RSS

It Doesn’t Make Any Cents

11 Oct

First, I’d like to apologies for my poor pun, but it had to happen. I’d like to talk about something that relates to our current system that really bothers me– pennies. The U.S Government creates new pennies and put them into circulation each year. In 2011 alone, the mint created 4.9 billion. Creating the money obviously costs money, for pennies you have to pay for the metal, fabrication, human labor, and transportation. But in 2012, the cost of producing one penny is 2.41 cents. So it costs over twice as much to make a penny as the penny is worth and we are making 4.9 billion of them.

cost to make penny

This is not a new issue. The first U.S. pennies were 100% pure copper, but as the price of the copper the penny contained became more valuable then the penny people began melting the pennies down to make a profit of the difference in price between the metal and the pennies worth (people have begun doing this again today and can face up to five years in prison). To stop the melting down of pennies and so the government wouldn’t have to pay money to make pennies, the U.S. Mint began making pennies that were 97.5% zinc, which was a much cheaper metal, and 2.5% copper to make a the outer shell. The price to manufacture the pennies and the price of the metal of the pennies dropped below one cent and everything was fine.

But, in 2006 the price of the metal contained within pennies once again became worth more than one cent. Last year alone, manufacturing pennies cost almost 100 million. I’m not saying making the manufacturing cost of pennies go down will have a significant impact on the debt crisis, it will barely be a dent,but it is something. Obama has recently proposed making pennies out of a cheaper material, but dissenters are saying it would make the penny easier to counterfeit. I’m sure there will eventually be a solution after a long a drawn out debate, and eventually manufacturing pennies will stop costing the Government money. But is the penny even really necessary?

In 1872 when the penny was first minted in the United States it had a purpose. There were plenty of things that actually cost 1 cent. But has inflation made pennies obsolete? It seems to me that the pennies only purpose is to make things end in 99 cents instead of a dollar to make products appear cheaper or to sit at the bottom of fountains. Is that worth 100 million? The purpose of money is to help facilitate everyday trade. Money can be used instead of bartering, but it needs to be divided into small amounts so no one over or underpays. But the penny is too small of an amount. In 1857 the U.S. Mint stopped producing the half-cent because it had too little buying power and didn’t help facilitate trade. The half-cent had the worth of today’s dime. Yet we continue to have pennies, which are worth 1/10th of that and cost more to make than they are worth.

Half cent obv.jpgthe half cent

One might think that prices will go up if the penny is eliminated. But New Zealand, Australia, Finland, the Netherlands, and Canada have all recently gotten rid of their versions of the penny and rounded to the nearest nickel. None of those countries saw an increase in prices or had any problems. There is no reason to keep pennies other than a fear of breaking away from tradition.

http://en.wikipedia.org/wiki/Penny

http://en.wikipedia.org/wiki/United_States_Mint

http://en.wikipedia.org/wiki/Half_cent_%28United_States_coin%29

Advertisements
 
9 Comments

Posted by on October 11, 2012 in Law and Policy

 

9 responses to “It Doesn’t Make Any Cents

  1. KW

    October 11, 2012 at 9:54 pm

    Hi Caitlin,
    Fascinating! I’ve noticed lately that the pennies in my pocket do nothing: vending machines won’t take them, parking meters refuse, and most cashiers will glare at you if you pay in pennies! I didn’t think to ask if it was worth making them! And that is a significant amount of money; 2.5 cents to make a single cent! Amazing!
    The use of virtual money (ie: credit/debit cards) have also affected the use of cash as a whole. I’m pretty sure eventually we will move away from a precious metals-based monetary system to more of what we have now with credit cards. What do you think?
    KW

     
  2. BoGRICH

    October 12, 2012 at 1:33 pm

    Hey Caitlin,

    I completely agree with you on this subject for a couple reasons. First of all, like you mentioned, pennies are just used for marketing to make something look less expensive, and even if they got rid of the penny, the could just do 95 cents increments. I lived in New Zealand for a while, and thats exactly what they do, and it really causes no problems. I actually think it gets rid of a hassle. I never keep pennies, because they just pile up in my pocket, so I just leave them in the Take-a-Penny. It also gets rid of that massive cost! 100 Million dollars to put towards education perhaps… Sounds better to me. I hope the government cuts this currency, and does something better with the money. Do you think that the US should stop production of the Dollar bill as well, and move towards the dollar coin more as it is cheaper to produce?

