Throwing good money after bad (minor)

[Lynn_Bodoni]

My main complaint about the Sackies is that they turn from gold to copper brown over time. I love the golden color, but I’m not nearly so fond of that brown for our largest coin (leaving aside the precious metal rounds that get made now and then). I liked the SBAs, too, but they did look and feel entirely too much like quarters. I used to try to get them and spend them, now I don’t really bother with promoting the Sackies.

One the one hand, I understand the reasoning behind getting rid of pennies. On the other hand, I love elongated/squished coins, particularly pennies. However, since pennies are sandwiches these days, they don’t make such attractive squished coins. And I just don’t see so many penny squishing machines as I used to, dang it all!

[OtakuLoki]

[QUOTE=rainwalker78]
Why does eliminating the one cent coin make sense? Not trying to start an argument (or even a debate), I am just curious as to the reasoning behind this.
[/QUOTE]

To support Dr. Drake’s point - according to this Wikipedia article, the penny currently contains, even with current copper-clad zinc penny, 0.89 cents worth of metal. And it costs the mint about 0.6 cents in manufacturing and handling charges to mint each coin.

I think that the American public will scream bloody murder if Congress does do the obvious thing, and kill the penny (and the dollar bill, for that matter.) but I can certainly see the logic behind the idea.

[Bearflag70]

What I would do:

TERMINATE:
Penny
Nickel
Dime
$1 Bill

INCREASE:
$0.50 Coin
$1.00 Coin
$2 Bill

[sinjin]

If you made dollar coins worth, say, two bucks each I’d be all for them, too.

[Giles]

[QUOTE=sinjin]
If you made dollar coins worth, say, two bucks each I’d be all for them, too.
[/QUOTE]

Wouldn’t they be two-dollar coins, then, like they have in Canada and Australia?

[Cheesesteak]

[QUOTE=rainwalker78]
Why does eliminating the one cent coin make sense?
[/QUOTE]
Because the coin is worthless, that’s why.

If you were developing a currency system from scratch, would you have one of the coins be so low value that you couldn’t collect enough of them in a day to buy anything? If someone placed a shiny new penny outside your door, every single morning, it would take you 2 years to gather up enough money to buy a sandwich. The only purpose for a coin that low value is to round off transactions to a tiny, tiny fraction of the transaction amount. If you buy lunch, it can cost darn near $10, that penny you get is necessary only if you need the transaction amount calculated to 1/1000th of its total amount.

The coin is so worthless that stores regularly leave a pile of them on the counter. Instead of spending them, people throw them in jars, wait a few months and then PAY someone to count them and give them "real’ money in return.

[silenus]

Coins are evil. Any move to increase the amount of change I carry will be met with unrelenting hostility. Getting rid of the dolar bill and replacing it with a heavy, noisy, ugly piece of metal is stupid. The penny I can see…relatively useless in today’s society. But ugly coins are not the answer.

[rainwalker78]

[QUOTE=Dr. Drake]
In my understanding, it now costs more than 1¢ worth of metal to make a penny. Besides that, there is vanishingly little that you can buy for 4¢ or less. From the founding of the USA until comparatively recently, neither of those statements were true, but inflation has taken its toll on the poor penny. It costs money to keep it in circulation, and it doesn’t add much value. I like them and I use them and I pick them up and keep them when I see them on the ground, and I’d add a healthy dash of tradition and nostalgia, but as I understand it the main argument for ditching our little copper* buddy is economic. The counter-arguments seem to be appeals to tradition and fears that wily merchants would round everything up. I don’t feel strongly either way.

*zinc
[/QUOTE]

[QUOTE=OtakuLoki]
To support Dr. Drake’s point - according to this Wikipedia article, the penny currently contains, even with current copper-clad zinc penny, 0.89 cents worth of metal. And it costs the mint about 0.6 cents in manufacturing and handling charges to mint each coin.

