Skip to comments.The penny's days are numbered (Canada ends production of cent)
Posted on 03/29/2012 11:15:09 PM PDT by JerseyanExile
The federal budget is guaranteed to leave Canadians penniless literally.
Among the victims of cutbacks outlined by Finance Minister Jim Flaherty in the government's 2012 federal budget on Thursday is Canada's one-cent coin.
Citing low purchasing power and rising production costs, the government has decided to phase the penny out of existence starting this fall, when the Royal Canadian Mint will stop distributing the one-cent coin to financial institutions.
Over time, that will lead to the penny effectively becoming extinct, although the government noted on Thursday that one-cent coins will always be accepted in cash transactions for as long as people still hold on to them.
The value of the penny has decreased to about 1/20th of its original purchasing power. Indeed, the lowly penny has fallen so far that Ottawa described it as a "burden to the economy" in a pamphlet explaining the change on Thursday.
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.
The solution Ottawa is proposing is to do away with the penny in cash transactions. Instead of fiddling with a few cents at the cash register, prices will be rounded up or down to the nearest five-cent increment.
That rounding will happen after any applicable sales taxes have been implemented.
Take a cup of coffee in Medicine Hat, Alta., that currently costs $1.80 and is subject to five per cent GST. A consumer today would pay $1.89 for that drink. Once the penny plan is implemented, that price would be rounded up to $1.90.
But the nickel and diming can work both ways. A sandwich combo at a deli in Oakville, Ont., that today costs $4.86 after HST would round down to $4.85 under the plan.
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.
Pennies themselves will continue to hold their inherent cash value, so Canadians can always trade them in at financial institutions, a government press release was quick to note.
But banks will then return those pennies to the mint for recycling into their base materials. That means before too long, the penny will be mostly removed from the Canadian economy except for the jars in Canadians' closets.
Credit, debit and cheque transactions will be unaffected, so one cent is still going to be the base unit of Canadian currency.
But once the mint stops cranking out the 7,000 tonnes worth of pennies a year it currently makes, there's going to be a lot less copper jiggling in the pockets of Canadians.
It won’t be long before we have a $5.00 coin, to jingle in our pockets along with loonies and twoonies. It’ll be worth what a quarter was worth originally.
I just bought 500’ of copper 12-2 and paid $180+ for it... no wonder thugs steal it.
The good times.
“But once the mint stops cranking out the 7,000 tonnes worth of pennies a year it currently makes, there’s going to be a lot less copper jiggling in the pockets of Canadians.”
But not in American pockets, thanks to supermarket cash registers across America.
How long before some Obama shill decides we need to send foreign aid to Canada in the form of a trainlod of American pennies.
And get rid of the filthy, disease-carrying dollar bills. They only fro months before they’re shredded and dumped in land fills. Print more Two Dollar Bills, and force people to use dollar coins, that last for decades!
“A 2005 study by the Bank of Canada concluded that doing away with the penny wouldn’t lead to any inflation.”
It doesn’t cause inflation; it is the SYMPTOM of inflation. You’re right, Canada already changed their $1 and $2 over to coin (but they did it well; vending machines very quickly accepted both, and the paper versions disappeared quickly). It does suck when you use $20 bill for a $6 item, and the clerk hands you back 7 Kennedy-half sized $2 coins (two-nies) for change.
Anyone here ever just walk around with 7 Kennedy halves in your pockets for no reason?
Ahhhh! Penny! One of my first crushes!
Flying Cloud Ranch memories.
Oops! Should have been Flying Crown. Weak coffee this AM.
Amen. Zeugma's proposal for currency reform would work like this.
All of the above could be accomplished along with a general resizing of the different denominations of coins as well. We'd be good to go until the Fed had inflated us up another hundred-fold.
(knock, knock, knock)
(knock, knock, knock)
(knock, knock, knock)
(Big Bang Theory fans will get this)
Penny’s not here. She’s with Dave. Dave’s not here.