Pennies: Enough Already!

INSERT DESCRIPTIONPhoto: Odalaigh

Whenever I travel in other wealthy countries, I am a bit embarrassed about the dollar bill’s insignificance compared to other countries’ smallest bills: a 5-pound note is worth $9; a 5-euro note is worth $7; a 1,000-yen note is worth $9. At the same time, no rich country has a coin as worthless as the U.S. penny.

Imagine my surprise at the recent announcement that the U.S. will be issuing four new versions of the penny, the first of which comes out in February, in honor of Lincoln‘s bicentennial.

What a waste of resources — and what a move inside the production-possibility frontier! Each penny costs much more than 1 cent to manufacture.

Many people have called for the demise of the penny. It should go, but so should the dollar bill. After all, at 3 percent annual inflation, by 2030 the dollar’s value will have fallen by half; will we still be using dollar bills (and more worthless pennies)? I hope not.

It’s time to join the rich world; it’s time to stop wasting resources; and it’s time to stop transferring taxpayer money as subsidies to zinc producers.


geoff

In Australia we got rid of the 1 and 2 cent coins (copper) and replaced the 1 and 2 dollar notes with coins. The transition was painless, with very few complaints.

Maybe you americans should just get over it - it's not a big deal.

And perhaps you should join the rest of the world and go metric while you're at it...

Lisa from NY

The penny is the most annoying coin and it should be eliminated. I often refuse to take them when they are handed out in change, I can't beleive we spend money to make these coins and now we are spending money to change the design. The dime or quarter should be the lowest value coin.

Tayloe

What about Euro cents? When I was in Spain and France in 2006 there were euro cent coins in denominations ranging from 50 cents down to 1 cent. Maybe that's changed since then, but I feel like I have some lying around somewhere. They were pretty worthless then, but I always got a kick out of paying for beer in a handful of 'centimes.'

Dave Munger

Bill in Sweden:

I use checks because they're the cheapest way to pay my bills. The "electronic" alternatives all cost more and are less convenient. But I don't use checks in the grocery store since the credit card is free to use.

Maybe someday someone will figure out a cheaper and easier electronic replacement for checks, but they're not there yet. Most automated bill-pay services cost about $10 per month, and I don't spend that much on checks.

Lloyd Alter

As Matt noted, Canada still has pennies, which this week are worth less than American pennies. However after the bailout and subsequent collapse of the dollar, they will be worth more. Canada also got rid of one and two dollar bills, replacing them with our beloved loonies and toonies.

There is nothing in the world sillier than american money, all the same colour, and with one dollar bills still in circulation.

decimal

Why do such small petty freakonomics? Getting rid of the penny should be part of an overall coinage review. Quarters are irrational - we don't divide into eight bits anymore - this is a decimal system after all. Okay - leave the dime and the next coin should be the 20 cent piece. And then one dollar two dollar and five dollar coins. And while they're at it, convert to the metric system for measurements and re-synchronize with the world.

smartalec

Reply to #20. As we move into a coin-less and paper-currency-less economy, all transactions are simply account transfers. No need to worry about having a penny.
And, in case some consumers still want to operate with "real" coins and paper currency, the transaction can be rounded up or down to the nearest 10. That's what they did in Belgium before adopting the Euro.

Patrick

The time wasted at checkout counting out change for a purchase totaled in pennies is an aggravation. If pennies are here to stay, why can't we simply adopt rounding at checkout or merchants price items that end with a zero? It's telling that our country refuses these logical custom often found in other countries.

Ken Hirsch

If pennies were eliminated, you don't need to round prices to the nearest 5 cents, just the after-tax total.

Even then, you would only need to round for cash sales, not credit/debit cards or checks, although it might be the case that enough people would try to game the system--by paying cash when the total would be rounded down and other methods when the total would be rounded up--that it may be better to round all totals.

We already round totals to the nearest cent for things like 6.25% sales tax and gas at $3.939/gallon.

tudza

Thanks for the mention of plastic bills, an alternative between the coin and the paper bill. I'll have to look up figures on how long they last versus paper.

Can't see why we don't do this or go to coins. The people who claim they don't want to carry around dollar coins don't seem to be aware that most people in other countries do the equivalent of that and seem to live happy lives.

