A Flip Of the Coin
They're Bright, New and Shiny. And You Can Bet Your Bottom Dollar, They're a Thing of the Past.

By Joel Garreau
Washington Post Staff Writer
Wednesday, March 21, 2007

The 1979 Susan B. Anthony dollar coin flopped. The 2000 Sacagawea dollar coin did little better. Nonetheless, the U.S. Mint in its infinite wisdom last month launched yet another new dollar coin.

Sit down in the handsome office of Edmund C. Moy, the director of the Mint. Ask him to comment on the quote attributed to Albert Einstein: "Insanity is doing the same thing over and over again, expecting different results."

Point out that the future of money is relentlessly shifting away from physical cash.

Ask him if he has lost his blooming mind.

The Congress made me do it, he replies.

* * *

What are these things, these shiny new objects with a cartoonish George Washington on one side and the Statue of Liberty on the other that, like their two predecessor dollar coins, are not much bigger than quarters?

As money -- "anything generally accepted as a medium of exchange" -- dollar coins are marginal. Less than 1 percent of the $2.6 billion processed last year by Coinstar, the nation's largest self-service coin-counting-machine company, were dollars.

Buy some gas with the new presidential dollars at the Sunoco at Glebe Road and Washington Boulevard in Arlington, and Giash Uddin, the clerk, fingers the edges suspiciously. Have you gotten many people spending these? you ask. Three are in the cash drawer from the previous night, he says, but no way will he try to give them to anybody as change. "People don't like them," he says. "Back to the bank" is where they're going, he says.

Buy a coffee at Starbucks, and the coins are a conversation starter. The woman behind you, Suzette Matthews, a consultant for the Federal Aviation Administration, says, "They're pretty, aren't they?" They are indeed decorative. As the light varies, the colors they reflect range from light copper to bright steel. You'd never confuse these manganese brass items with silver or gold, however. One Arlington man, hefting some, muses, "I liked the Spanish 100-peseta coins. They felt like pirate booty."

These new dollars do not. Physically, they occupy an odd middle ground. Individually, they don't feel like "hard money," as coins were known before the material from which they were made was debased. These seem almost plastic to the touch -- not precious. Yet a roll of 25 is heavy -- it weighs more than a full beer can. Slung in a sock, it would be an effective weapon.

This is one reason that women, particularly, view coins as a nuisance. "I like things to be light and easy," says Jacqueline Shempp, 22, an economist with the Bureau of Labor Statistics, showing off her sleek little purse while waiting in a bank line. It is barely big enough to hold a phone and some credit cards. It doesn't have a place for coins.

This is significant. In what few pockets their clothes offer, women hate putting anything. Bulges in jeans? Fuggedaboudit. Women might put a credit card and an ID in a hip pocket, but coins in a coin pocket? It is to laugh. And why should they? When was the last time you used a coin to make a phone call?

So if dollar coins rarely show up as money, what's their point?

They might be seen, by some, as objects of admiration. Only 29 percent of all Americans responding to a recent Coinstar poll loathed them so much as to actively avoid them. Buy lunch at a downtown Cosi's with the coins introduced last month and two cashiers vie for the opportunity to buy them out of the till.

Why?

"I'm going to put them on the mantel," says Michelle Moore.

"I want to leave my kids something," says Nevel Butler.

Really?

It's not until you go over to the RadioShack to buy some batteries that the light finally dawns. Michael Shearill, the sales rep, also quickly retrieves some bills from his wallet to swap the coins out of the register. "I've got a whole bunch of them -- around 20 or 30 dollars' worth," he says. "They just look cool."

What do you do, mount them in an album?

Oh, no, he says. "I have a picture of Halle Berry on my desk" at home, he says. He surrounds it with the sparkly dollar coins. "I just love Halle Berry," he says. " She's money."

In a flash, it all becomes clear.

These coins are not money. They are fetish items.

Lighter, Faster

Cash is not nearly as obsolete as those all-stars of the antique money world -- the massive stone coins of the island of Yap, in Micronesia, some of which are taller than a person. But the market share of U.S. government-issued physical money, both coins and bills, is dropping -- from 21 percent in 2003 to an estimated 15.7 percent in 2008 according to the Nilson Report, the leading industry newsletter on consumer payment systems. Various electronic forms, including credit and debit cards, are expected to rise from a 42 percent share to 65 percent over the same period.

This matters because we didn't just wake up one day and throw away our cash. Changes in how we think about money have always produced upheavals in how we live.

The ancient world of barter -- trading so many chickens for a sheep -- was revolutionized in the Mesopotamia of the third millennium B.C., by the rise of standardized money. An entire warehouse of olive oil, wine or wheat could be transformed in value to portable ingots of silver and gold called minas, shekels or talents, reports the cultural anthropologist Jack Weatherford in "The History of Money." They also worked better than units of butter, an ancient form of money in Tibet.

We still hear the phrase "rich as Croesus" because it was his Lydian dynasty that recognized the need for small ingots worth, perhaps, a couple of days of labor. These lumps, about the thickness of the end of a thumb, were stamped with a lion's head to establish authenticity. Soon, almost anything could be valued in terms of coin, whether it be a rack of lamb, a poem, sexual services, a day's labor chopping wood, or taxes to the sovereign. Such markets yielded extremely complex networks of human enterprise, culminating in Roman times in trade throughout the known world.

