This article appeared originally in Gulf news: link to original article
When was the last time you carried a bunch of 25-fil coins as you walked around a shopping mall in the UAE? Oh, you didn’t? Fine.
When was the last time you carried a single coin of those to pay for something that you know will cost you 25 fils to buy? You didn’t either? Hmm.
When was then the last time you carried 25 fils because you know something will cost you Dh100.25 to pay for? You also didn’t? Right.
Now think of the above questions in reference to the 50-fil coin.
I normally get annoyed when I pay for anything and I receive change in many 25 and 50 fil coins instead of much fewer Dh1 coins. My payback? I put them into the tip box.
The logic? Well, since tips are normally shared within a retailer, let whoever felt ingenious enough to propose giving customers change in 25 and 50 fils enjoy counting those at the end of the week or the month. Meaning? I know, but that’s my way of saying: “If you are using them, then you want them in circulation”.
I remember the 5 and 10 fils coins in circulation for a brief period of time — imagine if my above tactic was applied with those. Even back then, I couldn’t help not thinking of how illogical it is to have such coins in circulation. The same can be now said of the 25 and 50 fil coins.
The reason I am saying this is: 1. because inflation has averaged at around 4 per cent since the UAE was founded, 2. Because of the high cost associated with minting these coins.
The first point is self-fulfilling. If inflation has always been managed at an acceptable targeted rate, then the phasing out of smaller denominations is only natural. As a bizarre example, hyperinflations normally lead to the dropping of many smaller denominations and adding zeros to the ones left. Since inflation is a rise in price levels, then that rise will eliminate those small fractions in pricing mechanisms. We are getting there anyway — so why not cut to the chase?
The second point can be the result of the first point, but only indirectly and with minimal contribution. To illustrate the second point, let’s consider the breakdown of the US dollar: penny = 1 cent; nickel = 5 cents; dime = 10 cents; quarter = 25 cents.
The coins are mainly made from copper or an alloy with copper in it. Understandably, the simple calculation made to decide if any coin is worth keeping is how much does it cost to produce. In 2012, the penny cost the US Treasury 2.4 cents to mint while the nickel cost 11.2 cents.
How much are these worth again? 1 and 5 cents respectively. In such a case, there are two mutually exclusive options that could be taken — 1. discard, 2. change the minting mix.
The second option is the most apparent. However, the huge variance between the cost and the market worth says a lot about the increasing market value of commodities used in the minting process. If this variance has been growing over time, are the coins worth saving?
Going back to my favourite 25-fil coin, allow me to point out that a nickel is approximately 18 fils and is as such the closest in value to the 25 fils. That being said, I would imagine that the 25- and 50-fil coins are made of similar metals or alloys used in those of US coins.
In all cases, the cost will surely be higher than the worth of the coin plus the unseen costs of having it in circulation. The last thought I want to leave you with: how much money can I make if I collect 25- and 50-fil coins, melt and resell them?