Is it a big deal that it costs > 1 cent to make a penny?

[Revtim]

It's been in the news recently that it costs more than 1 cent to make a penny, and it seems to be one of the reasons given for getting rid of it. But does it really matter? I thought the purpose of minting coins was not to create wealth, but to provide coinage to the population for use in monetary transactions.

Does the gov't create significant (or any) wealth by simply minting coins and printing bills, when the cost is less than the face value of the money? Is the rising cost of creating pennies any more of a problem than, say, the rising cost of any other thing the gov't has to buy, like pencils?

[DanBlather]

One problem would be if the cost of melting down the coins was more than a penny. In that case the govt couldn't make them fast enough.

[yelimS]

Wonderful point, and a question worthy of Cecil, in my humblest.
Coins suck though, and after having lost my credit card somewhere, again, I'm waiting for one of those thumb implants.
On another note (sorry), I've read that something like 60% of the bills in circulation, at least here in Norway, are of the largest denomination. Most people rarely use these, however, and the author of the article suggested that they to a large extent were used by criminals and such, suggesting again that the two largest denominations be removed.

[Eureka]

No. It's a factoid that sounds significant but really isn't. It's significant in the sense that if 8 million pennies must be minted each year, that's more than $8 million that could be used for some other purpose, but it isn't really meaningfull.

[Least Original User Name Ever]

Get rid of pennies. Make some sort of government law that makes prices round numbers. I'd like to get rid of all change, but maybe we can keep quarters or half dollars or something.

[Do Not Taunt]

Wonderful point, and a question worthy of Cecil, in my humblest.
Done, and the answer is no, it's not meaningful.

The real question is not whether the government makes money on pennies but whether the coin serves any commercial purpose.

From http://www.straightdope.com/classics/a981009a.html.

[RTFirefly]

I wonder if any of our EU Dopers would care to enlighten us as to how it's done in Europe. As of 2002, I know they still had 1¢ and 2¢ coins, but in a cumulative total of 3+ weeks in Europe in 2002 and 2006, I think I got them in my change exactly once. Prices of individual items can be any multiple of one cent, but the total of almost every cash purchase I made there in 2002 was rounded to the nearest 5¢, and that was true of every cash purchase this year.

Since they've seemingly abandoned the 2¢ coin, which is worth between 2.5 and 2.6 American cents these days, without any ill effect, I'm sure we could get rid of our stinkin' penny without any hassle. The damned things are nothing more than pocket clutter.

[Cunctator]

I wonder if any of our EU Dopers would care to enlighten us as to how it's done in Europe.I'm not in the EU, but I think the procedure here is the same as in the EU. Australia ditched its one and two cent pieces in the early 1990s. Since then the total cash price of purchases has been rounded to the nearer five cents. If your total at the supermarket is $36.42 then you pay $36.40 in cash. If the total is $36.43 then you pay $36.45 in cash. If you're paying electronically then naturally you pay the exact amount.

I'd say that the vast majority were glad to see the back of the useless one and two cent coins and adapted to the new system very quickly.

[Leaper]

Make some sort of government law that makes prices round numbers.

Seems like a somewhat extreme suggestion. Do any countries do this already?

[Martini Enfield]

Seems like a somewhat extreme suggestion. Do any countries do this already?

What I think he means is "Swedish Rounding (http://en.wikipedia.org/wiki/Swedish_rounding)"- ie, the system in use in Australia, New Zealnd, which was explained by Cunctator in a previous post.

[Dubious Weasle]

It's also done at overseas military baes. No pennies. It works just fine. Actually it's one of the things I hate about returning to the states; too many damn pennies.

[Least Original User Name Ever]

Similar to Swedish Rounding. I had never heard of it before. I'd get rid of the nickels and dimes, though. Round to quarters or half dollars. Have multiple presidents' heads on the coins so Lincoln, Jefferson, and FDR don't get left out.

We should simplify. Hell, I'd even be about getting rid of ALL change. Maybe we can just call the difference between the true price and the rounded up amount "sales tax" or "extra tax" or some fun name like "incidental tax".

[DanBlather]

Seems like a somewhat extreme suggestion. Do any countries do this already?Don't we do this all the time anyway? You buy 1/2 lb of tomatoes at $2.99 a pound. Do you get out your tin snips so you can cut a penny in half and pay $1.445?

