why the state (and by extension society) should have to pander to the whims of the unobservant. On the other hand, if either the law or custom and practice have dictated one policy in the past and it then changes without warning, decent publicity and/or a reasonable explanation, then I think that is unreasonable.

Basically agreed. The "locals" will of course know when certain coins or notes lose their legal tender status, and whether/when they become obsolete. Usually the central bank, the finance ministry or so will inform the media and general public about an imminent deadline, and everybody can get their "old money" exchanged. People outside the country however may not know about this - and I bet that in a few weeks we will read from collectors or hoarders who "had no idea" that after 31 Dec 2017 or 1 Jan 2018 the pre-euro notes in Cyprus and Malta cannot be redeemed any more ...

Well, tough. In such cases it is up to those "keepers" to be informed about the customs in the issuing country, and about the schedule. I also think that exceptions from "common practice" can be OK: If there are many counterfeited old £1 coins, it may make sense to keep the redemption period shorter than usual.

What is unfair in my opinion is what the Italian government did a few years ago. For about ten years, "everybody" had known that the lira redemption period would end in early 2012. But then the government decided, in early December 2011, that enough is enough and, without prior notice, the pre-euro money could not be exchanged any more. ::)

Christian

Figleaf

That's covered by what I call the "mamma mia principle". This is not an Italian monopoly, but it may have been invented there. The principle consists of two parts: finding out officially you are in trouble when everyone knows that already and reacting far too late. In this case, the trouble would be the threat that Italy's budget would be out of bounds according to euro rules, a problem dating from 2008.

Another fine mamma mia example I treasure was when (some decades ago) the LSE found out that Britain's budgetary instruments were so finely tuned (at the insistence of the LSE) that instead of running a full growth/inflation cycle behind and working counter-cyclically, they were running half a cycle behind and working pro-cyclically. It took politicians ages to understand that. :D

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

Alan71

Quote from: Alan71 on October 15, 2017, 12:50:13 PM
If any shop dares to give me one after today (and preferably not today either) then they will soon be told where they can shove it!  :D
And guess what?  This actually happened to me today! My local Co-op gave me an old £1 in change.  Stupidly I didn't realise at first, as the 50p that came with it looked like a new one and I was more interested in that until I turned it over and saw it was just a 2015.

Anyway, within two minutes I went back to the Co-op.  The assistant remembered me but tried to make out she hadn't given it me!  I was fuming!  She said "we haven't got any".  I said "new pounds?" And she answered "no, old."  "Yes you have because you just gave it me".  Anyway, she did swap it but didn't really believe me.  I was true to my word though, I was about to tell her where to shove it!

OK, so she might not have realised when she gave it me, but to then make out I was the liar just takes the proverbial.  She presumably accepted it without realising and then gave it back out.


FosseWay

Quote from: Alan71 on October 28, 2017, 03:02:34 PM
OK, so she might not have realised when she gave it me, but to then make out I was the liar just takes the proverbial.  She presumably accepted it without realising and then gave it back out.

This is a common phenomenon and it's related to what you wrote at the top of this page about people not taking responsibility. Increasingly, people seem to think that if they didn't mean for something to happen, then this absolves them of both responsibility for the event and any subsequent legal or financial comeback. I see this all the time in respect of traffic accidents. No traffic accident is deliberate; if it was, it would be a case of criminal damage or (attempted) murder, not any of various motoring offences. People who drive, cycle or walk out right in front of another road user, causing a collision, are apt to start their input into the subsequent conversation with "But I didn't mean to!" and then proceed to use this as a reason not to accept responsibility for the cost of repairs to the other party's vehicle.

If you screw up, fess up and face the music.

Figleaf

My wife beat back two attempts to pass round pounds on her. She missed a third time. Fortunately, we found a bank just before it closed on Saturday, as we are leaving the country on Sunday. During the same trip, we were also able to offload an old fiver to a bank. Strangely, it seems that my wife's foreign accent attracts demonetised stuff.

Fortunately, lots of other things went well...

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

Alan71

Quote from: Figleaf on October 28, 2017, 07:00:42 PM
During the same trip, we were also able to offload an old fiver to a bank. Strangely, it seems that my wife's foreign accent attracts demonetised stuff.
Earlier in the day, before my experience with the old pound, I was paying a cheque in at my bank (a rare occurrence these days).  I was using the machine, and a man in front of me was paying in lots of old £5 notes.  The machine didn't appear to accept them at first but the assistant helped him. 

It seems that any bank will still accept them, but not sure how long for.  As far as I know, it's only the Bank of England that will accept them forever.