Sacagawea Dollar (idea)

It's interesting to note that the Sacagawea Dollar came about not because of any external push from industry or the public, but rather because everyone seems to dislike the Susan B. Anthony Dollar. Around 1997, the U.S. Mint announced that it was running low on sufficient inventory of the Anthony dollar to keep up with (paltry) demand, and would soon have to begin minting new Susan B. Anthony dollars in order to meet requests from the Federal Reserve Board. No one wanted this to happen; the SBA Dollar was so universally disliked, and so easily confused with the quarter that no one wanted to waste money minting more of them.

So, the United States $1 Coin Act of 1997 was introduced, mandating a new one dollar coin, bearing the image of a famous woman from American history, similar in size and weight to the Anthony dollar, but easily distinguishable from the quarter because of its distinctive color (gold) and different edges. In accord with this, the Mint announced it would stop producing Susan B. Anthony dollars in 1999.

At first, this move was hailed by a number of observers. The vending machine industry nearly wet itself with joy. For decades, they had been trying to develop better and better ways to make machines accept $1 bills, without getting fooled by copies, dollars-on-a-string, and other methods of ripping off vending machines. Coins are much easier to accept, verify, and store in vending machines. Everybody wins.

Furthermore, the economic gains of the dollar coin were hyped. Paper currency generally has a circulatory life of about 18 months. While a good number of bills survive longer, on average a bill is returned to the Federal Reserve in such condition that it can no longer be issues after only 18 months circulation. Coins, on the other hand, can stay in circulation for 30 years or longer, and are much more resistant to wear-and-tear.

The U.S. Mint and the Federal Reserve Bank geared up for the introduction of the "new dollar" as it was released in 2000. From January 2000 until through December 2001, the Reserve Banks suspended their policy of filling coin orders from banks using circulated specie first, and began filling 100% of their dollar coin orders with newly minted Sacagawea dollars. $558 million in gold dollars was paid out by the Federal Reserve Bank during the 2000 calendar year.

At first, it seemed that the coin would stick. The U.S. Mint released a series of television and radio commercials encouraging Americans to spend the gold dollar. Adds were placed in subways and on billboards. Demand for the coin stayed relatively high in 2001, dropping to $194 million in the new coins paid out by the Reserve (compare 1998 & 1999, when less then $100 million in dollar coins was paid out by the Reserve Bank).

Alas, it soon became clear that it was not to be. Because the Anthony dollar and the gold dollar were so close in weight and size, the Reserve bank lacked methods to separate the two coins as they were returned to the bank. Thus, starting in January 2002, orders for dollar coins began to be payed out in commingled Anthony and Sacagawea dollars. Its majors customers for dollar coins (primarily the U.S. Postal Service and the transit authorities of cities like New York and Boston) were fine with this set-up, as they were already equipped to handle both types, but the continued presence of both coins may have added to the confusion of a public already wary of dollar coins. It may also have discouraged banks from placing dollar coin orders, knowing that they would be getting the hated "Suzie" as well as the new dollar. As demand for the coin slumped further (a projected $120 million for 2002), the Mint announced that they would scale back their production of the new dollar coin, producing only 10 million or so in 2002, primarily for collectors. No word yet if production will resume in 2003.

Assessing the Failure, and Prospects for Recovery

At the moment, the Federal Reserve, U.S. Mint, banking industry, the vending machine industry and the public are united about the failure of the gold dollar: it's someone else's fault.

The public continues to be largely ignorant about the existence of the dollar. Polls show that only about a quarter of Americans have received or spent a gold dollar, and that many do not know they exist. The ad campaign released by the Mint tapered off significantly following the 2000 release of the coin, and likely failed to reach a great many Americans.

Banks, meanwhile, say that their hands are tied. They continue to not request the gold dollar because their customers don't request it. Critics claim that banks have made little effort to educate the public about the dollar because they dislike having to handle and store the dollar, which is bulkier than a comparable number of bills.

The Federal Reserve Bank is stuck with the metallic, weight, and size similarities of the Anthony and Sacagawea dollars, which hampers them in taking more Anthony dollars out of circulation, and lowers institutional demand for the gold dollar. As of Spring 2002, they continued to fill gold dollar-only requests from financial institutions, but their supplies of unmixed coins were declining, as were requests for such orders.

The U.S. Mint says the gold dollar is a success.

Moving on.

Vending machine makers have the best claim for knowing what's wrong with the gold dollar scheme. They are, in theory, the ones who should be handling most of them. The point their finger at the failure of the Fed to remove the $1 bill from circulation as the major contributor to the poor acceptance of the dollar coin. When the gold dollar was announced, the vending industry lobbied for the removal of the dollar bill from circulation, but were rebuffed. The Mint indicated that the success of the gold dollar would be judged by its use in street level, retail transactions, and that only then would a decision about the two dollars be made. Rather than replacing the dollar bill with the dollar coin, the dollar coin was used only to replace the existing, unpopular Anthony dollar.

The Mint had reason to fear; many Americans who know about the gold dollar remain resistant to it for entirely irrational reasons. While the gold dollar is heavy (in quantities of 100 or more), such concerns have not kept consumers in Canada and the European Union from adapting to whole dollar specie- apparently, those foreigners are made of sterner stuff than we thought.

Clearly, it is the Mints unwillingness to risk public criticism by eliminating the dollar bill that has ultimately sunk the Sacagawea dollar. The failure of the Susan B. Anthony Dollar and the success of the Loonie and the one and two euro coins show that the presence of a paper dollar is likely the most serious deterrent to adoption by the public. People like to keep what is familiar; thus they don't ask for the dollar coin, and thus it remains largely out of circulation.

Ultimately, the Mint and the federal government have to make up their minds. Either eliminate the dollar bill, and throw the weight of policy behind the Sacagawea dollar because it's "the right thing to do", or be done with it and get out of the business of minting dollar coins. Middle-of-the-road solutions continue to produce nothing but collector's items, and waste.