New £1 Coin

[The Ayatollah Buggeri]

I'm spinning this off from the budget thread, as it's really a separate issue.

It's been reported that the cost of adapting vending machines to take the proposed new £1 coin could be as high as £400 million, but Osborne insists that it's necessary as an anti-forgery measure.

I'm wondering if the real reason for this is to discourage the use of cash even more, and that instead of installing new coin mechanisms, many vending machine mechanisms will be adapted to take cards only, or even another electronic method such as PayPal. The last time I used a ticket machine at a British railway station, it had a chip and PIN card reader but did not accept cash.

I'm also struck by the frequency with which the UK changes its coins and notes. None of the currency that was in circulation in my childhood (born in 1972) exists anymore. In contrast, the dimensions of the current United States banknote have been unchanged since 1929. The 25-cent coin ("quarter") has had the same dimensions and the same basic visual features since 1828! The materials, visual designs and production methods have all changed slightly, but not enough to necessitate the expensive modification of vending machines. As an example of this, a friend of my wife's runs a retro-style cafe just up the road. It has a 1937 jukebox that plays 10" shellac records. In January, she asked me to fix it - needed a new valve and a couple of capacitors. Otherwise, the thing still works, and the coin-checking mechanism still accepts today's nickels, just like the ones in cirulcation when it was made.

It probably isn't very good at detecting forged ones, but my point is that the amount of forged currency in circulation here is clearly low enough that it isn't worth the hassle and expense of radically redesigning the physical currency every few years as an anti-counterfeiting measure. But yet in the UK this is done very frequently. Why?

[interestrateripoff]

He gets to announce something shiny. What's not to like?

I thought the BoE was leading the charge on £1 forgeries by making the pound worthless?

[Goat]

I'm somewhat dubious about that £400m figure, the link you provided indicates approximately 1m machines in the UK so that's £400 per machine, which sounds on the high side to me.

I would've thought that for most modern machines it would be a simple software update carried out as part of a routine maintenance, at worst I would expect the need to replace a few parts plus maybe 1/2 an hour of engineer time - can't see how you're ever going to get it up to £400.

Might be more of a problem for older machines but then maybe not, I'd guess it depends upon how much security against counterfeits the operators want. They may not be able to adjust them to recognise the bimetalic nature of the coins but size, shape and weight shouldn't be too much of an issue.

Also bear in mind we're looking at a 3-5 year lead in, what is the average age of a vending machine in the UK? What percentage will be replaced before the old £1 is phased out?

[longtomsilver2]

I would say the number of forgeries in circulation is much more prevalent than our government is letting on (not wishing to undermine the currency). I'm forever kicking back fake £1 coins to retailers and guestimate it could be as high as 1 in 8. My bets are also on a criminal outfit perhaps Romanian churning out millions a day using the same round/blanks derived from an African countries much lower valued Rand.

Euro 50 cent coins appear to work quite well in machines operated out of the UK that also get used being in Euroland being recognized as 50 pence (different coin obviously just manufacturers being lazy).

[The Ayatollah Buggeri]

Half an hour of technician time, plus his time travelling to and from the site, plus a few parts - I can believe £400 for that. You'll easily pay £200 for someone to come and look at your washing machine and replace a simple, mass-manufactured, almost zero-cost part (e.g. a thermal fuse). That person has probably got a shorter distance to travel, given that there are far more domestic appliances in existence than vending machines. I don't know how many different types of vending machine coin mechanism exist, but I wouldn't have thought there'd be a market for more than a few hundred units of each mod kit. Given the R & D and one-time manufacturing costs of these (making dies for the mechanical parts, etc.), I don't have a problem believing that these would have to be sold to the end user for between £100-200, in order for the maker to achieve any significant margin.

So, if you have, say, a Coke can and chocolate bar machine in the lobby of your hotel, what are you going to do - spend £400 having it modified to take the new coins, which will probably only be in circulation for a few years, or make a one-time investment of having a chip and PIN card reader put in it, for which most future maintenance can probably be done as over-the-wire firmware updates?