In bulk, nonetheless, coins were cumbersome, and easily stolen or counterfeited. The Chinese pioneered paper money, but it was Italian bank money -- bills of exchange written on paper -- that in the 1300s dramatically improving the speed and safety of the flow of cash, according to Weatherford. Instead of hiring an armed host to move the weighty money over weeks or months, you could send a single messenger to transfer the piece of paper in days. The resultant explosion in commerce fueled the Renaissance.

In this timeline of barter to coins, and coins to paper, one can see the trajectory of cash's demise, however. If cost of storage, ease of transmission and trustworthiness of value matters, it's hard to beat electronic money.

In 1871, Western Union introduced the money transfer service that would ultimately become its primary business. The credit card revolution took off in 1949when, as Fortune magazine recounts the tale, Alfred Bloomingdale, the department store legend,and Frank X. McNamara, a financier, were having an appropriately plutocratic lunch at Major's Cabin Grill in New York. They found themselves short of cash. Out of this embarrassment was born Diners Club.

Computerized money produces the world we live in today. It may be hard to remember, but at the beginning of the 1990s, only 5 percent of grocery stores accepted credit cards. Now, you sign for your pomegranates. Similarly, travelers to distant lands no longer stock up on exotic cash. They are confident their money cards will meet their every need the instant they land, wherever that might be.

The next frontier is to delete even the plastic from our "plastic," says Tim Attinger, who describes himself as being in charge of ridding the United States of cash and checks. He is the senior vice president of product innovation and development for Visa USA. "I dream of a day when kids on the corner selling lemonade will take Visa payments," he says. "Not next year, but it can happen."

In Asia, it is already common to pay for things by simply waving your chip-equipped cellphone at a point-of-sale terminal, moving money with a beep as quickly as commuters sail through the Dulles Toll Road with an EZ Pass. Devices are being deployed in the United States that allow you to pay simply by pressing your fingertip to a scanner.

At that point, our bodies become our money.

Our money, our selves.

Myth, Magic, and Money

So, is cash dead?

Edmund Moy, the director of the Mint -- who is the very picture of 19th-century banker probity in his three-piece suit with a silver chain across his vested tummy -- acknowledges that cash is losing market share. But, he is proud to tell you, the Mint is making more varieties of coins than ever, including these new ones mandated by the Presidential Dollar Coin Act of 2005. They are popular at automated car washes, he says.

Nonetheless, rare is the convenience or liquor store in America without a big plastic jug next to the register into which, in the name of some worthy cause, you are encouraged to throw away your change.

Coinstar's business model is turning "coins to cash." Interesting concept. It assumes we think they aren't. And sure enough, last year people happily paid a typical 8.9 percent to have the coin-counting gizmo turn the nuisance of billions' worth of metal discs into something useful, like a chit to pay for your groceries. Coinstar estimates that $10 billion worth of coins is sitting idle around American homes.

High-value coins are still used routinely in Canada, England and the eurozone, but only because people there have no choice. The equivalent units of paper money, like the one-pound note, have been eliminated. In the States, where choice is far more sacred, people go for dollar bills almost every time. "It's very difficult to legislate a change in consumer behavior," Attinger notes.

Cash is increasingly reduced to three arenas, Weatherford says. It is used for transactions performed by poor people -- "the unbanked population," as they are picturesquely known; anybody's small purchases -- like an ice cream cone; and for illicit activities like tax evasion, extramarital trysts and drug scores -- for which anonymity is at a premium.

Visa and its competitors are hard at work eliminating low-income people's need for cash. Already, more than 30 states deliver payments to the needy -- food stamps, child support, unemployment benefits -- via cards welcomed at retail establishments.

"Micropayments" -- under five dollars -- are the huge future for electronic money, especially for the young, who are accustomed to paying digitally for ring tones or iTunes. You can go into a 7-Eleven, grab your beef jerky, wave your card at a reader and be gone in a flash.

To be sure, electrons are not problem-free. Identities can be stolen; computers can be hacked; power can go off. That's why Moy mentions a fourth use for cash -- crises. "When the Fed plans for a doomsday electronic crash," he points out, "they're not stocking Visa cards in a bank vault, they're stocking cash. When Katrina wiped out the electronic financial infrastructure, what did most Americans turn to in order to buy goods and services?"

No one at the Mint really knows how many dollar coins are in commercial circulation compared with how many languish in sock drawers. What it does know is that there is a brilliant reason for continuing to make coins. The Mint turned a $775 million profit in the last reporting year, which it dutifully handed over to the U.S. Treasury.

A key reason is "seigniorage." Because it costs the Mint 20 cents to make the new dollar coin, and people pay a dollar for it, the margin on each one is 80 cents. If people proceed to squirrel the coin away, and not put it in circulation, this is wonderful. The government gets to keep that 80 cents forever.

That's one reason the Mint views those quarters with images from the 50 states on them as such a success. Collect them all! That's why these new dollars are part of a series that will ultimately sport the images of each of the more than 40 presidents.

They'll make a mint!

Even Attinger, however, admits that the world he is building is one in which invisible money is nothing more than a means to acquire commodities. He acknowledges that it's hard to cherish electrons.

That's why, as new things become money, the old ones become sentimental items, as is the case with vinyl records and typewriters. That's why, if you want more than just a means of exchange, if you want a relic, a totem, a symbol -- if what you want is myth and magic -- well, that's the last bastion of cash.

So what's the final frontier for Visa, you ask Attinger. The laundromat?

"No," he says.

"It's the tooth fairy."