Yet Another Reason to Hate the Penny?

Readers of this blog may recall Dubner’s crusade against the penny due to opportunity cost as well as the high actual cost of producing pennies. Now Slate takes a look at another currency question: is cash or credit more environmentally friendly? The article doesn’t manage to answer the question, but it does point out the heavy environmental toll of producing coins. More support for Dubner’s theory! And if you’re looking for a really compelling argument against coins, consider the possibility that coin-flipping isn’t as kosher a means of settling a bet as you might think. (HT: William Cochran) [%comments]


Eric M. Jones

Mexican Money Madness 1993:

Mexico's peso had inflated to about 3000 to the US dollar, so at the end of 1992 they just divided by 1000 and dropped the three zeros. The Nuevo Peso...N$Peso....was about three-per-buck. All the paper currency had to be reprinted. The dollar was more valuable than ever, so the Mexicans had old pesos, new pesos, huge clunky coins (most big coins were old pesos, finally sold for scrap to China, and the small coins were new, I think), and US dollars in mixed circulation.

Since we were staying at Club Med, I carried a little zippered belt pouch with me that contained a mixture of Club Med bar beads, old and new peso coins, new paper pesos, Amex traveler's checks, US paper money, US coins, a MasterCard, a Visa card and a little beach sand a few gum wrappers, our room key and some Bullfrog sun-block.

Furthermore many cash registers had not been updated to accept the new pesos, so decimal points were often wandering around unsettled. Often a piece of chewing gum became the decimal point. And of course the exchange rate floated hourly and varied from place to place. I sometimes used several types of currency in one deal (except maybe the Club Med bar beads). And the abbreviation for US dollars and Mexican pesos are identical. Yeh, okay and I didn't speak much Spanish, and in fact many of the salespeople were Mayan and many of them didn't speak Spanish or anything else I could recognize. And there was the third-world altered-reality of some things being ridiculously cheap and some thing being even pricier than in the US. Tolls on the fast empty toll road from Cancun to Merida, for example were twenty bucks or more.

Buying was further complicated by the cutthroat bargaining and the fact that small change was just a throwaway or a tip in most deals, by custom. Did I mention that the change was never offered in anything but a handful of Nuevo Pesos regardless of what form the original payment was in?

Thus, the calculations needed to pay for something were usually beyond my tropical Sun-addled brain. This was a problem that I solved by either giving everyone $20.00 US to start and hoping for the correct change (sometimes they wanted more money) or; holding all my money in various currencies in my open pouch and letting them root around and take what they wanted.

Both systems seemed to work well.

Read more...

Chance

As has been said before, cash and coins are being slowly replaced by debit, credit, and stored value cards, as well as electonic payments, so this whole "get rid of the penny" drive is unnecessary in the long run anyway.

The other thought I have is this: if businesses and customers are convinced that pennies are not useful, they can easily stop using them. If pennies are really as bad as you say, why isn't supply and demand causing them to go out of circulation?

David

Oh, but once we enter a runaway deflationary spiral, the penny will be worth something again.

Celeste

I only know two examples of businesses that don't accept pennies. Vending machines (don't accept nickles either) and a head shop in North Carolina. The owner just always rounded the change up to the nearest nickel, and didn't accept pennies.

Warren Burstein

In Israel, both the agora coin (1/100th of a New Israeli Shekel) and the 5. agora coin were taken out of circulation because of the cost of making them (the larger coin would be worth 1.2 US cents if it still existed). Prices are still figured to the agora, but rounded to the nearest ten if you're paying cash. Credit cards get billed the exact amount.

Mack

I stopped using the penny years ago. I don't own any, don't pay with them, and if offered them in change either refuse them, or leave them on the counter (never in those silly leave one / take one trays).

The revolution starts with you. Just say "keep it".

Thomas B.

"If pennies are really as bad as you say, why isn't supply and demand causing them to go out of circulation?"

Bad money chases out good?

paulwesterberg

Consumers using credit cards spend more money than those who pay with cash. When you pay with credit you just swipe your card and sign, the money you lose in the transaction doesn't seem real so you don't mind spending more. When you pay in cash you hand over your physical property immediately which has a much more real impact psychologically.

Since use of credit leads to more consumption, and excess consumption is bad for the environment I maintain that it is better to pay with cash, but don't bother with the pennies.

RC

The only thing that I would add to paulwesterberg's comment is that the credit use does not take into account the cost of the credit to both the merchant and the cardholder. In essence we are just giving several pennies out of every dollar to the credit card companies for no actual benefit, except not having to carry cash, assuming you settle up each month on credit debt.

Let's take that 2% and keep it moving though the economy without getting stuck in some greedy finance companies pocket.

Steve

I'll keep saying it. Revalue our currency up by a factor of 10. Keep everything a quarter or under in the new currency so a penny will now be worth a dime. This will give everyone a small gain. (Hit the banks and other large coin holders such as Brinks, with excess profits charges) We'll save billions in the need to mint new coinage. Everyone will be happy again and quickly forget that there is a bit of rounding going on. Imagine an era returning when a $20 is a lot and a dime will buy a coffee!

Bobby G

So with all recent deflation, is it now profitable to legally make money again?

john

In a consumer world...you need the penny...if u are missing just one cent from paying your transaction completely...then you must return the merchandise to the shelf...you must have the complete amount and some vendors and shopkeepers or retailers will not sell you anything without that missing penny