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US Pennies To Be Worth Five Cents?
Z-MaxX writes to point out Reuters coverage following up on last month's news that the US Mint has made it illegal to melt or export US coins in bulk, since the value of their constituent metals — in the case of pennies and nickels — now exceeds their face value. The new story quotes Francois Velde, senior economist at the Federal Reserve Bank of Chicago, who thinks the new rules will not be enough — he believes that determined speculators are already piling up pennies. Velde suggests "rebasing" the penny to be worth five cents. Quoting Velde: "These factors suggest that, sooner or later, the penny will join the farthing (one-quarter of a penny) and the hapenny (one-half of a penny) in coin museums."
If this were to happen, any funds you had in penny form would immediately grow by a HUGE percentage... And it couldn't really be tracked by anyone, so the tax liability wouldn't exactly be an issue.
So is it time to begin acquiring rolls of pennies? I've got space in the basement...
It was a joke! When you give me that look it was a joke.
We had steel pennys during WWII for a couple of years, they work fine, bring them back.
Copper is valuable enough that thieves are routinely stealing it wherever they can get it, even if that means taking live phone wires.
other idiocies:
1. the nickel itself is worth more than a nickel for the same reason the penny is worth more than a penny. the penny should just be gotten rid of
2. bills are the same color (the salmon pink $10 bill is a recent relief from that) and size so they are hard to tell apart easily, and impossible to tell apart for the blind... who in fact recently sued and won the us govt over this fact
3. a dollar coin you can't tell apart from quarters easily (still, i am talking about the sacagawea: same approximate size/ weight)
the usa is the largest important economy in the world, but its currency is designed worse than the coinage/ bills of some third world countries. i wrote a story about it recently on kuro5hin. i think australia has some of the best designed currency in the world (different colors/ sizes for the blind, made of plastic, not linen, etc.)
the us should do a dramatic rethink of the design of their bills and coins, what we have now is depressingly outdated, archaic, and not very user friendly
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
damn pennies ...
always messing with the man
wearing a hole in the pocket of his grey flannel suit
tasting funny in his mouth
too small to cover his dead eye's
won't buy penny candy for the undertaker's kid
to small to keep up with marching time
poor pennies
damn nickels
Do not look into LASER with remaining eye!
Exactly. I've actually just plain thrown away collections of small Yen, UK pennies and Euro cent coins because they weren't worth carrying and I couldn't find a way to spend them. It's illegal, but at least it should reduce inflation by taking money out of circulation so everyone benefits :)
Either make accepting all coins a legal requirement for vending machines (or even something like requiring them to have an attached charity box so coins you don't want will go to a good cause), or scrap the coins that aren't actually worth the hassle of carrying around to spend.
A few similar stories...
About 15-odd years ago, South Africa replaced all their coinage (and paper currency too). One unexpected side effect was that the new 20 cent coin was a similar size to the old one cent coin. Some older badly calibrated vending machines, notably parking meters, were unable to tell them apart, so there was a sudden rush to aquire old one cent coins, and lots of people got away with very cheap parking for a while.
The problem was fairly short-lived, though -- all the old one-cent coins used this way went straight to the banks and were destroyed, so although it caused a short-term revenue issue for vending machines, it did a very effective job of removing all those old coins from circulation much quicker than they would otherwise have been.
Further back, the British decimalised their currency in the 1970s, but kept the same sizes of coin, so they were interchangable. The older silver coins (shilling, two shilling, etc) had previously been made with a pretty high content of actual silver metal, the older the coin, the more it contained. And since the coins were still in circulation, it was possible occasionally to get in your change a hundred year old coin worth a lot more than the ten pence (two shilling) face value. My grandparents kept a collection of the really old ones they got for years. I don't know what happened to it in the end, but it would probably be quite valuable. (The UK coin sizes were changed relatively recently, so you won't get the really old coins any more)
More recently, again in Britain, the news media carried excitable stories about the two pence coin being worth three pence for it's scrap copper value. It has been illegal to deface British currency for a long time, and you'd have to collect a vast number of two pence coins to make it worth the effort, so as far as I know, no-one has bothered actually trying to make any money from it, but in theory it is possible.
