Posted on 05/05/2012 8:37:33 AM PDT by null and void
The Royal Canadian Mint‘s 2012 budget, which was issued on March 29, does not include funding for the production of one cent coins, according to Canadian and U.S. media sources.
The cost to produce and store the coins, not to mention the hassle of dealing with them, finally drove our neighbors to the north to decide that it no longer makes sense to make cents.
According to Canadian Finance Minister Jim Flaherty, as quoted in the Globe and Mail newspaper, “Pennies take up too much space on our dressers at home,” Mr. Flaherty added. “They take up far too much time for small businesses trying to grow and create jobs.”
Canadian one cent coins have been issued since 1858. According to Dr. James A. Haxby, author of the recently-published Guide Book of Canadian Coins and Tokens, which is a Whitman Publishing book (www.whitman.com), when the Dominion of Canada was established in 1867, it already had a large supply of cents made in 1858 and 1859 for the Province of Canada.
It currently costs Canada 1.6 cents to make each cent because of “rising labor, metal, and other manufacturing and distribution costs,” according to the Canadian Mint.
The Canadian government estimates that it loses $11 million a year making cents, according to Time magazine. Canada has been using alternative metal composition for its cents for years.
In 1999 more than 20,000 test cents were made from “multi-ply plated steel,” according to Dr. Haxby. Once it was determinated that collectors had managed to acquire examples of these test coins, the Mint decided to issue a special collectors set of them. Only six 2000-dated test coins are known to exist.
Since then Canada has issued cents made of both copper-plated zinc and plated steel.
In addition, according to the Globe and Mail, the Desjardins Group estimates that it costs the private sector in Canada $150 million per year to count, store, and transport the coins.
Canada plans to stop making the coins in April, and the Mint will stop distributing cents to banks in the fall. After that the coins will be withdrawn from circulation.
I suspect that Canadians will start hoarding their cents soon in the hope that they will be worth a premium after they are no longer available in circulation. This is what European Union citizens did during the transition to the euro currency.
According to Canadian officials, 17 other countries have already done away with their lowest denomination coin.
Perhaps the major issue for people who live in countries that have done away with cents, or their equivalents, is the matter of rounding.
Economists say that it all averages out, that there is as much rounding up as rounding down, but many people worry that there will be more rounding up than rounding down, and that the move will be inflationary.
Canadian businesses are urging the central government in Ottawa to do everything it can to explain the move to Canadian citizens. The government has suggested that businesses round to the next five cent increment, but has left it to the private sector to make the final decision on each transaction.
News reports on this story did not indicate that the coins would continue to be made for collectors in proof and mint sets, so for now I would have to assume that there will be no cents for collectors either.
This year Canada issued a special proof set in which each coin, including the cents, were made of 99.99% pure silver.
Last year our own government said it would end production of presidential dollar coins for circulation and only make a limited number that would be sold to collectors at a premium.
U.S. officials claim this would save $50 million per year, but many people, including myself explained that the supposed savings will be dwarfed by the hundreds of millions of dollars of seigniorage income that will be lost. Seigniorage is the difference between the face value of a coin and the cost to make it.
The cent, or penny, has played a central role in American numismatic history. It is, along with half cents, the oldest of U.S. coins, having been first minted in 1793.
It is also perhaps the most widely collected non-precious metal U.S. coin. Many collectors start out as cent collectors, particularly of the Lincoln variety issued since 1909.
The 1909 VDB cent with the initials of the coin’s designer, Victor David Brenner, remains a perennial favorite, as does the much rarer 1909 VDB cent produced at the San Francisco mint. In fact, many collectors cut their teeth in numismatics by searching and searching for those elusive 1909-S VDB pennies, which in higher grades are worth many thousands of dollars.
For years Americans have been told that our own pennies are also produced at a major loss, now costing 2.4 cents to produce. The coins are made of copper-coated zinc and contain very little copper.
It would clearly make a lot more sense to stop making cents at a loss than to stop producing dollars which produce income that helps reduce the deficit. Seigniorage is used to help fund coin production and some of it is returned to the Treasury to reduce the deficit.
Besides, dollar coins last for decades, whereas paper dollars only last a short period, and if Americans were forced to use dollar coins, billions of dollars used to make paper dollars could be saved. Over time the savings from moving exclusively to dollar coins would be even greater, but most Americans remain reluctant to make this switch.
Although it is part of the Treasury department, the U.S. Mint is a self-funded entity that is what is called a public enterprise fund. It does not receive taxpayer funding, but it is required to implement the laws which Congress passes and is subject to congressional oversight
Nickels are also produced at a substantial loss, costing an amazing 11.2 cents to produce, according to CNN Money.