I think that the American public will scream bloody murder if Congress does do the obvious thing, and kill the penny (and the dollar bill, for that matter.) but I can certainly see the logic behind the idea.
[/QUOTE]

[QUOTE=Cheesesteak]
Because the coin is worthless, that’s why.

If you were developing a currency system from scratch, would you have one of the coins be so low value that you couldn’t collect enough of them in a day to buy anything? If someone placed a shiny new penny outside your door, every single morning, it would take you 2 years to gather up enough money to buy a sandwich. The only purpose for a coin that low value is to round off transactions to a tiny, tiny fraction of the transaction amount. If you buy lunch, it can cost darn near $10, that penny you get is necessary only if you need the transaction amount calculated to 1/1000th of its total amount.

The coin is so worthless that stores regularly leave a pile of them on the counter. Instead of spending them, people throw them in jars, wait a few months and then PAY someone to count them and give them "real’ money in return.
[/QUOTE]

So…would we go to 10ths or 20ths of a dollar instead if 100ths in transactions? or would we still use 100ths of a dollar, and just not worry about rounding?

I am not sure we are ready to do away with that level of granularity yet.

Sorry for the hijack!

[Mtgman]

[QUOTE=rainwalker78]
Why does eliminating the one cent coin make sense? Not trying to start an argument (or even a debate), I am just curious as to the reasoning behind this.
[/QUOTE]

There are two main arguements for eliminating the one-cent coin from the minting portfolio. The first, and strongest, is they’re virtually useless. Almost nothing can be purchased for a penny and if prices changed from XX.99 to XX or XX.95, most would not even care. The half-penny was removed from the portfolio over a century ago, and during it’s time in circulation it had a purchasing power of several times what the penny does today. There’s precedent, and there is growing public discussion of eliminating the penny.

The second reason, and this is more specialized, has to do with seigniorage.

Seigniorage, also spelled seignorage or seigneurage, is the net revenue derived from the issuing of currency. Seigniorage derived from coins arises from the difference between the face value of a coin and the cost of producing, distributing and eventually retiring it from circulation. Seigniorage is an important source of revenue for some national banks. Seigniorage derived from notes is the difference between the interest earned on the government’s securities portfolio, and the costs of producing and distributing bank notes
…
Ordinarily seigniorage is only an interest-free loan to the issuer because when the currency is worn out the issuer buys it back at face value thereby negating the revenue earned when it was put into circulation. Currently under the rules governing monetary operations of major central banks (including the central bank of the USA), seigniorage on bank notes is simply defined as the interest payments received by central banks on the total amount of currency issued. However if the currency is collected - i.e. “somewhat destroyed” or taken permanently out of the money-circulation - instead of being returned to the issuer the back end of the deal never occurs. Thus the issuer of the currency gets to keep the whole seigniorage profit, by not having to buy worn out issued currency back at face value, thereby keeping the “profit” earned when the currency were put into circulation in the first place.

Example
The “50 State” series of quarters (25-cent coins) was launched in the U.S. in the late 1990s based on the Millennium quarter series in Canada[citation needed]. The U.S. government planned on a large number of people collecting each new quarter as it rolled out of the U.S. Mint thus taking the pieces out of circulation. Since it costs the Mint less than five cents for each 25-cent piece it produces the government made a profit whenever someone “bought” a coin and chose not to spend it. The U.S. Treasury estimates that it has earned about $5 billion in seigniorage revenue from the quarters so far.

Now that you know that all the cash you have in your wallet is an interest-free loan to the government, you may like to know that by keeping the penny around is the reverse. Coins cost more to make than face value

For the first time in U.S. history, the cost of manufacturing both a penny and a nickel is more than the 1-cent and 5-cent values of the coins themselves. Skyrocketing metals prices are behind the increase, the U.S. Mint said in a letter to members of Congress last week.

The Mint estimates it will cost 1.23 cents per penny and 5.73 cents per nickel this fiscal year, which ends Sept. 30. The cost of producing a penny has risen 27% in the last year, while nickel manufacturing costs have risen 19%.
…
Last year, the Mint’s coin-making profit was $730 million. Mint officials estimate the added penny and nickel expenses will reduce the Mint’s profit this year by $45 million.

