USA Trails In Retiring The Penny

pennies

“Right now, a penny doesn’t even buy a penny,” according to a website dedicated solely to the debate about whether to abolish it. According to RetireThePenny.org, “inflation has eaten away at the value of the penny to such a degree that it no longer facilitates commerce.” The last time the US phased out a coin was in 1857, when the half cent was taken out of circulation; it was worth approximately what the dime is worth todayOne argument of those seeking to keep the penny is the cultural and historic significance. With Abraham Lincoln depicted on it, some feel it would be un-American to do away with it. Consider this, however; the Department of Defense decided more than thirty years ago to ban the use of pennies on overseas military bases because they “are too heavy and not cost-effective to ship.” [1] Proponents of keeping the penny also claim that it keeps high prices in check and fuels charitable causes. The major factor influencing the opinion of average Americans is aversion to price rounding. [2] Would this indeed be a problem? Perhaps the US should take a cue from Scandinavia. Denmark, Sweden, and Norway have all abolished their smallest coins. [1]

From October 2008, Demark’s smallest coin, the 25-øre coin (worth about 4.5 US cents), was taken out of circulation. According to Denmark’s National Bank, “studies had shown that the 25-øre coin no longer had self-supporting purchasing power.” Rounding rules were implemented for cash payments, rounding up or down to the nearest whole or half krone. While some were concerned that removing small coins from circulation will cause prices to rise, Denmark’s National Bank claims that “previous experience from Denmark, Sweden and Norway shows that taking small coins out of circulation does not lead to higher prices.” The 25-øre coin wasn’t the first to go in Denmark. In 1989, the 5- and 10-øre pieces were abolished.   [3]

Sweden’s central bank, The Riksbank, has taken it one step further and rid itself of any coin less than one Swedish krone (worth a little more than 15 US cents). They began in 1972 with the 1- and 2-öre coins, between 1985–1992, the 5-, 10-, and 25-öre coins were gone, and finally in 2010, they took the 50-öre coin out of circulation. [4][5]. The Riksbank is also planning a complete overhaul of their banknotes and coins. Why? According to Riksbank, “the current coins are large and heavy in relation to their value. They need to be smaller and lighter to reduce the costs of handling them. The changes being made will also reduce the impact on the environment.” [6].

In May 2012, Norway also took their smallest coin at the time, the 50-øre piece, out of circulation. Joining Sweden in having their smallest coin be a whole krone. Norway’s research also shows that price rounding in cash payments won’t cause an overall hike in prices: “Rounding prices in cash transactions will not in itself cause prices to rise. It is only the final total in a cash transaction that will be rounded up or down, not the price of individual goods. Electronic payments are not affected by a withdrawal of coins from circulation.” [7]

The cost of producing and distributing the penny (and the nickel, for that matter) continually increased until 2011. Though it went down since then, it still costs nearly double to produce and distribute the penny than it’s worth; as of 2012, the unit cost of production and distribution of the penny is 1.8 cents. During 2013, the penny caused a loss of $55 million. [8]

Are you interested in supporting the movement to retire the penny? RetireThePenny.org has several suggestions to get involved:

  • Spread the word
  • If you’re a merchant, announce you’ll be rounding cash transactions to the nearest nickel [9].
  • Write to your elected officials requesting support. [10]

 

Written by Kristin Clay

Sources

1.http://www.retirethepenny.org/  

2. http://www.pennies.org/

3. http://nationalbanken.dk/DNUK/NotesAndCoins.nsf/side/25oere_coin_!OpenDocument

4. http://www.riksbank.se/en/Notes-and-coins/Coins/Invalid-coins/

5. http://www.nordstjernan.com/news/nordic/2694/

6. http://www.riksbank.se/en/FAQ/Notes-and-coins/Questions-and-answers—New-banknote-and-coin-series/

7. http://www.norges-bank.no/en/notes-and-coins/withdrawn-notes-and-coins/50-ore-coin-to-be-withdrawn-in-2012/

8. http://news.coinupdate.com/us-mint-cost-to-make-cent-and-nickel-declines-3113/

9. http://www.retirethepenny.org/pdfs/penny_free_business.pdf

10. http://www.retirethepenny.org/take_action.html

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