Bye-Bye Penny
The Royal Canadian Mint will no longer distribute pennies as of today. I say good riddance. It’s been decades since a penny was worth enough to matter.
It seems that one of the most convincing arguments for getting rid of the penny is that they cost more than a penny to make. I don’t see why this has anything to do with it. If the government could make $1 million worth of pennies for $800,000 in costs, should we say that they have made a $200,000 profit? They could just as easily make $1 million worth of $100 bills for far less than $800,000 in costs. For that matter, they could just create money that only exists in bank computers for next to no cost.
Suppose the government could make coins out of a very cheap metal with face value 1/10 of a cent at a cost of 1/20 of a cent each. Should they do this to make a 50% profit? The answer is obviously no. What is the point of a coin worth only 1/10 of a cent? Whether the coin is “profitable” is irrelevant. What matters is the usefulness of the coin. Pennies are almost completely useless for practical purposes.
The real test for getting rid of the smallest denomination coin is whether it represents an amount of money that makes a difference in a physical money transaction. Based on this test, we could certainly live without nickels and dimes as well. I’d be happy if retailers just rounded my change to the nearest quarter.
It seems that one of the most convincing arguments for getting rid of the penny is that they cost more than a penny to make. I don’t see why this has anything to do with it. If the government could make $1 million worth of pennies for $800,000 in costs, should we say that they have made a $200,000 profit? They could just as easily make $1 million worth of $100 bills for far less than $800,000 in costs. For that matter, they could just create money that only exists in bank computers for next to no cost.
Suppose the government could make coins out of a very cheap metal with face value 1/10 of a cent at a cost of 1/20 of a cent each. Should they do this to make a 50% profit? The answer is obviously no. What is the point of a coin worth only 1/10 of a cent? Whether the coin is “profitable” is irrelevant. What matters is the usefulness of the coin. Pennies are almost completely useless for practical purposes.
The real test for getting rid of the smallest denomination coin is whether it represents an amount of money that makes a difference in a physical money transaction. Based on this test, we could certainly live without nickels and dimes as well. I’d be happy if retailers just rounded my change to the nearest quarter.
I'd agree about rounding to quarters: the only people who will be at real disadvantage in this case are street beggars, there will be less useless change to spare.
ReplyDelete@AnatoliN: Maybe people will still give the same number of coins to street beggars who will get more because there won't be any pennies!
DeleteI agree the penny no longer will purchase anything of value, but is this really a good thing? It means our currency has been debased. Wouldn't it be nice if our coins actually had a small equivalent amount of silver actually in the metal? (Kind of like the old quarters?)
ReplyDeleteIf you had those old quarters today - what would they buy you? Would you consider throwing them in the street? I don't think so. I don't understand the hate of the penny and people actually now turning towards nickels and dimes. It's a symptom of what "true" inflation numbers are doing to our buying power.
@Paul: I agree that inflation is a major concern. However, we can't change the past. In my mind, getting rid of the penny isn't about embracing inflation but is about accepting reality. Going forward I'd be happy to support useful ideas for controlling future inflation.
DeleteEconomy needs it in the same way engine need grease. Keeping pennies will not change this. Modern society is way past allocating any worth to the currency aside of its assigned nominal. What's the value of $20 bill if you can't pay with it? In my mind, any precious metals added to coins is just wasted.
DeleteI bet, in 20 years we will not have any coins at all; just out of convenience, not due to inflation.
Thank you! The cost of producing a penny is relevant only to get an emotional response out of people and make them realize how silly the situation is.
ReplyDelete