[StainlessSteelCat]

I would say the number of forgeries in circulation is much more prevalent than our government is letting on (not wishing to undermine the currency).

I'd agree. In Leeds, I was getting at least one a week for a time. In one of the pound shops, I would get one without fail every time. I stopped going to it unless I had the change in the end. Out here in the sticks though, I haven't seen a dodgy pound coin for more than a year now.

I'd put the number of dodgy 'uns closer to 10% in some areas of the country.

[SleepyHead]

These days, the pound is worth what the old threepenny bit was.

Says it all really.

[Guest spp]

Probably further debasement of the metallic value.

The most important point - from 1971 through 2012 the British pound has lost around 92% of its buying power!!

PRINT BORROW AWAY!

[The Ayatollah Buggeri]

I'd agree. In Leeds, I was getting at least one a week for a time. In one of the pound shops, I would get one without fail every time. I stopped going to it unless I had the change in the end. Out here in the sticks though, I haven't seen a dodgy pound coin for more than a year now.

In that case I must have had hundreds pass through my hands during the seven years or so that I worked in Leeds. I wouldn't know how to spot a phony pound coin if I had one (unless the signs are really obvious, e.g. misspelt words), and no-one has ever refused to accept one from me, believing it to be fake. However, if anyone ever had, I would have educated myself pretty quickly and started to scrutinise the ones given to me.

All this says to me that the damage to the economy from fake £1 coins can't be that significant, because if it was, everyone would be constantly on the lookout for fakes. And as others have pointed out, the problem will eventually solve itself, by the value of a pound inflating away whataver margin the forgers are making, to the point at which it's no longer worth their while to produce them.

Edit - I was constantly having problems with supermarket self-checkout machines refusing to accept coins, £1s included. I assumed that this was just another symptom of their general uselessness (along with "unexpected item in the bagging area", etc. etc.), but maybe it was the coin mechanism detecting fakes. I can't ever remember having a pound coin rejected by a human checkout operator, though.

Edited March 19, 2014 by The Ayatollah Buggeri

[StainlessSteelCat]

In that case I must have had hundreds pass through my hands during the seven years or so that I worked in Leeds. I wouldn't know how to spot a phony pound coin if I had one (unless the signs are really obvious, e.g. misspelt words), and no-one has ever refused to accept one from me, believing it to be fake. However, if anyone ever had, I would have educated myself pretty quickly and started to scrutinise the ones given to me.

All this says to me that the damage to the economy from fake £1 coins can't be that significant, because if it was, everyone would be constantly on the lookout for fakes. And as others have pointed out, the problem will eventually solve itself, by the value of a pound inflating away whataver margin the forgers are making, to the point at which it's no longer worth their while to produce them.

Edit - I was constantly having problems with supermarket self-checkout machines refusing to accept coins, £1s included. I assumed that this was just another symptom of their general uselessness (along with "unexpected item in the bagging area", etc. etc.), but maybe it was the coin mechanism detecting fakes. I can't ever remember having a pound coin rejected by a human checkout operator, though.

The outside veg market and the pound shop near Holland & Barrett are the places I'd get given most of my dodgy ones. The small Tesco Express would occasionally serve one up too.

[Goat]

Half an hour of technician time, plus his time travelling to and from the site, plus a few parts - I can believe £400 for that. You'll easily pay £200 for someone to come and look at your washing machine and replace a simple, mass-manufactured, almost zero-cost part......

The difference is that the owners of these machines will have their own team of engineers who will presumably be servicing them on a regular basis anyway so the marginal cost is parts plus time on site.

It's much more like taking your car in for a service and asking them to change a light bulb at the same time.

Edit:

So, if you have, say, a Coke can and chocolate bar machine in the lobby of your hotel, what are you going to do - spend £400 having it modified....