[DanBlather]

Or maybe even $1.495 :smack:

[2sense]

Why would we want to sacrifice the penny to inflation? We should do what Mexico did and just move the decimal point over. Make the current penny worth one tenth of a new penny, the current dime worth one new penny, the current dollar worth one new dime, the current $10 bill worth one new dollar and so on. After a few years or so you can drop the "new" and be ready to do it again when inflation takes its toll. Then we can keep the relevance of our idioms ( "a penny saved is a penny earned", "a nickle bag" ) and have an added bonus: old people could no longer annoy you by saying things like, "You know, back in my day you could buy a new car for ten dollars."
-



Just my 2sense

[yelimS]

Incidental tax!!!!!!
Best! Idea! EVER!
Oops, budget surplus this year. Oh, well. We'll just work in some incidental spendings, too.

[sinjin]

I was just in Paris and Marseille for the better part of a month, and, while not as common as the 5/10/20/50 cent pieces, I did get several 1 and 2 cent coins. Especially at grocery stores. I stopped every morning to buy an apple and a typical price was 62 cents. So I paid 62 cents. <shrug>

[Sal Ammoniac]

One problem would be if the cost of melting down the coins was more than a penny. In that case the govt couldn't make them fast enough.
Makes me wonder what the melt price would have to hit before we started seeing this in a big way. The fact that pennies are an alloy, and not, alas, solid gold, seems to be an obstacle.

[Grumman]

Makes me wonder what the melt price would have to hit before we started seeing this in a big way. The fact that pennies are an alloy, and not, alas, solid gold, seems to be an obstacle.
There are a number of industries which use copper/zinc alloys - if it was cheaper for them to buy raw materials as pennies rather than bulk metal, then I think the most significant hurdle could be the legal aspect (assuming the US has laws that ban the defacing of legal tender).

[Ravenman]

Does the gov't create significant (or any) wealth by simply minting coins and printing bills, when the cost is less than the face value of the money? The answer is yes, the government does get richer when it mints money. It is called seigniorage, and it contributes about a billion dollars a year to government coffers for all coins and dollars combined. Unfortunately, I'm not able to find the latest specific figures for the cost and revenues associated with the penny, but the seigniorage from higher value coins is greater than for low values.

[Bytegeist]

Unfortunately, I'm not able to find the latest specific figures for the cost and revenues associated with the penny. . .

I found the U.S. Mint's 2004 Report (http://www.usmint.gov/downloads/about/annual_report/2004AnnualReport.pdf) (PDF), which, on pages 34 and 45, suppplies this information.

In 2004, the cost of making a penny was 0.93 cents, including administrative costs. (Down actually from the previous year, when it was 0.98 cents.) The raw manufacturing cost seems to be 0.90 cents per coin. Also, the Mint distributed about $71 million worth of the damn things that year, if I'm reading the tables right.

Also, the cost of making a nickel was 4.56 cents; a dime 3.14 cents; a quarter 7.33 cents; a half-dollar 16.97 cents; and a dollar coin 21.14 cents — making the dollar the cheapest coin to make per unit per face value. However, the government actually makes the largest total profit on quarters: almost $400 million in 2004.

How do they do it? It's simple. Volume.

[Ludovic]

I think I'll go to Second Citywide after work to pick up some new state quarters :)

[ivylass]

Why don't they just retool the penny so it's cheaper to make?

Either that, and round everything, but you get a "credit" on the rounding. Something costs $1.01, they round it to $1.05, but you have .04 credit on your next purchase. Over time your credits can be applied to purchases so it should all balance out.

[Cunctator]

Either that, and round everything, but you get a "credit" on the rounding. Something costs $1.01, they round it to $1.05, but you have .04 credit on your next purchase.That sounds excessively complicated to me. Every shop would have to create an individual account for every customer in order to keep track of the "credits".

[Lute Skywatcher]

It's also done at overseas military baes.And the entire state of Hawaii, AFAIK, for the same reason oversease military bases don't use 'em. Too expensive to import.

[Shagnasty]

That sounds excessively complicated to me. Every shop would have to create an individual account for every customer in order to keep track of the "credits".

It is easy really. Each store would have a little paper card they give you with ten circles on it. When you pay, the clerk with take out a little stamp and marks the number of pennies you have credited on that purchase. When you want to use your remaining pennies, you just present the card and the clerk X's off the one that you used. You just keep a little binder of cards for each store or chain that you frequent and present them as needed. Seamless.

[Martini Enfield]

It is easy really. Each store would have a little paper card they give you with ten circles on it. When you pay, the clerk with take out a little stamp and marks the number of pennies you have credited on that purchase. When you want to use your remaining pennies, you just present the card and the clerk X's off the one that you used. You just keep a little binder of cards for each store or chain that you frequent and present them as needed. Seamless.

Or, you could just round the prices off at the register, saving the whole "card punching" and carriage of yet another type of loyalty card in one's wallet or purse...