How did the old people take it?
I once mentioned it in front an old person that we should get rid of the pennies (back then [80s] folks were actually throwing them away!) and just round up/down to the nearest nickel. This old guy had a fit! "A 100 pennies makes a dollar! Pennies built this country! Why I should I pay MORE money! I'm an a FIXED income!" Yadda, yadda, yadda.
I think, at least back in the 80s, the old folks still remembered when a penny actually bought something. I think they could take the family to a movie and dinner after buying a car with that one penny - or something like that. In other words, I think there's a lot of emotional attachment and the fear that eliminating the penny will cause inflation.
And you KNOW it'll become a campaign issue!
DEMS: "The RICH are trying to screw us by eliminating the penny!"
REPS: (oh, help me out here.)
Follow Australia and get rid of the useless penny! What we did was phase out our 1 and 2 cent coins and now just round up or round down to the nearest 5 cents. Works well.
Or better yet, drop a digit after the decimal, ditch pennies and nickels both and have dimes as the smallest coin. Instead of $9.99 for a product, it will be $9.9. Round to the nearest tenth the way we round to the nearest 100th today. End of problem--at least until inflation makes dollars worth dimes.
The Future of Human Evolution: Autonomy
In the way back of American currency, there were these strange things called "folding quarter dollars" that were paper money worth 25 cents. Perhaps now would be a time to stop all metal coin production and switch over to all paper currency? Hell, it wouldn't even need be paper, could be something like polyester or other durable plastic that's a recyclable.
You must be very young. I can remember when the dollar *fell* to $2 = 1 GPB.
Bronze is tin and copper. I presume it'd be worth MORE, if anything.
It's actually a "good" thing that our pennies are worth 5 cents in metals. The "bad" part though is that we kicked the gold standard so our dollar isn't actually worth as squat compared to what it once was. If we really wanted an honest currency, all our currency would hold its face value in metal or other hard resources. We might have to redo our currency where one penny is equal to such and such grams of x metal. All our other coinage could change sizes and weights to match their relative worth. The problem comes with paper money. Let's be honest, our paper money is worthless except for whatever value we currently give it. At this time, it would be more practical just to eliminate paper or coinage as form of currency in the US. The US Treasury could issue every entity that currently holds US currency an ID/debit card with 0.00$ on it. The treasury, banks, or other places could credit/debit the amount from the card as needed. I see problems in that it would be possible to walk around with all your savings on this card instead of somewhat secured behind a bank and through fraud the entire amount gets drained away. I don't think that we are quite ready for that, but it would be the easiest tech thing within our reach to replace our paper and coinage with. One bonus as well is that they could define units of currency of less than a penny by just extending the decimal place and removing a smaller slice. This would help in the on-line world where there is the crowd that wants micropayments for things.
You're missing the point, as far as the U.S. Mint is concerned. They don't really care how convenient it is for you to use. They care about the fact that right now, it costs less than 5 cents to make a nickel. That means the Mint makes money on every nickel they sell to the banks. Introducing replacement nickels into the economy makes money for the mint. Currently, the cost to produce a Penny is rising above the face value of the coin. Very soon it will cost the Mint to introduce replacement pennies into the economy. At that point, they will phase out the penny. It may not be overtly related to the cost factor, but that will be the driving factor. No sane economy would spend money to produce currency. As for the paper bills, they're just harder to counterfeit. $5 is too valuable to turn into an easy-to-replicate coin. $1 is at the breaking point, which is why they are trying to replace it, but people seem attached to $1 paper bills so they're having trouble getting rid of that. Remember, we've got a country full of automated machines that take $1 paper bills but have no idea what to do with a $1 coin. Replacing all of that infrastructure is no easy task.
You are in error! The problem is not that money is not worth what it used to be worth. If that were the case we'd have to get rid of all of it even paper money. The problem here is that it costs more in material to make a penny (Obviously this has been true for a while.) than the penny itself is worth. As to your second point, Do you propose that all items purchased be rounded up to the nearest dollar? Good luck with that!
