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.
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.
the 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.