Getting rid of the US penny has been a very controversial subject. Congress has tried, in the past, to take the one-cent piece out of circulation. But due to sentiment or practicality and fear by consumers of rising prices, it remains in our pockets, coin purses and car cup holders. But is the era of the penny coming to an end? The answer may be “Yes”.
From www.WDTV.com Channel 5 out of West Virginia:
There’s no doubt that the United States’ most popular coin is the Lincoln penny…But the U.S. mint spends 1.4 cents on every penny it produces, costing the government more money than what the penny is worth…
“Every penny the government is making, it’s losing money on. When you’re making billions of pennies, it adds up,” said Joe Kremer, Assistant Professor of Finance at Fairmont State University. “I don’t think there would be a real price impact, but it would be a real cost savings for the government.”
At one time in American history, a half-penny was minted. From 1793-1857, a half-penny was a common coin used in commerce. But during that time, an average man would make $1.00 a day. It made sense to have coinage valued at a half cent. When it became apparent that there was no use for the half-penny, it was discontinued.
- What is the purpose of holding on to the one cent piece? It would not be for economic reasons, as it takes 40% above its value to make.
- Are prices going to be affected? Possibly. Retailers and government officials would need to work out rounding-up/rounding down.
With the cost of inflation there are no longer penny candy or penny slots. There is not much use for a penny when considering the cost of manufacturing. It is primarily used as a marketing strategy (charging $1.99 instead of $2.00) and when paying tax on items and incremental costing.
The Canadian government is no longer circulating their penny. As of February 4, 2013, the government is encouraging businesses to begin rounding transactions. They have adopted a rounding guide that has been successfully used in other countries. Canada estimates that they will save approximately 11 million dollars annually by discontinuing their penny. (Statistics from the Canadian government)
In our struggling economy, the United States may have made that final leap in taking the popular Lincoln Penny out of circulation. It will be a decision that will be made in the best interest of our country and its economy, after weighing the pros and cons.