Raj Pandravada

I do not see the connection between the projected loss in value of a US dollar, and the existence of a dollar bill. Last time I checked, most one dollar bills exist and circulate in the US. This might not be the case with higher denominations, such as the $100 bill (I'm not sure, but I do know that many countries hold USD in 100s), but definitely, singles are predominantly used in the US. Americans are going to use them regardless of their value. If in 2030 something that cost $1 today, costs $2, we'd just have to use two singles, wouldn't we?

Suppose the US dollar were to increase in value, to say double its current value by 2030. By your argument, we should get rid of a higher value bill, such as the $5.

Don't think so.

Besides, if singles are eliminated, what would 'exotic dancers', and more relevantly, their patrons, do?

Francois

I'd love to get rid of pennies. But a paper dollar bill is still relevant. It's lighter than a coin-- I would rather carry around $4 in bills than in coins. And it's still a useful denomination for buying small things such as a newspaper or candy bar. As long as there are still basic consumer items in our everyday economy that are under $1, the dollar is still good. If there was little to nothing to be bought for under $1, that would be the tipping point--and we probably are headed that way.

Tyler

I'm all for ridding the country of pennies--they're expensive to produce, not worth the economic cost of carrying around, and fully substitutable. If I recall correctly, the only people lobbying for them to remain in existance are:
1) Zinc/copper producers
2) Coinstar
3) Nonprofits that use donation trays/jars
4) The state of Illinois

That said, I'm for keeping the dollar bill. I just doing like carrying around coins--95% of my transactions are credit or are paid in full dollar amounts, but if I acquire change, I always empty my pockets at the end of the day and never take change out with me. Change isn't convenient to carry--when I lived in Australia, where cash transactions are more common and there is no dollar bill, I could accumulate $20, $30 in change a week on my dresser. THAT has a greater economic cost, in my opinion.

Plus, if they get rid of the dollar bill, how will we tip the entertainers at our favorite exotic dance clubs?

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David Betesh

The idea to make new designs for reverse of the Lincoln penny is a cheap attempt to get more people to collect pennies and get more people to use them. The same goes with the 50 State Quaters and the Presidential Golden Dollars. To date, the only coin that has not changed since 1945 is the Roosevelt Dime, which I believe should replace the penny as Americas lowest currency denomination.

ttj

If you actually lived in a foreign country, Mr. Hamermesh, you'd see that people abroad are accustomed to shortchanging customers using the excuse that there is a lack of small change. Further, when there are price hikes abroad, they are not by a matter of pennies, but by a matter of nickels, dimes, quarters and dollars. The penny, contrary what you are writing, is a sign of America's affluence (it can afford precision) and has an anti-inflationary function that doesn't exist elsewhere. The U.S. economy has always been admired and has attracted investment precisely for its stability, and the lowly penny plays its part.

AK

If we get rid of the dollar bill, what will we slip into the g-strings of strippers? Sacajawea dollars?

NU

Prof. Hamermesh: You should be informed (as the justly esteemed author of Labor Demand and many other serious works), that someone is writing about pennies and signing your name.

Dave Munger

Peter:

Why do we have coins at all, if paper is cheaper?

I'm pretty sure the reason is that while paper is cheaper to produce, coins last longer, and therefore in the long run they're cheaper. It's the same reason people own dishes instead of using paper plates all the time.

Joe

One of the main arguments you hear for keeping the penny is that if it were eliminated, prices would be rounded up and this would make everything more expensive. To my mind, it is well worth two cents not to have two pennies.

Rino

Well, I believe that 1 dollar bills and pennies have such a powerful symbolic value that people find it hard to see them go. Even though I am a foreign national, I grew quite fond of one dollar bills, and when they will finally go (I hope they will not redesign them with some color hue) I will miss them.

However, as far as they are around, no dollar coin, regardless how attractive its mint, will ever circulate. American men, I was told, put coins in their pocket, and if one dollar denominations were only available in coins, their pockets would get too heavy... I'm wondering what Canadians do...

On another note, readers should know that all pennies up to 1982, which are made of a 95% copper alloy are worth twice as much as scrap metal than as currency. Unfortunately, it is illegal to melt currency... So, Mark, if instead of sending around your $1000 by FedEx you melted them, you would double your savings instantly.

It would be interesting to see how the law would be enforced in that case. I can see a CNN headline of the kind: "Man gets arrested for getting his copper roof at half price using melted Lincoln pennies..."

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