Canada Kills Its Penny; Can We Please Be Next?

(Photo: mrgreen09)

If you’ve been reading this blog for a while, you may know that I am devoutly anti-penny. This includes a rant on 60 Minutes in which I argue that the penny should be killed off, as inflation has rendered it worse than worthless. 

The U.S. government remains unpersuaded, but our good neighbors to the north are about to take the leap (following the lead, it should be said, of several other countries).

Here are details from Canada’s Budget 2012 and here’s a CBC report:

In part because of rising prices for the metals it’s made of, it actually costs 1.6 cents to produce every penny. The government estimates it loses $11 million a year producing and distributing the penny, and that doesn’t include the costs and frustrations for businesses and consumers that use them in transactions.

A 2008 report by Quebec-based bank Desjardins estimated the penny’s existence cost Canada’s economy about $150 million in 2006. Canada’s big banks alone handle more than nine billion pennies a year, which costs them $20 million annually to process. …

A 2005 study by the Bank of Canada concluded that doing away with the penny wouldn’t lead to any inflation. And Ottawa says similar systems implemented in Norway, Australia, New Zealand and elsewhere didn’t lead to systemic price increases.

(HT: Adam Scott, Tyler Griffin)

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  1. robyn ann goldstein says:

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    • Bob Mc says:

      In Ben Franklin’s day, a penny was worth something like what a quarter is worth now. A quarter saved is a quarter earned — I’ll buy it. A penny saved goes in to a jar to amuse pre-school children. Costs more to make than the value represented, doesn’t facilitate commerce, can’t be used in vending machines or parking meters because the value:volume ratio isn’t there, wastes time & effort to carry, use, & store, makes room for the dollar coin in register drawers… The penny isn’t the fundamental unit of currency — the dollar is. If there’s no need to trade in hundredths of dollars, why do it? Argh.

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      • Dark Penguin says:

        And it’s too expensive to produce. As an American I think most people south of the 49th parallel are like Mr. Gumby in the old Monty Python sketch, where the Gumby says “I think we should tax all people standing in water!”, then realizes that he, himself, is standing in water. The government is all “Oh, dear, whatever shall we do” and the people rail about inflation and government waste on programs they don’t like–but hardly ever about the waste of making pennies themselves. What nearly everybody misses is that when the cost of metal becomes greater than the face value of the coin, it needs to be discontinued.

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      • Mike B says:

        If there is a value problem with the Penny then re-value the dollar to bring the penny back into usefulness, not the other way round. Once you get on the hyper inflation treadmill its hard to get off.

        Second the government makes billions every year in Seigniorage. Subsidizing pennies and nickles is probably more helpful in people’s lives than a lot of the other stuff they are currently doing. If you give me a choice between pennies and oil subsidies I’ll take the penny.

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  2. James says:

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    • Mike B says:

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    • Tim says:

      It is broke. That’s the whole point.

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    • Joe Dokes says:

      James,

      The reality is, it is broken. It now costs more than a penny to make a penny. In addition to that banks and other institutions that use cash have to handle billions of pennies a year at significant cost.

      So yes, it is broke.

      Regards,

      Joe Dokes

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      • James says:

        The cost of making a penny – or any coin or bill – is irrelevant to its function as money. It’s not as though the government is trying to make a profit by selling them. Think instead of coins and bills as parts of a machine which enables economic exchanges. This machine produces value far in excess of the cost of its component parts.

        Further, eliminating the penny wouldn’t address the real problem here, which is the ongoing debasement of the currency that has made the penny of little worth. At best, it’s like spreading a new coat of paint over rotten wood.

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  3. Horatio says:

    Please Happy Canadian, no coloring our bills and no dollar coins. It actual is quite easy to distinguish the bills and when I travel to Europe I hate lugging around the heavy coins, although I thoroughly enjoy most other aspects of Europe (and Canada for that matter). Even so I think it will all be moot very soon as ‘hard’ money will disappear or be used so infrequently as to be a non-issue.

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  4. Aleksander says:

    In Norway we’re killing our “50 øre”-coin (=9 cents) 1st of May, leaving the “1 kr”-coin (=18 cents) as our smallest coin. I don’t think anyone here will miss the 50-øre coin, and I don’t see why the Americans will feel any different. Maybe US should think bigger and remove both the penny, nickel and the dime?

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  5. robyn ann goldstein scientist-at-large says:

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    • Bob Mc says:

      Don’t worry, you’ll still have 1 DOLLAR for decades. And besides, “zero is my hero, how wonderful you are”.

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  6. Brian says:

    Stephen, I don’t think that you’re paying sufficient deference to the cultural barrier that stands between us and what I agree would be a better penny-free world.

    I work for an American payroll company and am continuously amazed when I see figures on the proportion of employees that we pay whom still prefer to receive paper checks as opposed to direct deposit – it’s bigger than you would likely guess. Why is this? Furthermore issuance of paper checks in the U.S. is in stark contrast to Europe, where I believe they are all but a thing of the past.

    Is there something related to tangibility of pennies creating a logical block as in the payroll world?

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    • James says:

      Why do a lot of employees prefer paper checks? I can suggest a couple, one perhaps good, one bad. First, here in Nevada they can cash the check at local casinos, and have a chance to win various prizes (good if they don’t then gamble or drink away the original check). Second, under current laws a lot of working people are effectively locked out of the banking system, and so must take their checks to check-cashing services, which charge a percentage of the check amount for the service.

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  7. Eric Hamilton says:

    I like what France did at the end of 1959. They revalued, not de-valued, their cash and created the “new Frank” which was worth exactly 10 franks (I guess that would be “old” Franks.) Then it might make it worth wile to bring back in general circulation the fifty cents coin and maybe also get dollar coins into circulation.

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  8. John says:

    How is sales tax handled? If I buy $2 worth of stuff in most state I would have to pay $2.16. If the amount is rounded down to $2.15 is the retailer still responsible for the full tax amount?

    If I pay on a credit card is the amount still rounded down?

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