One yen coins (currently worth about 0.84 US cents) are made of aluminum. I'd go for aluminum pennies (they're fun to play with... and as they're made of less than a cent's worth of metal, they wouldn't mind if you do all those cool experiments with them). :)
Once upon a time, there were mille coins in the U.S., and my parents remember them. The individual states often minted them, which would likely not be allowed under our increasingly powerful central government of today.
We do not have anything smaller than a penny actually minted any more, specifically because each of the smaller coins experienced this same situation of costing more than its own value. Many things are still priced in half-penny or tenth of a penny denominations, especially things sold in bulk. The final price is just rounded to the nearest penny. (Or sometimes bumped up to the next penny in favor of the vendor for any fraction).
If the penny goes away, the same thing will probably still be done, only we'll be rounding to nickels or dimes.
Our bills are different color ($5, $10, $20, $50, $100). However, they are still the same size. What's interesting is that all bills have braille, so that the blind can read them.
I always thought, what happens to braille in very used bills, say, after 10 years...
Because of colouring, though, our money looks.umm... colourful. It's OK for what it is, but it doesn't have that striking appearance of the US dollar. When you hold US bills in your hands, it looks like real, solid money, and the graphics/print on them speak of a solid state.
If you're not sure what i mean, listen to the USSR anthem sang by their soldier choir - that will send shrivels down your spine, it's definitely very powerful and makes a statement. US money do the same, IMO.
Both are evenly divisible by 3, so how is $1.20 easier?
Quote from this interview:
That's deceptive. The rate of inflation is actually horrendous, especially for low-to-middle-income people, who spend their money on food and fuel, and clothing and medical care. Even if inflation was as low as stated, it's the same type of deception that occurred in the 1920s. They kept saying there's no inflation. Inflation is measured by the increase in the money and credit. The distortions sometimes lead to higher prices, but many times you can't predict where those higher prices will emerge. Sometimes it's in a stock market bubble, sometimes it's in commodities, sometimes it goes into the consumer price index. So inflation emerges in different ways. Meanwhile, the biggest problem is the deception that interest rates are low, which causes people who save, people who invest, people who spend to do things they otherwise wouldn't do.
Interestingly, the Federal Reserve does no longer publish M3 - the interview with Ron Paul might explain why.
I hope I didn't brain my damage.
1) Show all prices after sales tax (if applicable)
This would solve the problem right away.
Stores would start pricing things to the nearest nickel or dime except for small items under a dollar, where differences of under a nickel are significant.
Japan had a similar situation before instituting a 3% consumption tax in 1989. Before that, in general, prices of items over 1000 yen usually ended in a zero, so people didn't have to carry 1 and 5 yen coins around as a matter of course; they were used sparingly.
Then the consumption tax came in and the government found itself having to produce many more of these aluminum and brass coins because of all the odd prices that people were paying.
But very recently they went to tax-inclusive pricing, which has smoothed things out quite a bit. You only really need three significant figures in prices anyway. If you're shopping for a baseball glove or a suit jacket, you can leave the small coins at home.
Sales tax, which creates odd prices, is the real culprit here, not the existence of a small unit of currency. I actually favor the existence of a small unit because little kids buy things with their own money and learn how to manage it. They can't learn these skills if 25c packs of gum and 3c Tootsie Rolls are only sold in bulk (and consequently bought by their parents) because cents aren't in use anymore.
I recognize that tax-inclusive prices would pave the way for "stealth" increases, and shift the preceived burden of consumption tax from the purchaser to the retailer, but it's just smoother. Either this or have retailers set prices that result in round totals after tax, such as charging $5.67 + 6% tax for a $6 item.
I'd really like to convince governments to return to inflation-proof hard currency, or to eliminate consumption taxes, but since that doesn't look very possible, how about a solution more creative than eliminating small coins?
