THE UNITED States currency system, fundamentally unaltered during this century, is in desperate need of change -- specifically, a dollar coin.

The institution of a modern $1 coin would not only reduce government spending, eliminate the need for costly fare-box conversions, help hold down the cost of vending-machine products and aid the visually handicapped, but would remove various hidden costs of the outmoded dollar bill.

It would also be a sensible acknowledgment of inflation. In the past 30 years, the Consumer Price Index has risen from 84.3 to 338.7, a four-fold increase. Today's dollar is the quarter of the 1950s. In the Eisenhower years, a buck would buy hamburgers, french fries and soft drinks for two at McDonald's or Cokes for an entire baseball team. Today, it is no longer the threshold of a moderate purchase.

Moreover, a dollar coin would remove numerous inconveniences from modern life. With paper bills, we cannot make a long-distance call on a pay phone, buy a Sunday paper from a street box, drive through a toll booth or use a long-term parking meter. We wait in lines as Metro's farecard machines reject, then (perhaps) slowly accept bills. And the list of annoyances goes on. The High Cost of Money The American taxpayer would save over $50 million annually if a coin replaced the dollar bill, according to a 1979 Federal Reserve estimate. The reason: Coins last approximately 20 years; dollar bills only 18 months on average. The cost of handling worn-out bills runs to $16 million a year. And although coins wear 13 times longer, they have only a slightly higher initial material and minting cost -- three cents apiece versus 2.6 cents for a bill.

These life-cycle savings would increase dramatically as the population and economy expand and more dollars are needed. From 1976 to 1986, for example, the number of dollar bills printed annually increased from 1.4 billion to 3.1 billion. In 1986, $1 bills accounted for 47.5 percent of all bills printed; some 3.8 billion are currently in circulation.

Based on Treasury estimates, the Fed would have to pay a total of $1.3 billion (in 1987 dollars) over the next 20 years to purchase and replace those 3.8 billion bills every 18 months -- not counting internal handling costs. But the Mint would have to spend only $114 million for the same $3.8 billion in the form of coins. The Treasury Department is currently refining these figures.

But those are only the obvious savings. The technology required to deal with paper $1 bills is expensive, and those costs eventually are passed along to consumers in the form of higher prices. Conversely, eliminating the need for that machinery would hold prices down. Bill changers cost about $2,400 each, according to the National Automatic Merchandising Association. These costs are being passed on to buyers. So are the costs of retrofitting 700,000 cigarette, window-front and food machines with bill acceptors at about $400 per machine; an additional 1.2 million remain to be adapted. Most of the 1.8 million soft-drink machines cannot handle bills, although all the new ones are being made with the capability of accepting a dollar coin.

Alternatives to bill-acceptors would prove equally expensive. The vending industry already has plans for a system of magnetically coded "debit" cards which would function like Metro subway farecards: The consumer would buy a card for a certain face amount, and each purchase would subtract an increment. The installation cost is estimated at a minimum of $750 per machine. As is the case with subway tokens and travelers' checks, the seller of debit cards would have the use of the cash for goods and services not yet consumed; and of course the cost of machine changes would eventually be borne by the customer.

In addition, without prompt currency reform many more mass-transit authorities will be forced to follow the example of the Cleveland, Washington and Chicago systems, which recently spent $5 million, $8.7 million and $15 million respectively to refit buses with new fare machines to accept dollar bills. Yet Metro s old fare boxes would have accepted a dollar coin.

The New York City bus system has an easy solution to the paper-dollar problem: It doesn t accept them. No token or change, no ride -- in spite of the phrase "legal tender for all debts" printed on all U.S. bills. A dollar coin would, however, negate the need for tokens, which are now used for about 37 percent of New York s bus fares.

The RP Foundation Fighting Blindness is concerned about its members' ability to differentiate among various currency denominations. If there were no dollar bills in circulation, small purchases by the visually impaired could be made without fear of accidentally spending a large bill or of being cheated when receiving change. Many blind persons have devised their own systems for telling paper bills apart: For example, folding fives in half, tens length-wise, twenties quartered and singles unfolded. Technology offers another solution: a six-pound talking paper-money identifier for $625. Confusion at the Edge The last time a $1 coin was introduced -- the Susan B. Anthony dollar in 1979 -- it was firmly rejected by the public. The U.S government never formally studied the failure of the "Suzie," but the most serious problem seems to have been that it was easily confused with the quarter. Additionally, retailers didn't want to count and store both paper and metal dollars. The Treasury Department also conceded in a January 1987 study that the rejection was "due, at least in part, to the continued production of the dollar bill after the coin -- the Susan B. Anthony dollar -- had been released."

When people confused the Anthony dollar and the quarter, it was not because the two coins have similar diameters, but because both share an identical silver color and both have "reeding" (small ribs on the edges). The public has no problem differentiating dimes from pennies (which are very close in size, but different in color) or quarters from nickels, which have the same relative sizes as the quarter and the Anthony dollar. The key element for fingers in discerning coin differences is the contrast between smooth and reeded edges.

