Please, No More Coins

Chicklet-currency As election day approaches, I thought this would a good time to discuss a bloated federal program that wastes taxpayer dollars, annoys the citizenry, and uses up our precious natural resources. I am talking about the minting of coins.

I was reminded of this continuing national tragedy by a post at The Consumerist about a brave grass-roots effort to address this issue. Apparently, there is Dunkin Donuts shop somewhere (for obvious reasons of safety its location was not disclosed) that now rounds all purchases to the nearest nickel. If a customer for some reason actually wants the pennies (the mind boggles) the shop will provide them.

I think this is an excellent first step and one that I hope more courageous shop managers will employ. I am sure this must be a violation of federal law (why else has it taken so long?) but if all stores do it the feds will be overwhelmed. I think the Secret Service must be in charge of enforcing the penny laws.

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Why Dollar Cost Averaging is Popular

[Today’s Thursday re-run first ran October 5, 2009.]

Sometimes topics crop up in the PF blogosphere, seemingly out of nowhere, and rattle around from blog to blog for a while. Dollar cost averaging is a recent example. The Digerati Life brought it up on September 23, Lazy Man and Money responded the next day, and The Sun’s Financial Diary shared its Stock Chart thoughts on the 28th. There are probably several other mentions out there I missed.

Before I add my voice to the echo chamber, I’ll define the term. Dollar cost averaging refers to buying an investment, usually a stock or stock fund, over time in installments of equal dollar value.

It is often confused with the laudable and similar idea of regularly saving. Setting aside a certain amount of your pay every week or month may look like dollar cost averaging, but it’s not exactly the same thing.  Implicit in the question "is dollar cost averaging a good idea" is the premise that there is an alternative, that you could have invested it all at once rather than slowly as you earned it.

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Gift Cards

Am I in danger of becoming obsessed with plastic cards? It’s possible. But there is one type of card I have somehow managed to avoid discussing in 21 months of blogging.

Sarah_Palin_Salvation_Army CropThat type is gift cards, the anonymous chits that are as good as money in one  particular store. In their current form they are a relatively recent innovation. When I was your age (20+ years ago) stores sometimes sold paper gift certificates for specified amounts, but they were a one-use item. If you bought a $50 sweater with a $100 gift certificate you generally got $50 in actual cash as change.

It wasn’t until we entered the digital age that modern gift cards, each a miniature debit account, were born. Spend $50 with a $100 gift card and your “change” is the same old card, only now it is worth just $50.

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High(er) Tech Credit Cards

Last week I wrote about credit card technology, in particular the “chip and PIN” or “smart” cards that Europeans have been using for decades. I said that although the technology used by European (and Canadian, it turns out) cards is unquestionably more sophisticated than the dumb old plastic we simpleDynamics--Citi--Dividend2G--300dpi--Photo--(C)2010 Crop Americans carry, it is not particularly “smart.” The only meaningful advantage is in fighting fraud, but that problem has such a tiny economic impact that it is hard to imagine how upgrading from our current swiping system could possibly make sense.

Indeed, I still do not understand how adopting chip and PIN makes economic sense outside the USA. I can understand it making psychological sense. Everybody seems to have an irrationally exaggerated fear of credit card fraud. And there is no discounting the cool factor: the natural human attraction to new technology.

Speaking of which, two readers pointed me to a New York Times blog entry posted two days later on even higher tech cards now in the pipeline.

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The Cost of Security Theater

Airport Crop What is the total cost of airline delays in the US? Funny you should ask. A recent 82 page paper from The National Center of Excellence for Aviation Operations Research (miraculously acronymed as NEXTOR) estimated a total cost of $32.9B for 2007.

It is a wonderful paper. That it uses 2007 data tells you that it was a multi-year effort. It has ten primary authors and employed the “assistance” of six others mentioned on the title page. And they included in their calculation everything from the cost to the airlines of paying flight crew to wait around to the added cost to passengers who take earlier flights than they really need to account for the possibility of delays. I look forward to reading it through someday.

The $32.9B NEXTOR laboriously comes up with sounds pretty big, but in context it’s not quite as alarming as I think they mean it to be. It is about $109 per American per year, or about $39.40 per air passenger-flight. Now, of course, that’s not zero. If there was something easy we could do to eliminate that “waste” we would be better off.

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