I can already imagine the outcry among cent lovers and those worried about the prospect of the inflation they think will come from rounding up a lot more often than rounding down.
It would make a lot of sense, as Charles Morgan argued recently in Coin Week, to stop making both cents and nickels for circulation, and to produce them only for collectors in small numbers and sold at a premium.
But I doubt that will happen any time soon.
Instead, U.S. Treasury secretary Timothy Geithner has tasked his employees to explore alternative metals that could be used to make cents and nickels at a lower cost. This was proposed in the fiscal year 2013 budget that President Obama recently sent to Congress.
Eliminate the penny as well. I usually dump them in those little change jars that are on most store countertops. Not even worth putting in my pocket and when I'm vacuuming my car, I just suck them right up.
I'm an advocate of the dollar coin, only instead of some Indian shoeshine girl (Sacagawea) or some mean looking lesbian (Susan B Anthony), put on it Ronald Reagan.
n&v,
Guess you’re right. I’d love to see them get rid of pennies and those silly dollar coins.
In the 1950’s a pack of gum or a candy bar (my guides at the time) cost a nickel. Today, they cost over 10 times that. The CPI in the 1950’s was 23; today it’s 230.
So, today’s dime is yesterday’s penny. It’s really that simple. Do away with pennies and nickels and, in a stroke of foresight given that Obama/Geitner/Bernanke’s economic mismanagement is likely to cause inflation to accelerate, also drop the dime. Nobody uses them unless they have to anyway because they don’t buy anything on their own anymore.
Round everything to the nearest quarter, and make a new quarter about the size of a nickel. Drop the fifty-cent piece, and dollar bills, $5 bills and $10 dollar bills and issue two dollar coins and ten dollar coins.
Instead of six coins (penny, nickel, dime, quarter, fifty-cent and dollar) we’d be down to three (quarters, two-dollars and ten-dollars) and we’d no longer be printing millions of $1 and $5 bills every year.
If you make an $8 purchase with 5% sales tax, the price would be $8.40, rounded up to $8.50, pay with a $10 coin (or five $2 ones) and get six quarters in return (the size of nickels).
If you make a $7 purchase with 5% sales tax, the price would be $7.35, rounded down to $7.25, and pay with four $2 coins and get three quarters in change. Or pay with a $10 coin and get a $2 coin and three quarters.
If you routinely carried 8 to 10 quarters (today’s equivalent of 10 nickels in size) and a few $2 coins (about the size of today’s quarters), and stocked your wallet with $20 bills and $50 bills, you’d be able to carry out the normal cash transaction without a hassle.
The government would save tens of millions of dollars of issuing costs per year, of which I’d like, say, a .01% cut for proposing this if it’s adopted. (The government would also benefit because every coin they sold when issuing additional currency would be sold at a tremendous profit margin, instead of the present losses they incur.)
I havent used coins for years. If I get change back from a cash purchase it goes in the coin purse or the church offering. Most purchases are plastic where I earn free travel or hotel nights. I suppose I leaned to do without coins from five years in Afgahnistan where everything was paper money down to the 1 Afghani note (2 cents).
So that means your taxes just went up 4%. You don’t expect anyone to round down to the lowest nickel unless they owe YOU money,do you?
Does this mean I will no longer find Canadian pennies in my change? Perhaps Canadians will start getting stuck with US pennies. It would only be fair!
The Talking Heads were about 20 years ahead of everybody on this one.
100% agreement!
KILL THE FILTHY DOLLAR BILL!
I sense two agendas:
1) Raise taxes by rounding up.
2) Move us all into government-tracked payment cards.
If we get rid of it here, I won’t need a key board with the ¢ on it any more.
Ban pennies and round up to the nearest nickel. Pennies made sense when a 1 pound candy bar was a nickle. There is absolutely no reason today for using pennies. Nobody complained 100 years ago when every transaction was rounded to a penny instead of a mil (1/10 cent).
The dollar has lost 97% of its value since 1913. A nickle today buys what 2/10ths of a penny bought in 1913. A penny in 1913 bought what would cost $0.35 today.
My point is, today’s nickle is a smaller real-world denomination of currency than a penny was in 2013. It is nothing.
Ban pennies, round to the nearest nickel and call it good, start issuing $2.50 bills.
Scratch that. Plan for inflation now.
Ban pennies and nickels.
Make the smallest coin a dime, so all transactions would be rounded to the nearest dime (which is still a smaller real world currency denomination than the penny was in 1913.
The empty penny and nickel coin trays in cash register drawers can now be used for $1 and $2.50 coins. The empty slot for the now obsolete $1 paper bills can be used for the new common need for $50 bills.
Done. Good to go.
Maybe an electron microscope and I don't think you will see too much live crawling or wallowing.
