Do dollar coins cause inflation?

I was thinking today: Does the shift from paper money to coinage cause inflation?

Hear me out. I just moved to Canada where they have one and two dollar coins. If I went to a vending machine in the states and saw something for two dollars, I would think twice about it, but here I just fish the "two-nies" out of my pocket.

 

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Inflation isn't caused by the types of money. It is caused by:

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.

Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring central banks can adjust nominal interest rates (intended to mitigate recessions), and encouraging investment in non-monetary capital projects.

http://en.wikipedia.org/wiki/Inflation

 

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I cannot see how the type of currency would have any effect either way. :shrug: I do see what you're getting at about "impulse"- (or whatever) buying but I doubt it would cause many people to hesitate even for a moment.

Another facet of that, though, is the fact that coins are cheaper to keep in circulation because they last MUCH longer than paper. But they sure aren't going to make me carry around $10 - $15 in coins - NO WAY!

Something else to keep in mind is that the amount of currency of all kinds is fairly rapidly declining due to electronic transactions including direct deposit and credit/debit cards. In fact, most "cash" in many countries today exists only in the form of electronic bits and bytes.

 

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Exactly.

I was just thinking the other day that in the last six years I have not had any money from my job actually cross my palm.

My pay is direct deposited and I do almost all of my transactions by either of debit or credit card, and then once a month I go to the automatic teller at the bank and another on-line transaction to pay off the credit card.

I do 'real' work, yet my transactions take place in a virtual world.

Think about it.

The value of money only exists in our minds anyway.

The bank just moves numbers around on a spread sheet.

The same thing with national and global economies. It's just a larger scale.

The only thing of value is that which we perform and produce with our sweat equity.

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Intellectual sweat equity counts too, lol....

 

I'll go along with all that except for the fact that money is FAR more real than you give it credit for. And it's extremely good as a medium of exchange.

What if, instead of money, you were paid in pigs or shoes? Except for working, you'd have to spend the rest of every day trying to find someone to barter with to change those pigs or shoes into something you really needed. Actually, you'd probably spend MORE time doing that than working just to get a shirt to wear or find milk for the kids. What a horrible life that would be!!!

 

No they don't.

Vending machines at work charge 1.45 for a FUCKING PACK OF GUM. WTF! Might as well be a toonie.

So you put your toonie in and get a shiton of the USELESS change back. 5 Toonies buys dinner at any non service joint. Toonies are REAL money lol.

I will never pay that much for some cheap excel gum. But there are some really dumb people at my work who will. One lady in sales(which make ridiculous money and they are all basically mentally challenged in one way or another), had a fuckin fit when the machine ran out of Diet Coke. She had a middle aged woman tantrum, I shit you not, when all she had to do was take the elevator down 5 floors and buy one for a buck(loonie) cheaper from the koreans running the little cafe in the building.

I hate sales people.

 

Money, money, money. The conceptual medium of exchange that lubricates the economy.

Actually, pigs and shoes might be very handy to have at some point in the future. I have some excellent recipes for pork, lol....

Of course I understand why we are utilizing the present model.

There isn't another that will work at present.

And the existing mechanism isn't working that well either. Have discussed this topic at length in another time and place. :shrug:

The recovering economy is far from recovering, in my opinion.

Can you just imagine if everyone's debt was suddenly called? Not just individuals with credit card debt and mortgages......the debt between nations as well. Can't be done. The game would end.

Money doesn't really exist. It is a conceptual tool that serves as a medium of exchange whereby we are actually trading our time, energy and resources for arbitrarily assigned figures that reflect supply and demand.

Pigs and shoes serve a lot better purpose than the arms trade.....

Just my opinion.

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I'm aware of the macroeconomic reasons for inflation.

I think that I perceive the two dollar coins here as worth less, simply because they're coins. If people are _more willing to spend a two dollar coin than two one dollar bills (for whatever reason), this creates demand which raises the price of some things (i.e. vending machine snacks).

This thread was slightly tongue in cheek, although I feel I shouldn't have to point that out...

 

Ah Yeah , For a minute I thought you were hitting the crack pipe . Glad you clearified

 

I think your assertion is that the type of money used by countries has an effect on the "velocity of money" which is claimed to be one of the determinants of inflation.

The question becomes two fold:
1. Does the type of money used change the velocity of money?
2. Does the velocity of money affect inflation?

 

An easy way to set a bit aside, is to bank those one and two dollar coins. Out of sight, out of mind, and they add up a far sight quicker than those other bits of change.

I wonder if people hoarding those coins for a while has an effect on the economy?

Likely not, as fewer persons are even dealing with cash these days, debit, credit and 'direct deposit' getting to be the everyday norm.

 

$100 bills spend to easy . Once you brake em blame there as well as gone

 

I don't think the "ease of spending" has much if anything to do with inflation. About the only way that coinage could influence the rate of inflation is if it were minted as specie as a _replacement_ for paper money. Specie largely prevents inflation by not allowing the money supply to easily increase; thus an increase in price is prevented by simply not having enough money in circulation for people to be able to spend.

 

Here's an interesting article related to U.S. dollar coins:

http://www.npr.org/blogs/money/2011...xploit-a-government-program-to-get-free-trips

 

Never mind coins contributing to inflation. Has anybody been watching what gold is doing at present?

$1,590.00 an ounce and rising.......

Crazy.

 

That usually indicates that people are worried about what their dollar is actually worth and are investing in gold against the devaluation of the dollar.

 

Conceded.

Soooooo.......in a crunch, which would you rather have in your possession?

A small pouch of gold nuggets, coins and/or ingots, or a wheelbarrow equivalent of the currency of the realm?

As I have mentioned elsewhere (and was mildly rebuked) the value of money is assigned by us. It is a conceptual medium of exchange.

The real value lies in the goods and services themselves, which are less easy to transport around the globe. :bugeye:

Hence we use money. Another medium of exchange that works well in small communities is 'green hours', whereby persons contribute their skills and bank time instead of pay for same. The challenge lies in balancing out the goods and services exchanged, as at forty below, everyone will be needing the plumber to thaw frozen pipes, but what do they have in the green bank that likewise works for the plumber?

Quite fascinating to study the history of fiat money and to try to think of a solution for the current economic cat's cradle, at least it is of interest to me.

 

What do you mean by that remark?

I was only answering the question of why people are buying gold and I gave my opinion about that, not whether or not it is good to have, but only why it is being bought by worried investors.

Most of the gold being sold is on paper not actual gold bars. So if they ever want to actually go and get their gold they will be surprised to only receive a check in the amount that the golds value is at the time they want to cash in their stocks. So that eliminates people running around with loads of gold in their pockets as you suggest for the most part. There will be some that actually have real gold coins, bars and other forms of it which they will need to convert that into money, real currency, to buy things.

 

Dude why you so jumpy . She was not criticizing. Forms of expression .

Green banks , barter , could come down to that if the system fails ? Who knows how low we will go ! O.K. that sounds like a line of a song lyric . Got to remember that one

 

Not jumpy at all , just asking what she meant by it because I've never seen her say that to me before. Just curious is all.

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