Is it time to get rid of the penny?
Some believe that pennies are an anachronism that needs to be removed from circulation. Plus, they're expensive to make.
This post comes from Len Penzo at partner blog Len Penzo dot Com.
A while back I moved into a new office at work. When I looked in the desk, I found 162 pennies in one of the drawers. I can only assume that the previous owner used the desk as his chosen repository for all the pennies he received in change whenever he went out for lunch.
I can't really blame the guy who did that. In fact, I think pennies are an anachronism and need to be removed from circulation. Here are several reasons, some admittedly better than others:
Inflation has made the penny irrelevant. In 1857, the U.S. Congress stopped production of the half-cent piece. In 1857, a half-cent had the purchasing power of 11 cents in 2007 dollars. In essence, when the half-cent was finally discontinued, the penny had more than 20 times the purchasing power it does today. If the Congress of 1857 were still in power today, not only would the penny be discontinued, but so would the nickel.
Pennies are expensive to produce. By the end of 2010, it cost the U.S. Mint almost 1.79 cents to make a penny. That means that the U.S. Mint is increasing the national debt with every penny it produces. Post continues after video.
You can't use them in vending machines. Well, at least I've never seen a vending machine that accepts them.
They slow down transactions at retail establishments. While not as bad as the time I got stuck behind a lady who paid for her groceries with only quarters, I hate it whenever I have to wait for folks who dig into their lint-filled pockets for pennies in order to avoid receiving any more of the dreaded coins in their change.
I know what you're thinking: But, Len, won't elimination of the penny result in increased consumer costs?
Uh-oh. I see you've fallen for the fairy tales being spouted by Americans for Common Cents, a pro-penny group that is backed by the zinc industry (pennies are almost 98% zinc). Let's look at their two primary arguments in favor of keeping the penny:
Rounding prices up to the nearest nickel would result in higher prices. Past evidence shows that this claim is utterly baseless, for if this were true one would expect inflation to have occurred in the years immediately following the abolition of the half-cent in 1857. However, in fact the opposite effect occurred; the United States actually suffered from a significant bout of deflation the following year.
To wit, here are the rates of inflation between 1858 and 1861:
- -7.1% (deflation) in 1858.
- 3.8% in 1859.
- 0.0% in 1860.
- 0.0% in 1861.
Many charities are totally dependent on pennies for their donations. This claim is so absolutely preposterous that it should be dismissed out of hand, but I'll address it anyway. To make such an argument presupposes that Americans, the most charitable people on Earth, would suddenly stop putting money in the Salvation Army kettle or handing coins over to other charities simply because the smallest coin they have in their pocket would now be a nickel instead of a penny.
It actually makes more sense that charities would see an increase in their contributions. Why? Because although a nickel is worth five times as much as a penny, it does have one big thing in common with its copper cousin: absent additional cash, you simply can't buy anything with it. You know I'm right.
Congress is responsible for regulating the national currency. What do you think? Should Congress abolish the penny? If you have a moment to spare, please share your thoughts on this, because I really want to know.
In the meantime, I'm going to the grocery store to find something I can buy for $1.62 -- all in pennies, of course. Hopefully you won't be the lucky person who gets stuck behind me at the checkout counter.
More on Len Penzo dot Com and MSN Money:
There was a time when Americans looked at foreign money with distain and called it 'funny money'. Indeed, Italy for example during the days of the Lira had weird local lira-bills to represent coins and pennies were sometimes given as a candy or something odd. Meanwhile the HARD currencies like the German Mark had coins at 1,2.5,10,50 pfennigs, coins at one Mark, two marks and five marks up to one thousand.
The Euro comes in coins from one cent to 5 Euros, in essence $7 coins, and bills from 5 Euro to 500 Euros (about $700). And prices at the registers INCLUDE the tax and are typically rounded to prices like 9.95 and not the foolish 9.99 plus tax.
So why don't we swallow our pride and watch how 'they' (the other countries) handle their change dilemmas (that they don't have, unless you are a stubborn Italian).
