Ending Coinage And The Coin Age

There has been a lot of buzz in the media lately about the cost of producing coins, particularly the lower-value pennies and nickels.  A penny, it is said, now costs 1.8 cents to produce, while a nickel costs 9.4 cents.

I used to think that was a good argument to do away with these coins, especially pennies, but I'm not so certain of that any longer.  It occurs to me that regardless of what it costs to mint them and put them into circulation, their value in our monetary system is determined by the multiplier effect of their being circulated over a long life cycle.   Governments don't exist to make a profit; the cost of minting coins is just a "cost of doing government."  So the cost argument, as far as I'm concerned, is just a non-starter.  

That's not to say that we shouldn't try to reduce costs of production.  The more obvious ones are to stop using expensive zinc in pennies, nickel in nickels, and copper in both, and to substitute steel or some other cheaper material.  The days are long gone - nearly a century ago - when anybody felt the value of a coin had to be backed up by an equivalent value of some precious metal in it.  Otherwise, we'd still be making silver dollars.

Now, there is (of course) a penny lobby, Americans For Common Cents.  But like so many other lobbying efforts that seek to disguise themselves as groundswells of public opinion, this one is operated/funded by the zinc industry (!) because pennies are currently made mostly of costly zinc.  So the interesting thing about the penny lobby is that it's basically uninterested in the survival of the penny as a coin.  It's far more interested in the survival of the penny made of zinc.  The other folks who fight to preserve pennies are the ones who make those coin-sorting machines. 

Bottom line: we can, and should safely ignore Americans for Common Cents.  Would that be difficult, given the political pressures the mining industry can bring to bear on their politicians like Senator Rockbottom of Minnerado?  Probably.  But maybe we could let the Mint sell pennies directly to businesses (or individuals) who need them.  That would raise a hue and cry from retail businesses that could easily drown out the Zincists and Nickelodians (Hah - nickel, lode, good one huh?) 

The fact is, though, that there are lots of good reasons to abandon pennies, perhaps even nickels, to wit:  

• They don't buy anything anymore; in my local parking meters, even a nickel now gets me only two minutes.
• The need for pennies and nickels arises largely in the context of paying retail sales tax on cash transactions.  But there are far fewer cash transactions these days (I see millenials whipping out credit cards to pay for a single cup of coffee); sales tax calculations could easily be adjusted; and surely those conservatives who insist we must have a penny wouldn't object to just rounding everything to the next dime, right?
• There is no "cent" key on my keyboard, and even to find it as an add-in symbol is a bit of a hunt.  What does that say about our need for pennies?
• One of the greatest mysteries in all this discussion, for me, is why the Mint has to keep producing so many of them.  They last indefinitely, need for them is decreasing, so why isn't production falling off?  Maybe it's because a lot of people, faced with a pile of pennies in their pocket or on their dresser, just toss them in the trash.  I've done that; I expect other people do.

So yes, definitely, let's do away with pennies and nickels, and for the die-hards who insist we must have them, let's allow the U.S. Mint to continue production for a while and offer them directly for sale to businesses and the public -- at the cost of production, of course.  That should pretty well do in the fake demand for these coins.

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Postscript:  Did you know that tire manufacturers and safety experts are cooperating in the effort to get rid of pennies?  The old advice on judging your tread wear (replace if you insert a penny and can't see the top of Lincoln's head) has been declared passé; now, you're supposed to use a quarter and look for the top of Washington's pate). 

 

Comments

[PiedType]

I'd be worried that taxes would go up. A lot of taxes are in mills, or fractions of a cent. No doubt those would all be rounded up, not down. And I wonder if retailers would be willing to give up the last .9 they collect on every $2.99 item. As much as marketing gurus might tell them to hang on to the priced starting with a 2, I bet they'd all go up to $3.

As for my coins going into the trash -- that would only be by accident. When my purse starts getting notably heavier because of all the loose coins in the bottom, I scoop them out and dump them in a coffee can. One of these days, I'll take them to the nearest bank with a coin counter and get some bills.