[Gene Frenkle]

Shagnasty, I went from lurker to guest member just to say your post was the funniest thing I have read here in a long time. :)

[Common Tater]

"Seignorage" is the profit or difference between the intrinsic value of coinage versus the official stated value that the king or government takes for themselves along with the right to regulate money, or in the modern case print currency. Nickles and cents are anachronistic in the sense they represent a certain intrinsic value that has exceeded their stated official value, a common problem years ago when money was scarce - it tended to make money even more scarce.

[Spectre of Pithecanthropus]

It is easy really. Each store would have a little paper card they give you with ten circles on it. When you pay, the clerk with take out a little stamp and marks the number of pennies you have credited on that purchase. When you want to use your remaining pennies, you just present the card and the clerk X's off the one that you used. You just keep a little binder of cards for each store or chain that you frequent and present them as needed. Seamless.

Seamless? You've got to be kidding. You expect people to carry around a card, for each store they regularly patronise, and waste their own time, and that of everybody in line behind them by fiddling around with their little books or cards? What's next--bringing back counterchecks and abolishing debit card payments?

It's time to end the dysfunction of our currency system rather than continuing to accommodate it.

BTW I didn't see if it's been mentioned, but the report mentioned by the OP said that nickels also cost more than their face value to make.

[Spectre of Pithecanthropus]

Seamless? You've got to be kidding. You expect people to carry around a card, for each store they regularly patronise, .

Oops, that was supposed to be patronize.

Though many of you may think I spelled it perfectly correctly the first time. :)

[Martini Enfield]

Oops, that was supposed to be patronize.

Though many of you may think I spelled it perfectly correctly the first time. :)

I was going to ask why you'd edited it from a correct spelling to an incorrect one... :D

[Fern Forest]

And the entire state of Hawaii, AFAIK, for the same reason oversease military bases don't use 'em. Too expensive to import.
What? No, we have pennies and lots of them.

[Driver8]

South Africa got rid of its 1c and 2c coins some years back. Supermarkets would automatically round down your total to the nearest 5c, for example your R45.67 purchase would become R45.65.

I agree with the poster who said that it is not in any way different from rounding to the nearest 1c, something we are all comfortable with.

[Spectre of Pithecanthropus]

If pennies and nickels were abolished, I'd think that, in the effort to compete, stores would be just as likely to round down as up, depending on the article. If this were the year 1900, when many small articles still cost a nickel or three cents, then yes, abolishing the small denominations would have a huge negative effect on the consumer. But that's just not true any more. And keep in mind that the rounding need not occur on each item bought, but on the total bill.

[Ravenman]

Wait, it just hit me: let's find a Republican solution to this. Let's get rid of the penny, but also cut everyone's income tax by $20 bucks to make up for the difference of rounding up purchases by as much as two cents. That $20 bucks would cover 1,000 purchases in which the price has been rounded up from $xx.03 to $xx.05.

Senator Frist, you may thank me in your speech introducing this fine bill.

[Least Original User Name Ever]

We could have them made in China.

[Gangster Octopus]

Of course one of the main issues with pennies is not that they are expensive to make, but that folks don't spend them (http://www.bizjournals.com/denver/stories/1999/08/02/story6.html).

[Malacandra]

Oops, that was supposed to be patronize.

Though many of you may think I spelled it perfectly correctly the first time. :)

"What a delightful little store. Do you run it all by yourself? You must be awfully clever to do that. Everything's laid out so beautifully and the shelves are just too too much!" :D

[Bytegeist]

We could have [ pennies ] made in China.

We'll have to watch for that. Keep an eye out for any Maoist tendencies in Lincoln.

[Stringer]

It is easy really. Each store would have a little paper card they give you with ten circles on it. When you pay, the clerk with take out a little stamp and marks the number of pennies you have credited on that purchase. When you want to use your remaining pennies, you just present the card and the clerk X's off the one that you used. You just keep a little binder of cards for each store or chain that you frequent and present them as needed. Seamless.
Oh man this was funny. I see a couple people even got whooshed.

[Spectre of Pithecanthropus]

Oh man this was funny. I see a couple people even got whooshed.

I hope you're not accusing me of being whooshed. Think about it; I'm living in a country where everybody seems to think we have to walk around with infinitesimal coins that are worth a fiftieth of a newspaper or a thousandth of a movie ticket. You can't tell me that Shagnasty's proposal, or any other, would be too ludicrous to be seriously entertained.

[Common Tater]

Well, how about the other side of the coin, so to speak? Couldn't we just recognize that a penny is now "worth" 2c?