In the early 70’s I was stationed at RAF Mildenhall in the UK when both the Exchanges and commissaries stopped using pennies. Costs were rounded up or down to the nearest nickle.
It’s time once again to trot out my currency and coinage reform proposal.
Given that there has been ample inflation on the order of 10 since the last change, and we have an excessive array of confusing coins and low-value currency, it is time for a practical simplification.
First, denominations need to proceed in a proportional way without large value ratios or crowded ratios. The classic 1-5-10-50-100... progression with ratios of 2.0-5.0 is ideal as a minimum, with denominations of 2, 20, etc. being optional for important valuations.
Second, we want to avoid coins of such low value that they are more trouble than they are worth. Economic waste occurs with the extra time wasted dealing with needlessly small coins. A dime is worth less than a minute of labor at minimum wages, and no currency transaction requires anything smaller than this denomination. The penny and the half-cent served well as the smallest denominations when their values were that of today’s dime. (Note to any economic imbeciles: electronic transactions are often conducted in smaller units than our smallest coin, and that cash registers have been “rounding” - without bias up or down - to the nearest small coin for sales tax purposes for generations. Google “sales tax rounding” if you have doubts and read a few articles).
Third, we want to set the coin/currency transition at a practical level that avoids our wallets being overstuffed with small bills, or our pockets with too many coins. Coins should be suitable for purchases like a magazine, a coffee, a lunch, or a brief cab ride.
Fourth, the ratio between the largest and smallest coin should be limited to a practical factor. Consider that the economy functions effectively with coins at 0.05, 0.10, and 0.25, with pennies treated as trash, and larger coins generally not used. That is a factor of 5 between the largest and smallest coin. A factor of 10-50 may be ideal, and a factor of 100 (as in actual current coinage) is excessive.
Fifth, we need bills of adequately high value for large cash purchases (consider the largest Euro note has a value of about 6.5 times that of the largest US note.)
Sixth, coins should be sized approximately proportional to their value for ease of recognition and use.
The proposal:
Coins:
$0.10 (slightly smaller than the current dime)
$0.50 (slightly smaller than the current nickel, larger than the penny)
$1.00 (slightly smaller than the current quarter dollar, larger than the nickel)
$5.00 (slightly smaller than the current half-dollar) Or it could be set at $2 to avoid overlap with a $5 note.
Currency Notes:
$5 (optional)
$10
$20 (optional)
$50
$100
$500
Our current 6 coins are replaced with 4.
Our current 7 notes are replaced with 4-6.
If you want to talk about making coins out of silver or gold, I’m even more enthusiastic:
$1000 gold coin (1 oz)
$500 gold coin (1/2 oz)
$100 gold coin (1/10 oz)
$20 silver coin (1 oz)
$10 silver coin (1/2 oz)
$2 silver coin (1/10 oz)
$1 copper or base metal coin (1/2 oz)
$0.50 copper or base metal coin (1/4 oz)
$0.10 copper or base metal coin (1/10 oz)
IF the government were honest it would be a rounding thing.
Friends who have spent extensive time elsewhere say that coinage whose values increase in 2-3 unit increments are most efficient. Based on their experience I’d say your 2.0-5.0 ratios allow steps that are too large.
Make that a 10¢, 20¢ (or 25¢ for old time’s sake), 50¢, $1 and $2 coins, monotonically increasing in size and thickness with value, every other value reeded. The dime and dollar retain the size of the current coins.
$5, $10, $20, $50, $100, $200 banknotes, possibly also increasing in size with value.
As currently no really large bills because we don’t want Bad People smuggling cash out of the country...
Then the retailer will round up the base price to the nearest nickle...
Or would you prefer that the Federal Government tell every Mom-n-Pop store exactly how they can set the price of every item they sell, and have the muscle in place to enforce it?
Then the retailer will round up the base price to the nearest nickle...
Or would you prefer that the Federal Government tell every Mom-n-Pop store exactly how they can set the price of every item they sell, and have the muscle in place to enforce it?
Incidentally, if you made a half-dozen taxable retail purchases a week, and got cheated out of 2.5 cents each time, that’s $8 per year. Which wouldn’t happen anyway.
What part of “they’re already rounding fairly to the nearest penny” don’t you understand? Or are you convinced that you’re being cheated out of tenths of a cent each time?
Sorry, the segue wasn’t very smooth.
I switched from taxes to total bill. Mom-n-Pop aren’t going to lower any price they can get away with raising.
Net effect, the extra (now imaginary) pennies add up for them, and everyone pays a little more for every item.
Sorta like an airline saving millions by putting one olive in the salad instead of two. The customer doesn’t consciously notice, but has a vague free floating sense that they aren’t getting as much as the used to.
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