If a new $1 coin is designed, the Anthony dollar s dimensions should be retained, but it should be made without reeding and the color should be gold.

Several Western countries studied the U.S. experience with the Anthony dollar. Recognizing the problems of a paper-based currency system, they have introduced high-denomination coins, and in every case have removed or phased out the bill of the same denomination: 1982, the 500-yen in Japan; 1983, the 1-pound in England and the 10-kroner in Norway; 1984, the dollar in Australia; and in 1986, the 10-franc in France. Two weeks ago, Canada joined the reformers when it premiered its new $1 coin; its dollar bill is also on the way out.

Canada s new coin is the same diameter as the Anthony dollar, but offers two distinctive differences. The color is bronze-like and the edge is 11-sided without reeding (thus answering blind persons' chief objection to the Suzie -- that it was hard to tell from a quarter).

Because the Canadian dollar retains the same dimensions as the Anthony dollar, U.S. vending-machine manufacturers, which export 90 percent of the machines used in Canada, will be able to employ existing coin-validators designed to accommodate the Suzie. By doing so, Canada also saved the expense of having to inventory and measure coins from every country in the world: The United States had already performed that task in designing the Anthony dollar, to ensure that no foreign coin of inferior value would accidentally prove to be interchangeable with the Suzie. If the United States were to change the dimensions of a new $1 coin, it would require a new measurement inventory, entailing further delay. And millions of coin-operated machines would have be refitted.

U.S. designers had rejected a multi-sided, flat-edged coin for the Suzie because validators in coin-operated machines require a coin that rolls down a chute; a coin with flat sides might slide or bounce. So the Anthony dollar was made round. But along the inside perimeter, an 11-sided figure was stamped in relief to aid in differentiation. The Canadian Mint made its dollar coin 11-sided, and solved the "bounce" problem by making each side an arc instead of a straight edge. How Money Makes Money Having been burned by the rejection of the Suzie, the Treasury Department is reluctant to take the lead in reintroducing a dollar coin. There are still half a billion of the original 800 million Anthony dollars sitting unused in the vaults of three U.S. Mints and 37 Federal Reserve branches across the country. The accounting system used in creating money has posed barriers to destroying these coins. Here's why:

To mint a dollar, one cent's worth of metal strip is purchased through the Mint's Coinage Metal Fund from private metal fabricators. (Congress appropriates two cents to the Mint for manufacturing costs.) The Mint then produces a coin worth -- presto -- $1. This dollar is recorded in the Coinage Profit Fund, which then replenishes the Metal Fund for one cent. The remaining 99-cent profit (called seigniorage) is swept daily from the Profit Fund into the Treasury's general fund.

If those coins were melted down, the process would have to be reversed -- instantly adding nearly one-half billion dollars to the nation's deficit. But minting a new $1 coin would offer a solution as the new coins could be "traded" for the old coins without taking the seigniorage on the first 500 million minted. The old Anthony dollars could then be melted down.

For reasons of cost, efficiency and convenience, a diverse group of interests including the coin-operated-machine industry, metal producers and fabricators, convenience stores and the visually handicapped have joined to form the Coin Coalition. The group is calling for modernization of the U.S. currency system through the issuance of a well-designed dollar coin and a phased removal of the $1 bill.

Critics may well object that the elimination of dollar bills would add too much weight to the American pocket. (That was a serious problem in an earlier failed experiment, the Eisenhower dollar minted from 1971 to 1976. The coin was popular only in the West and in casinos, which made their own cartwheel-sized tokens when they found they needed more.) But for those who prefer paper, there is always the $2 bill, which is very popular in Canada and Australia.

Some people fear that a dollar coin would make it easier for vendors to charge a buck for a Coke and for transit authorities to raise their fares to a $1. But the cost of materials, labor and capital remains the driving force of inflation, not the form of our currency. A coin at the dollar threshold will no more cause inflation than its absence will prevent it. There was no dollar window on gas pumps in 1973 -- but did that keep gasoline prices under a dollar after the Arab oil embargo?

Although there is no organized opposition to currency reform, there is substantial public inertia. Just as with Uniform Packaging Codes and the recent extension of Daylight Saving Time, a major educational campaign is required to demonstrate that currency reform will help fight inflation and reduce government spending.

In successive steps, the United States has gone off the gold standard, removed silver from its coins and ceased to honor silver certificates. Controversy accompanied each change because an article of faith -- faith being the basis of all money -- had been altered.

Money is, after all, whatever a society agrees on -- shells, beads, metal or a bank's computer printout. As Drake University economics professor Dwight Saunders used to tell his students, "Remember, we're only talking about ceremonially blessed dirty rags and mud pies."