We have had to deal with this in our business -- converting Dollars or Euros to Swiss Francs. Francs only go down to the 0.05 level, while the Dollar and Euro both go down to the 0.01 level. In our business (gift cards) the conversion rule was below 0.025 rounded down to 0 while 0.025 up to 0.05 rounded up to 0.05 (rinse and repeat for other values).
What this means is if a customer from the E.U. comes into a Swiss store and buys an item for 9.95 Francs and the amount of cash on his card (issued in the E.U. and stored as Euros) is converted to 9.926 Francs (before rounding), the customer would have enough money on the card to complete the purchase and the merchant would be credited 9.95 Francs. In this case, the gift card issuer would lose a little bit of money in the transaction, but they would only lose up to the value of 0.025 Francs per transaction. Of course, if the conversion was a little over, they would gain up to 0.025 Francs, so in the end it would mostly even out.
We could drop the penny and follow the same basic rules for sales tax. If the amount of the purchase after tax is less than 0.025, round down, if it is between 0.025 and 0.05, round up (again, rinse and repeat for other values). This would mean that a purchase that comes to $4.47 would be charged $4.45 while a purchase for $4.48 would be charged $4.50.
Requiring the same rule for cash or electronic transactions would keep everything consistent, although I suppose you could allow EFT, Gift Card, and Credit Card transactions to go to the $0.01 level while only using the $0.05 rule for cash. That would make accounting a bookkeeping more difficult and open up opportunities for fraud.
Beware of Sleestak
A modest proposal:
1. Release a new half-dollar coin that is about the size and cost of a nickel. Make it maybe a little smaller with a rough edge so that coin mechs won't see it as a nickel. The existing 50-cent coin is too big, too expensive to produce and unsupported by automated coin mechs.
2. Release a new dime design that looks and works just like current dimes except its a "tenth dollar," not ten cents.
3. Cease production of the penny and nickle.
4. Phase out production of the quarter over the course of a decade. The new system calls for tenths of a dollar and the quarter is an odd quantity.
5. At the same time, increase the mass production of the dollar coin. With room for it in the cash register, it'll see increasing use.
The result: US currency moves to a system of dollars and tenths of a dollar, leaving the old system of cents behind. Nobody feels cheated by rounding because its no different than rounding to cents is now.
It also creates a precedent for phasing out the sub-dollar coins 50 years from now.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
Stealing power lines is for wimps. These guys stole the third rail!
Then, that does give some weight to what I've read recently that the Federal Reserve bank is constitutionally illegal?!?! They are privately owned, not a branch of the Federal Govt. This is a new argument to me, and I'd not known it in the past, but, it bears some looking into...?
Reference 1 and Reference 2 ....are among many links I found Google pertaining to this.
Any opinions out there? I've read on some sites, that if we did away with the Fed tomorrow...we could wipe out our debt almost overnight...due to the bonds and such they give out...and the Fed. Govt. would then own the money it has 'borrowed' from the Fed....
I don't know much about finances, but, it sounded interesting.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Lots of people seemed to be concerned about how transactions will be rounded. Will something that costs $1.96 be rounded to $1.95 or $2.00? My big question is, what happens to those of us who seldom pay cash for anything? If I have the option at all, I pay with my debit card, so there's no reason I can't pay $1.96 even. Would rounding apply to credit/debit cards, checks, and other method payments that don't involve cash?
I can't speak for the Netherlands, but at least in Finland, the way it worked out is that the central bank did mint (and continues to mint) the 1 and 2 cent coins, in a limited fashion, but they weren't put into circulation in the normal fashion, but only sold as collectors items. Shops will and do round up all sums to the closest rounded five cent sum, upwards if the sum ends in 3, 4, 8 or 9 cents, downwards otherwise. The prices of individual items in the shops do use more precise prices, but the rounding is done at the cash register.
As regards the coins themselves, which they still mint for collectors, immediately around the conversion to Euros in the new year (actually a bit before, since the mint sold sample bags of the new coin set (including each coin including one and two cents) to familiarize the populace on what the genuine article loos like, which sold for up to 50 euro when completist numismatists held them in great demand on eBay.