This is a waste of taxpayer dollars. Admittedly, a small one(compared to the overall budget), and the mint is still profitable, but a loss nonetheless. Eliminating the penny and re-formulating the nickel would stop these losses.

Enjoy,
Steven

[Giles]

[QUOTE=rainwalker78]
So…would we go to 10ths or 20ths of a dollar instead if 100ths in transactions? or would we still use 100ths of a dollar, and just not worry about rounding?

I am not sure we are ready to do away with that level of granularity yet.

Sorry for the hijack!
[/QUOTE]

When Australia eliminated 1c and 2c coins, prices could still be in cents (e.g., $1.99), but the sum of your purchases was rounded to the nearest 5c (e.g., $1.02 would become $1.00 and $1.03 would become $1.05) – if you were paying with cash. If you paid with a credit card, it stayed at the exact cent.

Australia has a GST (goods and services tax) similar to sales tax in the US, at 10%. However, displayed store prices are inclusive of GST. When you get a receipt, it tells you what part was GST (e.g., something priced at $10 would include 91c of GST), just n case you are using the goods or service in your business and so can claim the GST.

If this were done in the US, I’d expect rounding to take place after sales tax was added, e.g., $1.99 + 13c sales tax = $2.12, rounding down to $2.10.

[Cheesesteak]

[QUOTE=rainwalker78]
I am not sure we are ready to do away with that level of granularity yet.
[/QUOTE]
What are you talking about? The penny has been our smallest unit of currency for 150 years. Before that, they had a half penny, but discontinued it because it wasn’t worth enough. That’s 150 years of price inflation without updating our currency in the slightest bit. Maybe once we get another 50 years under our belt, a small cup of plain coffee will be $5, newspapers will be $1 and we’ll finally be ready to round transactions to the nearest nickel.

Our currency is a joke. This resistance to change has gone on so long that we as a society have forgotten that coins can be money* instead of just change**. We think of coins as a hassle because you never use them to buy things they only appear as a pile of worthless metal in your pocket after buying something. We won’t get back to buying things with coins until they actually start to have real value, $5 is about the minimum in my book. With a $5 coin it’s possible to buy lunch with the coins in your pocket. $1 and $2 aren’t enough, they’ll just be getting the way.

• Money is currency you use to buy stuff with
  ** Change is currency you get back when you buy things

[silenus]

So what? With a 5 bill in my pocket I can buy lunch and not sound like a maraca as I walk down the street. A better idea would be to dump coins altogether and go exclusively to bills. Start them at .05, going up to $100. That way we could save all that metal in coins and do our part to quiet the environment and save wear and tear on pockets.

[Bearflag70]

[QUOTE=silenus]
Coins are evil. Any move to increase the amount of change I carry will be met with unrelenting hostility. Getting rid of the dolar bill and replacing it with a heavy, noisy, ugly piece of metal is stupid. The penny I can see…relatively useless in today’s society. But ugly coins are not the answer.
[/QUOTE]

My plan would reduce the number of coins in your pocket.

TERMINATE:
Penny
Nickel
Dime
$1 Bill

INCREASE:
$0.50 Coin
$1.00 Coin
$2 Bill

Just think of all the newfound space in your pocket once all those low value coins are eliminated.

@silenus

A better idea would be to dump coins altogether and go exclusively to bills. Start them at $.05, going up to $100. That way we could save all that metal in coins and do our part to quiet the environment and save wear and tear on pockets.

Those small value bills would wear out so fast we would have the shred our forests to keep up and spend a lot more money making those bills.