The absurd need for pennies in virtually EVERY transaction is our least problem. The single dollar bill represents about as much as 1970's 'funny money'. It is filthy, it wears out and costs EVEN MORE than the penny. And some people on here want to 'reinvent the deal' and make MORE bills! Could it be that modern-day Americans are just too set in their ways and we simply WON'T change.
We have, after all, now become the country with FUNNY MONEY! Single dollar bills steeped in e-coli and pocket-filth and signs that say 'nothing over a 20 accepted'. Buy a candy bar for 99cents but pay 1.08 with two singles when the thing could be $1! Pull out a $50 at a fast-food place and it becomes a capital affair!
One way or the other the banks want to be in on it with their cards and we are just too gullible to oblige!
Keep the penny! Not all one cent coins are the same. Every Lincoln and wheat back penny made from 1982 and earlier contains 95% copper. With copper around 4 dollars a pound that means about 145 copper pennies is about 4 dollars!.
The real fraud however is when all precious and semi precious metals were removed from US coins. Every US coin with the exception of the nickel and penny, prior to 1965 contains 90% silver. Think about it, a pre-1965 Roosevelt dime has almost 3 dollars in silver value as of today! The point is that our coinage used to have real metal value; it wasn't the denomination on the coin that created the value but rather what the coin contained that gave it value.
This is why some one such as Dr. Ron Paul is a good choice for our next president. He understands how the Fed Reserve has systematically hoodwinked Americans by forcing the removal of all precious metals from our currency and is campaigning to end the Fed. Why should Americans pay a private bank with many foreign owners to create and circulate our money? Our US dollars, fiat currency, is backed by nothing but trust and god. Why did the US have over 4 billion ounces of silver in 1959 in the strategic stockpile and as of today they-we have none?
This article mentions the elimation of the half cent? If you consider since the founding of the Fed. Reserve in 1913, the purchasing power of the dollar to today has depreciated 96%. What a dollar used to buy in 1913 will buy you about .04 cents today! This is the true crime of the Fed. Reserve in that they steal your money through inflation. For a Keynesian based economy even Mr. Keynes had something to say about inflation:
"The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. "- John Maynard Keynes
It is actually incredibly easy and simple for our govt. to solve all of our debt and spending problems. As Americans all we have to do is force Congress to pass a bill where if spending exceeds 3% of GDP, then any standing member of Congress would become ineligible for re-election.
If the mint retired the half cent over 150 years ago, and inflation has reduced the value of 1 cent to 1/20 of what it was worth in 1857, we should get rid of both the penny and the nickel all at once. Nickels cost the mint more than 5 cents. They are bulky as well. A dime is now about equal in buying power to what a half cent was in 1857 when it was abolished, so even getting rid of the dime would not be too extreme, However changing our system to dollars and tenths of dollars instead of dollars and hundredths of dollars makes a lot of CENTS!! Keep the dime for now, but get rid of the pennies and nickels.
Also the dollar coins will never be accepted unless the government stops printing paper dollars (which makes economic sense since the life span of the coin is 50 times that of the paper). So stop printing paper dollars, or stop minting dollar coins. Make a decision!
Well, here's something you can do right now, Len. You don't have to change anything: When you get pennies in change, just leave them at the counter, or dump them in the "tip jar", if there is one. Pennies can stay for those that still want them, and you don't have do deal with them.
Give a handful to a kid. Drop it in a donation bucket. Put it in a homeless man's cup. Roll it down the sidewalk, for someone else to find for good luck. You don't complain about having to carry around your drink cup when it no longer serves its purpose, do you? No, you just get rid of it and forget it. Why would a penny be any different?
People, please start thinking pragmatically about this. If you make something and sell it for less than it cost to make, does this make fiduciary sense? Just because some people use the penny as their "savings" or to use as mad-money or school supplies means they could do this with a nickel or dime just as well. I understand times are difficult for a lot of people and for many, use the penny to get by or splurge, but what you are talking about is a behavioral issue, not a financial one. To be smart about money means spending less than you take in and learning to live within your means. The penny DOES NOT fit within these parameters.
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