Our Pocket Change Has Become Nearly Worthless

A couple of weeks ago when I wrapped up my "70 at 70" series, I reflected on the effects of inflation over the past 70 years. Roughly speaking, our dollar today has the approximate buying power of the dime in 1947. Expressed another way, prices today are roughly 10X their levels of 70 years ago.

Going back another generation, to the establishment of the Federal Reserve in 1913, the statistics are even more dramatic. Today’s dollar buys what roughly cost four cents in 1913, for an increase in prices of approximately 25X. (This is as measured by the Bureau of Labor Statistics' annual Consumer Price Index (CPI), established in 1913.)

Yet today, we are using the same denominations (in both our coin and currency) as we did in 1913. In our hard coin, we use the cent, nickel, dime, quarter and half, while our major circulating currency consists of the $1, $5, $10, $20, $50 and $100 notes. There has been no change in over 100 years, despite prices having risen by about 2500%.

(If all this is amazing, keep in mind that in reality, we are still using basically the same coin denominations as set down in the original Mint Act of April 1792. Aside from the elimination of the half cent in 1857 and the substitution of the five cent nickel for the half dime in 1866, the denominations we use today are identical to what we used 225 years ago!)

So returning to 1913, if the denominations in use today mirrored those in use about 100 years ago in terms of buying power, our coins would be denominated as follows:

25 cents, $1, $2.50, $6, $12.50

Now of course, I realize times have changed, and credit cards (and to a lesser extent, checks) have taken over most of the monetary transactions we engage in today. Yet it seems to me, that we should at least update our circulating coins to absorb at least some of the inflation. Simply going about halfway there, our current circulating coin denominations should be at least as follows:

10 cents, 50 cents, $1, $2.50, $5

Ironically, counting gold coins, all of these denominations were used in 1913 as well!

Hard to believe, but this little group of coins in 1913 packed the purchasing power of $22.75 in today’s dollars

So in a nutshell, I’d recommend eliminating the cent, nickel and quarter, and replacing them with a circulating half dollar and dollar coin, and adding a $2.50 and $5 coin. In addition, I’d eliminate the $1, $2 and $5 note and simply print the $10, $20, $50 and $100 notes. Sadly, I fear we may be moving in the opposite direction, with rumors of the elimination of the $100 bill. I suppose big brother needs to keep an eye on us. Just my 50 cents worth...