To coin a currency = Inflation

Inflationary pressures have gripped the planet lately, with commodity prices rising at unprecedented levels. True, there has been some corrections in the markets, but the trend has not relented. With central banks printing money at will, the shaky foundation of stable economics has eroded.

But there's another inflationary factor i've never really noticed before. Coins. What kind of coins you ask? Nickles, quarters, euro coins and dollar coins in some countries. So you ask, what do coins have to do with inflation?

Strange as it seems, paper money has the illusion of having more value in our pockets (though as a commodity, paper is worth less than the metal in coins). We are less inclined to spend our bills than our change. Coins are given away more easily.

This theory is not based on any scientific research or statistics, but what i have personally noticed in economies where paper currency has been replaced by coin of similar face value. Canada replaced the $1 and $2 notes with coins years ago, many other countries similarly. Europe, the latest to replace a slew of paper currency notes with 1 and 2 euro coins, with Estonia joining just months ago.

Despite promises of 'no price increase with euro', prices have increased substantially for most small ticket items. How much of the increase can be attributed to the new currency and how much to commodity related pressures is arguable. One thing most people have noticed is that money, especially the coins disappear much quicker than it did with the old currency. Also credit and debit card use is up dramatically, a seamless painless way to pay, until the bill comes.

The US is one of the few developed economies that still has it's base unit currency as a paper note. How much that helps in staving off addition inflation, who knows? But i'll bet you my last dollar note, that if and when the US changes to a dollar coin, prices will hike as it has in every other coined currency.