    Have a good one,
    Bo

     
  3. kevin1234567

    October 12, 2012 at 4:33 pm

    Hi there,
    I definitely agree with you, it does not make a lot of sense why we keep producing pennies. I don’t think I can think of a time when I’ve ever used a penny. Whenever I get them they just go straight into my jar of change, and just sit there. It definitely seems like the government is spending a lot of money on making pennies, where the money could be used for a much better cause. I think it would make sense for us to implement a similar strategy as the other countries that you mentioned, and it shouldn’t be too big of a change, although stores wouldn’t be too happy that they can’t trick their customers with those $.99’s. Do you think that America will ever consider completely getting rid of the penny? Or is it too ingrained into our society?

    Great post!
    -Kevin

     
  4. shoults076

    October 12, 2012 at 5:16 pm

    Hello Caitlin,

    Yes! While 100 million may not make a dent into the debt, that is still a vast amount of money gone on something no one uses. You are correct, the penny is completely obsolete. When was the last time you bought anything with a penny? I do hope that our government realizes this and gets rid of them.

    -David

     
  5. sawyersauce

    October 12, 2012 at 9:26 pm

    Hey Caitlin,

    (clever title!)

    This post is very interesting. The idea that the government is wasting money creating pennies IS ridiculous. Especially when it is illegal to destroy any form of money except pennies!!! The most expensive form of money is the only one which we are allowed to destroy. If pennies is so meaningless that we are technically allowed to destroy them, then why are we making them?

    Two possible answers popped into my head, (one of which you had addressed)

    1) They carry a certain sentimental value as a country: they represent Abraham Lincoln, they are a traditional part of our currency, and it would upset some people or feel too strange to stop making them. As you said, they are a “tradition”

    2) Our country and its businesses want to be able to set prices to the penny, and do not want to have to round off to the nearest five cents.

    If you have any other ideas, let me know! I’m curious.

    -Sawyer

     
  6. nickyrob

    October 13, 2012 at 3:30 pm

    Hi Caitlin,

    I completely agree with you that the production of pennies nowadays is pointless, especially if it is costing the United States extra to produce them. I personally never use pennies and often they will either go into a change jar, or I won’t even take the penny. It seems to me the only purpose of the penny is to make things look a little bit cheaper. How do you think the country would be impacted if we completely removed the penny from our society?

    – Nick

     
  7. olivia1414

    October 14, 2012 at 11:28 am

    Hi Caitlin,

    I completely agree with you! We recently did a lab in chemistry that involved calculating the percent zinc and copper in a penny and then trying to figure out how much it would cost to make, and I remember being very surprised by the number that I got. What is the point of producing a coin that is worth less than half of what it costs to manufacture? Wouldn’t that money go to better use elsewhere? I rarely use pennies anyway, and I’m always happy for the chance to get rid of them. Do you think eliminating the use of the penny would cause any major changes in our society? Great post!

    -Olivia

     
  8. tebom

    October 14, 2012 at 9:53 pm

    Hi Caitlin,

    This has bothered me for several years as well. I never understood the point in pennies, even as a little kid. As a little kid, it just bothered me that they had no practical value for buying things, but after I learned that not only were they pointless, but also unprofitable, it only cemented my hate against them. I have waited my entire life for the government to put an end to pennies, and it still hasn’t happened. Great post, and insight into this topic.

    Martin

     
  9. Alan

    October 15, 2012 at 8:19 pm

    Hi Caitlin,

    I agree with you that pennies seem rather useless and overly expensive to mint. It seems to me that many people are starting to care about change less and less as a whole, with many of my friends not even wanting the change they get back. I find myself having a couple coins in my pocket, forgetting about it, and proceeding to lose the 50 cents or so I had. Even though it only costs 100 million dollars to mint pennies each year, if you are able to cut out unneeded spending and become a more frivolously spending government, it will be much easier to balance your budget.

    Thanks for the thought-provoking blog!
    Al

     

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: