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» Hatrack River Forum » Active Forums » Books, Films, Food and Culture » It costs the US Mint 2.4 cents to produce a penny

   
Author Topic: It costs the US Mint 2.4 cents to produce a penny
ScottF
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...at a loss of $70M for 2012. Time to kill this outdated currency. I'm starting the revolution by throwing a button into the next fountain I see and wishing for a more efficient government.

On the plus side, apparently your thoughts have more than doubled in value.

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Rakeesh
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On the one hand, sure, inefficient production, though the truth is $70M/yr is potentially not that much.

Then you have to ask just what eliminating the penny would actually do. That $70M would be saved, but every cash transaction would then have to be bumped up or down by as much as $0.02.

Now, how much of an impact would that actually have? Actually I have no idea, but I do think it's possible that difficulty is worth $70M/yr. It would need to be examined more than 'it's inefficient!', though.

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ScottF
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I found this short little video that does a good and engaging job at explaining why the penny should be killed. I hadn't realized that a number of countries already have.

http://blog.cgpgrey.com/death-to-pennies/

Would love to hear some arguments as to why we should keep it. Not being rhetorical/facetious, I really would like to hear them.

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Rakeesh
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To me the only potentially persuasive part of the script was when it mentioned other nations have done it without any bad impact. If that is true, then it is pretty compelling. It just states it, though, as fact.
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ScottF
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New Zealand even got rid of their nickel (which also costs double it's value to produce) back in 2006, apparently without any major problems.

I honestly think hard currency will be mostly obsolete in another decade or two.

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Stone_Wolf_
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Great video, thanks for sharing ScottF, makes a lot of great points!

quote:
And, even if you think it’s unpatriotic or disrespectful to retire Presidential coinage, allow me to direct you to a little organization known as the United States Military.

Where, in overseas bases, they’ve already abolished the penny by automatically rounding to the nearest five cents.


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ScottF
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Thanks SW. It does point out one company that would be hurt by this - the only company that creates machines that accept pennies, Coinstar.

Of course you're only getting .9 cents back for the convenience, but I really don't begrudge Coinstar for making a profit to dispose of thousands of pounds of useless coins.

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Emreecheek
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Wouldn't eliminating the penny just increase reliance on the nickel, which costs about 3 times as much to produce?
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Stone_Wolf_
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Oh and I found this:

quote:
In fact, the dollar has lost over 96% of its value. That means today’s dollar would be worth less than 4 cents back in 1913.
Source.
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Lyrhawn
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Pennies are silly. I don't get a lot of change anymore because I never carry much cash on me. Pennies, and change in general, goes into a jar for years at a time until I muster up the will to roll them and take them to the bank.

Not only are pennies expensive to produce, there's also an environmental toll that comes from producing that much copper and zinc.

9 times out of 10 I just tell the cashier to keep the pennies. I don't want to be bothered with them.

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imogen
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We got rid of our 1 and 2c coins a while back. We still have 5, 10, 20 and 50. I don't miss the 1c and 2c at all.
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El JT de Spang
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Here's a link to my blog post from six years ago detailing all the reasons why we should ditch pennies: http://everyoneisstupidbutme.com/rants/jts-campaign-against-pennies/

So, yeah, this is hardly news.

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ScottF
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Nice blog post. I figured its covered ground but still interesting that the penny legacy won't go away. If I had a nickel for every time pennies annoyed me...
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Blayne Bradley
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If there is no reason to keep the penny, then I see no compelling reason to not abolish it a.s.a.p as Canada just did.
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Stone_Wolf_
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That statement is redundant and should have read, "Canada just dropped their penny."
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Stone_Wolf_
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Hey, quick, someone invent a compressed air penny gun...talk about cheap ammo!
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Foust
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Korea's currency is the won. A dollar is worth about 1000 won, give or take depending on the exchange rates.

The smallest coins in use are 10 won coins, and they are rarely if ever used. Nearly all the prices here are rounded to 500 won, with some being 100 won, and a few being 50 won.

Basically, it means a pair of "50 cent" coins, the 500 won coin, are actually useful and are worth having in your pocket.

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El JT de Spang
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The six year follow up from me writing that blog post is that I almost always leave pennies with cashiers when I do cash transactions. I tell them to keep the pennies. Also, the last few years, I've expanded that to straight up asking them if a slight lower amount is ok if I don't have pennies. If it's $1.32, I count out my change and then ask if $1.30 is ok. Lots of times it is.

I may be biased, but it seems like it's catching on a bit.

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rollainm
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I'm a bit curious if there would be a significant psychological effect on the economy given today's popular 99 cent pricing strategy. Would that just fade away or would prices drop 4 cents to maintain that one less dollar perception?
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Jeff C.
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Yeah, I've been saying how useless pennies are for a while now. We really need to evolve our currency.
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King of Men
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Norway phased out the one-øre coin before I was born, and the 10- and 25-øre within my lifetime. The smallest denomination of the Norwegian kroner is now the half-krone coin. (Well! Actually I just learned that this coin hasn't been legal tender since May 1st. So I guess the smallest denomination is now the single krone.) I am not aware of any ill effects on the Norwegian economy, although admittedly I don't see how you'd observe the counterfactual. I note that 13-year-old me was pretty sad when the 10-øre was discontinued; my mother used to bake Christmas dumplings with these coins wrapped in foil inside. The half-kroner is just too big for that use. And sure, we have a collection of 10-øres that gets brought out every Christmas and then carefully collected back in again, but it's just not the same when you don't get to keep the coin!
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Orincoro
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quote:
Originally posted by rollainm:
I'm a bit curious if there would be a significant psychological effect on the economy given today's popular 99 cent pricing strategy. Would that just fade away or would prices drop 4 cents to maintain that one less dollar perception?

Here the currency is the crown, with denominations of 1, 2, 5, 10, 20, 50, 100, 200, 500, 1000, 2000, and 5,000. One dollar is roughly equivalent to 20 crowns, meaning that a crown is worth about 5 cents. Prices are typically *not* lowered a crown for small purchases, as this is I suppose considered a hassle and not worth the incentive considering profit margin. Plus, taxes are figured into purchases as a matter of practice due to the higher value of the crown against the cent post-purchase tax application involves too much rounding, and people resent large amounts of small change. Strangely, people resent small change for the opposite reason that they do in the US. Change here is too valuable, and thus piling it up in a jar at home is considered wasteful- so people are annoyed at having to carry the money and count it out to spend it. It's a common sight to see someone who has forgotten to go to the bankomat go to the corner store with a pocket full of 1s and 2s, which is actually enough to make their purchases.

Up until about 5 years ago, there was the Heller, which was 1/100 of a crown. There was only the 50 heller piece, worth 2.5 cents. When the heller was eliminated, prices continued to be represented as Crowns + Hellers, with rounding from 50 up, which for a few years caused shopkeepers to price items at 19.50, or similar, when they would in fact collect 20, but this has since fallen out of practice as well.

Prices *are* lowered below round numbers on large purchases, when people are more likely to pay by card. For instance, a big screen TV might cost 9,950, 18,880, crowns or some similar figure. For items like a coffee or a pack of gum, you're likely to see nice round figures. 20 crowns, 10 crowns, dinner for 180, etc.

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King of Men
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Do I recall correctly that you live in the Czech Republic, Orincoro?
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Orincoro
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Yep, 4 years on and off.
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ScottF
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Yay. Those Canadians are smart cookies.

http://news.nationalpost.com/2013/02/04/canadian-penny-last-day/

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theamazeeaz
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Complaining about the penny-elimination raising the prices of things is like complaining that your pizza costs $0.14 more because the company has to provide health insurance to their adult employees who have the misfortune of working at a pizza joint for their living. Quite possibly the best excuse for a price increase I've heard in a while. In fact, anything up to a few DOLLARS wouldn't have been a big deal.

So. What. This makes a difference in my spending? My survival? Seriously?

And I say this as someone who LOVES the Tightwad Gazette.

Go ahead, Republicans. I will back you on this one.

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Samprimary
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gonna start buying old pennies now in bulk
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Tittles
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There is no way that some people out that there aren't making money off of this. Find/buy some pennies, melt them down, sell the copper.
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BlackBlade
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I think something like 2% of the penny is copper. Other metals round it out.
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rivka
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A penny does not contain 2 cents worth of metal, so buying them and melting them down for the metal would be useless.

A large part of the cost is the formation of the specific alloy, casting each penny, etc.

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Orincoro
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Well this is not 100% accurate, as some older pennies are still circulating which may contain a higher percentage of copper, but this is less true than it was when I was a kid and you could find them in just about any pile of change (or in some of your childhoods, before they started doing zinc pennies).

Still, I think the alloys employed and the actual copper weight of even the old pennies would make melting them down more expensive than the yield of metal. Which means that yes, it really is time to get rid of the penny entirely. I haven't done this research in a while, but I recall reading that it is near or at the bottom of the list of least valuable coins in the world, and it is probably the least valuable coin in the developed world.

This reminds me- there used to be this trick in Spain when I was first there in about 2002. The 1 peseta coin (which had left circulation), happened to fit precisely between the battery and the circuit board of a Nokia 5110 (the most popular cell in the world at the time I think). That model had an issue where the battery fitted poorly onto the case and would rattle. You put the 1 peseta coin on top of the sim, and it would stop rattling. People used to collect the things for that purpose.

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theamazeeaz
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http://www.getrichslowly.org/blog/2012/06/19/what-your-loose-change-is-really-worth/

You're welcome.

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rivka
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quote:
Originally posted by Orincoro:
Well this is not 100% accurate, as some older pennies are still circulating which may contain a higher percentage of copper

Fair enough. I meant the ones currently being made (at a cost of over 2 cents each), but it's true that I did not specify.
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Samprimary
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quote:
Originally posted by BlackBlade:
I think something like 2% of the penny is copper. Other metals round it out.

Not old pennies.
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Ael
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I find it more likely that prices would lower. Stores largely charge $13.99 instead of $14 because some people look at $13.99 and see $13, not almost-$14. From a psychological angle, unless your margins are /very/ slim, it would make much more sense to lower the price of goods to $13.95 rather than raise them to $14.
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Lyrhawn
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The penny isn't eliminated for the same reason dollar bills haven't been replaced with dollar coins: Whenever Congress tries, the public throws a hissy fit.

For sentimental reasons, or because people just don't like change, they refuse. At the end of the day I suppose it's not a huge amount. The Mint says it could save a billion or two over a couple decades by switching to dollar coins, add more for the penny. But people would rather spend more because they can't be bothered with it.

I think we're getting closer to widespread use of digital wallets, but we're not there yet, and won't be for a number of years still.

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Lyrhawn
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quote:
Originally posted by Ael:
I find it more likely that prices would lower. Stores largely charge $13.99 instead of $14 because some people look at $13.99 and see $13, not almost-$14. From a psychological angle, unless your margins are /very/ slim, it would make much more sense to lower the price of goods to $13.95 rather than raise them to $14.

Studies in Canada and elsewhere have shown that by and large customers break even with this. Naysayers say it costs them billions of dollars, but, I think that underestimates the undercirculation of penny currency in transactions.

I think most retailers would shift prices to adjust to this, and it would change depending how sales taxes affect things. Sales tax in Michigan is six cents, so something that's 99 cents is a dollar five, which would work out perfectly. That'll change depending on local taxes, and I'm sure a lot of places will adjust prices accordingly to not get tagged with the two cent loss, but I bet most people wouldn't notice.

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Teshi
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Canada just got rid of their penny the other day. It's clearly bringing up some soul-searching around the world.

The UK still has 1p and 2p coins. 2p coins are the worst. They are huge, and heavy, and useless.

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Orincoro
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quote:
Originally posted by Ael:
I find it more likely that prices would lower. Stores largely charge $13.99 instead of $14 because some people look at $13.99 and see $13, not almost-$14. From a psychological angle, unless your margins are /very/ slim, it would make much more sense to lower the price of goods to $13.95 rather than raise them to $14.

As noted in my older post- this is about break even. The elimination of a smaller denomination causes up rounding, but slowly retailers phase out the smaller price reductions in favor of either larger reductions, or no reductions (depending largely on whether the new reduction would hurt the bottom line).

For example, in Czech Republic, odd numbers (9, 19, 29) etc, are not seen often, while prices of 950, or 18,880, are more common. Retailers take into account the psychology of the purchase, but also stop reductions that are considered too substantial. 99¢ is actually not a law of nature in sales- it's not something seen as much with other currencies.

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Alexbrit
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I am happy with the performance of our government.We need to spent money on these things to make us more honorable nation in the world.Our country is the land of immigration and we should take extra care of all here.This is my opinion only.


investor visa australia

[ February 09, 2013, 09:52 AM: Message edited by: Alexbrit ]

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Ael
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quote:
Originally posted by Lyrhawn:
Sales tax in Michigan is six cents, so something that's 99 cents is a dollar five, which would work out perfectly. That'll change depending on local taxes, and I'm sure a lot of places will adjust prices accordingly to not get tagged with the two cent loss, but I bet most people wouldn't notice.

That sounds sensible to me. [Smile]

Orinoco: Yes, that matches what I remember from when I visited there. We do seem to like going /right/ to the edge on prices in America, for some reason--but thinking about it, I frequently see prices ending in .95. Like Lyrhawn, my suspicion is that most people wouldn't notice.

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