I'm not 100% sure but I think the usual arangement with vending machines is that they are owned and operated by outside contractors who give you a cut of the proceeds in return for the right to site the machines there.

Edited March 19, 2014 by Goat

[Rain'ard]

The Public are going to choose the design of the obverse side.

I wonder what would be most suitable !Luminarti all seeing eye? "Don't Panic "

[swissy_fit]

In his Budget statement to the Commons, Chancellor George Osborne said: "The prerequisite of sound money is a sound currency"

I love it, he's got nearly the balls of Blair turning up at the Cenotaph.

[awaytogo]

Half an hour of technician time, plus his time travelling to and from the site, plus a few parts - I can believe £400 for that. You'll easily pay £200 for someone to come and look at your washing machine and replace a simple, mass-manufactured, almost zero-cost part (e.g. a thermal fuse). That person has probably got a shorter distance to travel, given that there are far more domestic appliances in existence than vending machines. I don't know how many different types of vending machine coin mechanism exist, but I wouldn't have thought there'd be a market for more than a few hundred units of each mod kit. Given the R & D and one-time manufacturing costs of these (making dies for the mechanical parts, etc.), I don't have a problem believing that these would have to be sold to the end user for between £100-200, in order for the maker to achieve any significant margin.

So, if you have, say, a Coke can and chocolate bar machine in the lobby of your hotel, what are you going to do - spend £400 having it modified to take the new coins, which will probably only be in circulation for a few years, or make a one-time investment of having a chip and PIN card reader put in it, for which most future maintenance can probably be done as over-the-wire firmware updates?

I think your reading a little to much into the change, Most vending m/cs will have or will be ready for replacing by the time the new coin comes into use or as happens they have a major retrofit.

I believe than within the next 20 years we will become a cashless society, Boy will the tax man be rubbing his hands then, but i believe we have a way to go yet.

[Ulfar]

It will be because of the fakes.

There are millions of almost perfect fakes in circulation and have been for some years. I am of course talking about the ones produced by professional organized outfits. The reason the £50 note is being replaced is because someone will have been caught producing notes indistinguishable from the real thing.

The amateur coins made out of lead are easy to spot, just like the bank notes printed using computer printers.

Edited March 19, 2014 by Ulfar

[ChumpusRex]

I'd put the number of dodgy 'uns closer to 10% in some areas of the country.

I'd agree. I'd noticed this in East London, where many of the fakes basically had no effort put in. Presumably, they only needed to be good enough to drop into the tube ticket machines. But even in the shops, you would regularly get better quality fakes (but still visible fakes - e.g. edge printing not straight).

It's also pretty rampant in some parts of the North West.

[happy_renting]

I have become so cynical about our currency now, I just regard counterfeit coins as free-market QE.

[oracle]

Probably further debasement of the metallic value.

The most important point - from 1971 through 2012 the British pound has lost around 92% of its buying power!!

PRINT BORROW AWAY!

actually it's been stolen

in years gone by you would have seen the words"I promise to pay the bearer on demand xx pounds STERLING"

NOW IT'S JUST "i PROMISE TO PAY THE BEARER ON DEMAND XX POUNDS"

WHAT HAPPENED TO ALL OUR SILVER?

[oracle]

Probably further debasement of the metallic value.

The most important point - from 1971 through 2012 the British pound has lost around 92% of its buying power!!

PRINT BORROW AWAY!

actually it's been stolen

in years gone by you would have seen the words"I promise to pay the bearer on demand xx pounds STERLING"

NOW IT'S JUST "i PROMISE TO PAY THE BEARER ON DEMAND XX POUNDS"

WHAT HAPPENED TO ALL OUR SILVER?

[R K]

In his Budget statement to the Commons, Chancellor George Osborne said: "The prerequisite of sound money is a sound currency"

I love it, he's got nearly the balls of Blair turning up at the Cenotaph.

With a bit of luck it might be still be worth 94p by the time it's issued, but I doubt it.