[Bill_Door]

[QUOTE=Bearflag70]
(snip) Those small value bills would wear out so fast we would have the shred our forests to keep up and spend a lot more money making those bills.
[/QUOTE]

[nitpick]In actual fact the sole source of paper for currency is the Crane Company, which makes enough paper to produce 10 billion notes each year out of 100% cotton fiber. Not a tree in a carload of the stuff. [/nitpick]

[Bearflag70]

[QUOTE=Bill Door]
[nitpick]In actual fact the sole source of paper for currency is the Crane Company, which makes enough paper to produce 10 billion notes each year out of 100% cotton fiber. Not a tree in a carload of the stuff. [/nitpick]
[/QUOTE]

Hmm. Interesting. Thanks.

[Santo_Rugger]

[QUOTE=rainwalker78]
So…would we go to 10ths or 20ths of a dollar instead if 100ths in transactions? or would we still use 100ths of a dollar, and just not worry about rounding?

I am not sure we are ready to do away with that level of granularity yet.

Sorry for the hijack!
[/QUOTE]

Do you really care if you get back 57 cents or 55? Or get back 60 cents instead of 58? The price for individual items does not have to change, the transaction could be rounded at the end. I would bet dollars to doughnuts that 90% of a persons transactions are for more than $10, and 99.9% are above $1. Although the transaction would be “granular” at the $1 level, as stated before, is breaking down a lunch transaction to 1/1000 of it’s total cost really granular?

[QUOTE=silenus]
Coins are evil. Any move to increase the amount of change I carry will be met with unrelenting hostility. Getting rid of the dolar bill and replacing it with a heavy, noisy, ugly piece of metal is stupid. The penny I can see…relatively useless in today’s society. But ugly coins are not the answer.
[/QUOTE]

If the penny were eliminated and the dollar coin was widely circulated, you could conceivably have less change in your pocket.

[Dinsdale]

[QUOTE=NDP]
I have nothing against a smaller and lighter dollar coin per se but does the government have to keep making them quarter-sized?
[/QUOTE]

Beautifully and concisely put.
Of the last 3 dollar coins, Susie B, Sackie, and the ugly presidents, they cannot vary more than a minute fraction of an inch from the diameter and thickness of the quarter. Hooray for discovering after the Susie B debacle that coins could actually be made in a color other than silver. But I would imagine that geometry would permit them to come up with a size or shape that was more readily distinguishable from a quarter.
My personal preferences would be for a round coin with a hole in the middle like a washer, or a multi-sided polyhedron.

[Projammer]

[QUOTE=Dinsdale]
My personal preferences would be for a round coin with a hole in the middle like a washer, or a multi-sided polyhedron.
[/QUOTE]

ticker posted a link to the fifty pence coin back in message #10. It’s a well designed 7-sided coin.

[Sampiro]

[QUOTE=NDP]
The fact the Ike dollar coins were heavy was the reason they were discontinued. I have nothing against a smaller and lighter dollar coin per se but does the government have to keep making them quarter-sized? Why not, for example, make them roughly the same size as the old JFK fifty-cent piece but perhaps a bit thinner like a dime?
[/QUOTE]

That’s the biggest mystery to me. “The Susan B. Anthony failed because it was easily mistaken for a quarter” [including by vending machines] “so in our new coin (celebrating the information age by featuring the first search Injun) we’re going to fix that by making it brass colored. Okay, Sacagawea failed because she was still easily mistaken for a quarter once that brass color wears off [two minutes after exposure to hand oils] so we’ll fix that by changing it to Dead Presidents!” Makes no sense.

And are there any vending machines that accept a dollar coin as a dollar coin yet? Or why don’t they have a bimetallic colored coin like Canada’s 2 dollar? Those are impossible to mistake for quarters in look and feel (plus they’re more aesthetically pleasing).

[Sampiro]

The Canadian $2 [URL=http://en.wikipedia.org/wiki/Image:Toonie-reverse.jpg- this is what we should do (I’d suggest a non-white American other than Sacagawea [who we don’t know what she looked like anyway]- MLK, or Harriet Tubman, or if you want to really piss off Sean Hannity and Ann Coulter, Malcolm X [who would probably have the distinction of the most spotless married life of anybody on American currency other than perhaps U.S. Grant]).