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)


Brian

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?

James

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.

Eric Hamilton

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.

John

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?

LS

No -- all non-cash transactions are still to the penny.

The Weatherman

Australia killed off its penny (and its 2 cent piece) years ago. Number of times I've thought about it since = zero. Until now of course.

[WORDPRESS HASHCASH] The poster sent us '0 which is not a hashcash value.

Jason

I'm glad we're eliminating the penny. In fact, I wish we'd just drop that entire decimal place. Get rid of the penny, nickel and quarter and then introduce a new 50 cent piece.