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Real economic change -- in your pocket

  • Story Highlights
  • In the financial crisis, more people appear to be using change
  • Research shows people spend coins and small denominations faster
  • Coin business has helped propel Coinstar to one of the better performing stocks
  • Police are seeing an increase in criminals stealing change
By Kevin Voigt
CNN
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(CNN) -- As times get tough, people look for change. Not just new presidents and prime ministers, but change they can count on -- or, at least, count. And they're willing to turn over couch cushions to find it.

Police in Normal, Illinois, are looking for these suspects in the theft of $10,000 in coins from video machines in two states.

The piggy bank business is one industry that has seen business boom in the wake of the financial crisis.

As the financial crisis thrust billion-dollar figures onto the front pages, it also has cast a spotlight on how we perceive and use the smallest of currencies -- namely, metal coins.

In Thailand, the Treasury Department has found that coin exchange for paper currency has doubled in the first half of the year. In Argentina, the year began with a drought of coins as people began to hoard pesos.

While most Christmas gift-giving slumped, retailers in the U.S. and the U.K. saw a rise in piggy bank sales -- U.K. retailer Debenhams reported a 150 percent increase in sales during the holiday season.

Priya Raghubir is not surprised. As a researcher at New York University, she studies how coins and small denominations of cash alter people's spending habits -- research inspired partly by her son's delight in getting change after a 7-Eleven purchase on a trip to Hong Kong

"Yet my son refused to cash in a $100 bill he'd been given as a present," she said. She was curious if the same was true for adults.

Her research suggests, indeed, adults spend like children. She found that if two groups are given an equivalent amount of cash -- say a $1 bill versus four quarters, or a $100 bill versus five $20 bills -- the latter group will always spend more cash. Video Watch why people gravitate toward small change during a recession »

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The phenomena crosses borders. When homemakers in China received a week's pay from researchers in large bills vs. small, the ones with smaller bills spent it faster.

The research suggests one way to loosen consumer spending is to increase the supply of small bills or change.

"It suggests that if central banks changed to smaller denominations, people would spend it faster," Raghubir said. Also, if governments gave tax rebates in the form of money orders or traveler's checks that can be cashed at locations other than banks, spending might increase, she added.

There's a lot of spare change out of circulation -- in the United States alone, at least $10 billion sitting unused in piggy banks and coffee cups, according to Coinstar -- a U.S. business which operates and markets change counting machines primarily in the U.S., Canada, the U.K. and Ireland.

Unlike most companies, Coinstar has been able to grow through the credit crisis. "In 2006 we had 13,000 (coin changing) kiosks in place, and in 2008 we had 18,000," said Mike Skinner, president of Coinstar's change business. "We plan to add 1000 or 1500 more this year."

More people are using that change to make purchases at the stores where coin change machines are located -- 55 percent of change ends up being spent immediately on purchases, up nearly 10 percent from 2003, Skinner said. "They tend (to use redeemed change) to upgrade their purchases, like stepping up to a steak rather than a roast, or buying a nicer bottle of wine," he said.

Company research suggests coins are becoming more important to cash-strapped consumers -- a survey late last year found that 42 percent of people aged 18 to 34 are cashing in more change than the previous year. Almost four in 10 survey respondents said they value loose change more than before the credit crisis.

This has all been good business for Coinstar, which saw its stock value jump 70 percent this year, making it one of the better performing stocks this year.

A big reason for Coinstar's success this year came from using revenue built from loose change to buy Redbox, which provides self-service kiosks at stores across the U.S. for $1-a-night rentals on new DVD releases.

The low-cost DVD rental business is doing so well in this economy, it has raised the ire of Hollywood titans -- Redbox filed a lawsuit against Universal, Fox and Warner Bros. (owned by Time Warner, parent company of CNN) after the companies began holding back releases to Redbox out of fears it will further erode new video sales.

Unfortunately, the hunt for change has resulted in some extreme measures. Police in Illinois and Iowa are looking for a Bonnie-and-Clyde pair of bandits caught twice on video tape robbing video game machines at Wal-Marts in north central Illinois, said Detective Jim Merica of the Normal, Ill., police department.

The pair is believed to be responsible for a string of robberies that has netted $10,000 in change from vending machines from June to July. "They hide in plain sight, going into game rooms at times when there are only kids present," he said. "It's a pretty unusual case because of the interstate nature of it."

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And in Italy, hard times have brought back the country's most famous coin bandit. For 30 years Roberto Cancelletto was a fixture at Rome's Trevi fountain using a high-powered magnet and fishing reel to nick change from the waters until his arrest in 2002 and a clampdown by Rome police on coin fishing at the fountain. It was reported that Cancelletto made as much as $250,000 a year fishing for change.

This past July, Cancelletto was back at Trevi -- but this time atop the fountain staging a one-man protest until police arrested him. The subject of his protest: He can't find a job, Italian press reported.

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