TODAY THE U.S. House of Representatives approved a resolution to stop making pennies that cost more than they're worth -- a move that "could save about $100 million a year, or roughly three dimes for every American." (See the complete story at http://redwoodage.com/content/view/136373/45.)
The U.S. minted 7.4 billion pennies in 2007, at a cost of 1.26 cents per penny. Nickels cost about 7.5 cents. We know that the cost of zinc and copper has risen sharply in recent years -- consistent with metal prices in other times of war.
A year and a half ago the U.S. Mint even took the step to declare it illegal for consumers to recycle pennies as scrap metal. It seemed a random law, until you looked at the fact that with copper's skyrocketing prices a penny's worth of metal was worth more than the penny itself. (Note that copper pennies made prior to 1982 are all copper, versus the zinc blend produced after 1982. The zinc extraction process for the newer pennies makes recycling cost-prohibitive anyhow.) According to one source, historically coins that are worth more in their base metals than their face values quickly disappear out of circulation despite the law.
One solution proposed by Congress earlier this week is steel pennies and nickels. (Pennies made during World War II were composed of steel.) Other solutions bantered about include:
• Have the U.S. Mint make new types of pennies and nickels out of metals worth less than their face values.
• Re-value the penny to be worth a nickel, and re-value the nickel to be a worth dime.
• Phase out the creation of new pennies and nickels.
But there's another reason for the penny's increased cost that's lurking in the background. Indeed, it's the good old paper dollar (an instrument hit with rising pulp-paper costs).
The dollar has fallen so far against foreign currencies. A euro cost just 87 American pennies shortly after it was introduced in 1999. But two weeks ago, it hit $1.60. If those rates hadn't changed, a penny might only cost 0.6 cents today.
If the Bush administration wants to preserve the penny, it ought to start supporting the dollar. Otherwise, that may be the next piece of currency we eliminate.
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| Jennifer D. Meacham, Gather Money Correspondent | ||||
Jennifer's column, "The Bottom Line," is published every week to the Gather Essentials: Money channel. Jennifer is a business and personal finance columnist who covers money matters for RedwoodAge.com and real estate news for RISMedia, and co-authored the best-selling retirement investing guide "IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment" (Square One Publishers, New York). Keep up on the latest news and analysis into how you can take control of your business and personal financial future by joining Jennifer's "Self-Directed Investing 101" network. | ||||
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Comments: 40
1) What are your suggestions for how to deal with the penny, or the nickel or dollar for that matter?
2) Are you in agreement that the U.S. administration must focus on the value of the dollar compared to international currencies in order to help keep our national debt from continually climbing?
I think that looking for low cost alternatives might be a better option, as the rounding up and down of financial transactions could really get ...messy (but achievable I suppose).
As far as your second question - my only advice is to get a Democrat in there to save the country from completely imploding............
Although I don't see a reason why you couldn't focus on both at the same time.
Thank you Kevin!
Thank you also everyone else for your feedback. I'll be back to respond to posts soon.
All my best,
Great article and thanks for sharing!
Although I'm not usually carrying pennies,nickels or dimes around with me unless they're part of the change I receive after a purchase, I would mourn the loss of them. I think it would be best to produce them with relatively inexpensive metals. The paper dollar may be rather difficult to discontinue. No matter how much it has been hoped that the people will favor the one-dollar coin over the one-dollar bill, the coins do not seem to be desired. Congress will need to choose a date that would discontinue the printing of one-dollar bills.
In order to curb the climb of the nation's debt, the federal government needs to have the decline in the dollar's worth in comparison to other currencies in focus. There doesn't seem to be a quick fix for this problem, but, as Kevin wrote, government officials need to prioritize things, so that the things that are most likely to improve the dollar's trading value will be implemented.
> "If the Bush administration wants to preserve the penny, it ought to start supporting the dollar. Otherwise, that may be the next piece of currency we eliminate."
Bushco has not supported on thing that is good for our country. The only things Bushco has consistently supported are things that will benefit themselves and their moneytheist repug friends. If that ain't obvious after almost 8 years of his big mess, then I don't know what is.
I think getting rid of the penny would be difficult so I think that they should make it out of steel or aluminum or some base metal. They could do the same with nickels. I don't really see us changing our coinage because it is something that we all become fond of. In some strange way so many of us have grown fond of our buffalo nickels and indian head pennies and our real silver dollars. Coinage is an emotional issue.
As an extra note:
Autstralia has a two dollar coin that I loved! I could have a pocket full of change and it was worth enough to buy something. A handful of change could be 20 bucks!
I think if we concentrate on getting the economy stabilized and strengthening the dollar then I think other things will improve. However, I still think we should be making our coins out of the cheapest material possible. Hasn't Congress ever heard of living within your means?
The time of America as the big spender should be coming to an end.
Of course, learning to count by fives (nickels) and tens (dimes) are fine skills. I'm just not clear why pennies have to be eliminated. I have noticed that many people collect bags of them, consider them a nuisance and banks don't always automatically count and sort them for you. They tend to end up in the bottom of purses or in coin holders on dressers. Even penny candy doesn't cost a penny any more. When I was a kid, you could buy things for a penny or two, even if it was only candy.
BTW, Wanda, No Congress has NEVER HEARD of "living within your means."
I'm not so sure about ever being able to phase out cash entirely. For instance, there is still a fairly large (but quiet) segment of the population that refuses to use banks or simply can't due to their past history (YAY to banks for getting smart and tracking those that repeatedly fail to behave responsibly). Those people aren't going to go away nor are they suddenly going to start trusting financial institutions with their hard-earned paychecks.
This may sound drastic, but having a "limited" amount of money in circulation would help revalue things a bit. The fact that the government just keeps printing money shows what we think about it - money itself has become a cheap commodity.
and.
I had no idea that all pre-1982 pennies were solid copper.
In New Zealand we got rid of our one and two cent coins long ago. Since I left a few years ago I think the five cents has gone too. As I recall, it wasn't a big deal when the one and two cents went. Maurice K, I don't think "inflation spiraled" although admittedly I haven't read any real studies on what happened to prices. When you buy things at a supermarket, it's the total that's rounded, not the individual item prices.
I've hear people say that it wouldn't work in the US because of the sales tax but ... the total is rounded now anyway, it just happens to be to the nearest $0.01 rather than $0.05.
But, what's a penny really worth today. It can't be worth much when you find them scattered on the ground and no one stops to pick them up. Some times they are a nuisance, always getting in the way. If we stop using the penny, does that mean the gas prices will no longer end in .99 9/10? Does that mean that pricing items you have to make them come out to even .05 or .10 or .90? We go round and round with this penny, but no one knows exactly what to do with it.
Nice article Jennifer. Keep up the good work.