Search Results
Briefing
Rounding Up: The Impact of Phasing Out the Penny
The U.S. government is expected to stop producing new pennies for circulation by early 2026. In 2024, the Treasury incurred a seigniorage loss of $85.3 million on penny production.As pennies phase out, businesses are likely to round cash transactions to the nearest 5 cents, resulting in a "rounding tax."Using data from the 2023 Diary of Consumer Payment Choice, we estimate that rounding tax could cost U.S. consumers approximately $6 million annually.Eliminating the nickel in addition to the penny could result in significantly higher rounding costs: up to $56 million per year for consumers.
Briefing
The Value of Government Services: Evidence From Flight Delays During the 2025 Shutdown
The value of government services is difficult to determine, but when they are disrupted, the value they provide can be inferred from the resulting losses.The flight delays occurring during the government shutdown provides an opportunity to place a value on government services in aviation.An analysis shows that an estimated 1 million extra work-hours of delay were incurred during the 43 days of shutdown beginning Oct. 1, costing $66 million.
Briefing
Should the Fed Issue Digital Currency?
The United States might benefit from eventually replacing most physical cash with central bank digital currency (CBCD), but first the Federal Reserve must resolve several key policy and implementation issues, such as establishing comparative advantage over private issuers and ensuring safety and soundness.
Briefing
Should Central Banks Worry About Facebook's Diem and Alibaba's Alipay?
Alibaba — an e-commerce platform in China similar to Amazon — has created its own payment system (Alipay) to provide currency-like services: facilitating transactions, supporting peer-to-peer transfers and paying interest. Platforms like Facebook and Amazon are also researching creating their own digital currencies, but so far they have relied primarily on existing payment methods. What drives platforms to develop their own digital currency rather than use existing cash and card options? And should central banks and financial regulators worry about platforms issuing their own currency?
Briefing
The Borrower of Last Resort: What Explains the Rise of ON RRP Facility Usage?
This article explains why the Fed has been borrowing more than $1.4 trillion from its borrower-of-last-resort facility: the Overnight Reverse Repo. We compare the roles of five channels potentially driving Fed borrowing (such as saving glut, quantitative easing, regulation, etc.) and find that one channel — the Treasury General Account drawdown — is associated with most of the current usage. We also find this channel's impact could be partially moderated if the Fed tapers quantitative easing accordingly.
Briefing
What Is SWIFT, and Could Sanctions Impact the U.S. Dollar's Dominance?
The recent removal of Russian banks from the SWIFT messaging system has highlighted the importance of payments in supporting economies. But the weaponization of SWIFT has also left some commentators worrying about the loss of the U.S. dollar's dominance, as it might drive banks and firms to other substitutes. This Economic Brief discusses the economics of SWIFT and explains why emigrating from the U.S. dollar may be more difficult than we thought.
Briefing
A Historical Perspective on Digital Currencies
This article reviews private currencies in U.S. history to shed light on the contemporary issue of digital currencies. This perspective suggests that government interventions have a critical role in creating a well-functioning money and payments system. Particularly, a central bank digital currency (CBDC) can be a useful tool to supplement regulation in addressing long-standing concerns and risks associated with private currencies.
Briefing
Why Stablecoins Fail: An Economist’s Post-Mortem on Terra
Why do some stablecoins, such as Terra's UST, fail but others do not? Was Terra just an unlucky victim of a classic bank run or speculative attack? Or was its high-yield deposit offering doomed to fail like a Ponzi scheme? What is the limit of the stablecoin's algorithm? What makes payment stable? In this article, we'll dive into potential answers to these questions about the failed stablecoin.
Briefing
What Is a Crypto Conglomerate Like FTX? Economics and Regulations
We explain the economics behind the rise and fall of FTX. We view FTX and its associates as components making up one large entity: a crypto conglomerate. Understanding the economics of crypto conglomerates is crucial for designing effective regulations.