The U.S. Mint has announced that it now costs more to produce a penny than the coin itself is worth:
A penny used to buy a loaf of bread, but in an age of inflation and affluence, the coin is slowly sliding into monetary obsolescence.
For the first time, the U.S. Mint has said this year that pennies are costing more than 1 cent to make, thanks to higher metal prices.
That idea of spending 1.2 cents to put 1 cent into play strikes many people as “faintly ridiculous,” said Jeff Gore, of Elkton, Md., founder of a group called Citizens for Retiring the Penny.
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The Mint’s announcement is a milestone, because coins have historically cost less to produce than the face value paid by receiving banks and have usually been moneymakers for the government. Rep. Jim Kolbe (R-Ariz.) wants to keep it that way. When he asked Congress to phase out the penny five years ago, he failed; he plans to try again this year.
Faintly ridiculous is putting it mildly. Of course, there are those who cling to tradition and other ridiculous notions who would have us ignore reality:
Still, Gallup polling has shown that two-thirds of Americans want to keep the penny. There’s even a pro-penny lobby called Americans for Common Cents.
“It’s part of their past, so they want to keep it in their future,” said Dave Harper, editor of Numismatic News.
Yea, well you could’ve said the same thing about the horse and buggy.
Those who want to keep the penny coin include small merchants who prefer cash transactions, contractors who help supply pennies and consumer advocates who fear the rounding up of purchases.
“We think the penny is important as a hedge to inflation,” said executive director Mark Weller of Americans for Common Cents. “Anytime you have more accurate pricing, consumers benefit.”
Excuse me ? In a society where more and more transactions are cashless, what real purpose does a one-cent coin really serve. When was the last time you spent a penny rather than getting it as chance ?
Yea, I didn’t think so.
If its costing more than one-cent per coin to make a penny, then there’s no economic sense in making it at all. And, while we’re at it, let’s look at other coins as well:
By the way, the Mint says nickels are also costing more to produce than they are worth.
Now wait, if a penny costs more to produce than we have assigned a worth to it, isn’t that creating deflation?
But yeah, as someone who rarely even carries paper money even more, I won’t miss pennies at all.
Brad,
Actually its a form of reverse seigniorage. Instead of making money on the coins that are minted, we’re actually managing to lose money. It would seem that the only alternatives are to either find a cheaper way to make the coins, or stop making them altogether.