According to the inflation calculator, a dime today is worth the same as a penny in 1947. If for some reason we wanted to return the value’s to 1947 where a penny was worth something how would it be done and would there be any benefit?
Inflation has made the penny the equivalent of 1/10 cent in 1947. A denomination which did not exist. I assume this would also make everything drop my a factor of 10. I would take home $4,700 per year. But my rent would drop to $70. etc.
They would just issue new notes and coins in the “new dollar” values, revalue everything (bank accounts, bonds, debts, etc.) in the “new dollar”, and exchange the old money for the new. So, if you had a treasury bond denominated at $1,000, it would now be worth 100 new dollars; if you contracted last month to buy a house at $100,000, you’d only need to pay 10,000 new dollars.
Would doing this have any negative economic effects? Suddenly all those ‘useless’ pennies would have a bit of purchasing power. On day 1 of the re-evaluation, you could buy a Coke out of the machine at work for 5 pennies. So you would get alot of pennies in circulation that would be like flooding the market with dimes the day before.
No, the old cents would now be worth 0.1 of a new cent; the old dime would be 1 new cent; the old dollar bill/coin would be one new dime; the old ten dollar bill would be one new dollar. Otherwise you are giving a windfall profit to people holding a lot of the old currency, and increasing the national debt to pay for it.
No, it wouldn’t, since the old penny would be devalued too. To use the numbers from Giles’ example, your old penny would be worth a tenth of a new penny. So even while prices would be deflated by a factor of ten, monetary denominations would be, too, and the purchasing power of a coin or banknote would be unchanged (ceteris paribus, of course; nobody knows how inflation proceeds afterwards, but the currency reform itself would keep purchasing power in real terms unaffected).
The economic consequences would be nil in an ideal world; in real life, the costs of transition would, of course, be enormous (printing new bills and coining new coins, replacing existing ones with the new ones, re-equipping ATMs, vending machines etc.), but I guess this is not what you mean by “economic consequences.”
So I guess it would make pennies way more valuable for just their copper content?
In other words, i’m never getting rid of these pennies unless I roll them, right? And when something cost $2.97 and I get 3 cents back, it’s “here’s nothing” for my change.
I’m routinely using small-value coins (1, 2, and 5 cents European) in everyday transactions. I’m not collecting them in a jar, like some people, I simply keep them in my wallet, and whenever I have enough of them to use in a transaction I do so. In your case, for instance, I might put them together to get an amount of seven cents, so my change would be something involving a ten cent coin as smallest denominations. Works like a charm, and usually vendors don’t protest me passing on my petty change to them (when they do, I either politely insist, or use some other coin and keep the copper change for later, depending on my mood).
But then again, I’m also the type of guy who bends down to pick up any coin, even a penny, lying on the floor. Not because I need it, but because I have a feeling that it’s still money, and that it would be decadent not to pick up money out of sheer laziness.
Pennies aren’t made from copper. They’re copper-plated zinc.
If you want real examples of countries revaluing their currencies, Mexico did this not too long ago. There’s the peso and the nuevo peso. It’s not at all uncommon.
Of course, plenty of countries never bother revaluing; they just stop producing coins or notes with a value below what’s considered worth having There’s no reason the US has to produce pennies; we could make a nickel or even a dime the smallest unit of currency Just look at the Italian lyra; I remember my parents went on vacation there and spent 20,000 lyra on breakfast.
The big advantage of revaluing the currency is that it forces all the money in the hidden economy to come out in the open (and subject to taxation) or be rendered worthless. But as far as I know, the US dollar has never been revalued and I doubt it ever will.
I do like the idea of making the dime the smallest coin, and introducing one-dollar coins (and either a fifty-cent piece or a two-dollar coin) to replace the penny and nickel.
Not a new concept. Until 1857, the halfpenny was the smallest-denomination U.S. coin. We’ve added and dropped a lot of denominations over the years. Just off the top of my head, we’ve had coins worth 1/2-cent, 1 cent, 2 cents, 3 cents, 5 cents, 10 cents (both nickels and “half-dimes”), 20 cents, 25 cents, 50 cents, $1, $2.50, $3.00, $4.00, $5.00, $10.00, and $20.00. And that’s not even counting mills (0.1 cents), which were minted by the states, and commemorative coins, which (if I recall correctly) have been minted in denominations up to $50.
If we devalued the currency, we could bring back the halfpenny to be the equivalent of today’s nickel. The value of the “old” pennies would be one mill. The whole process would make sense only if they were phased out right away.
