Yahoo Finance The Penny Is Pointless and Costs More to Make Than Its Currency Value
A pandemic coin shortage has revitalized the anti-penny campaign in the U.S.
Penny haters say the value of U.S. currency has moved beyond the smallest denomination.
Pennies cost more to make than their currency value.
After decades of anti-penny campaigning, could the COVID-19 (coronavirus) pandemic bring the penny’s true end at last?
NPR’s Planet Money podcast has the latest in a long line of reporting, both in the U.S. and around the world, about the outmoding of our smallest denominations. The pandemic has led to a coin shortage in some places, but the penny has been futilely singing for its supper for decades.
Each penny, which is worth one cent, costs two cents to make. Naturally, anti-penny campaigners use this as a fundamental gotcha. This statistic suggests the only value money has is for its material cost, which hearkens back to the Gold Standard days. But it’s true the penny’s buying power is rapidly draining to zero.
Coin shortages aren’t new, and many nations have traditions of tokens and “good-fors” that have gotten the job done in a pinch. Like a U.S. “Forever” stamp, a token is often associated with a discrete service or good rather than a particular and changeable monetary value. In contrast, prices of goods in the U.S. are about 27 times higher today than they were when the first penny was made in 1787.
The quarter is the new penny, in a sense. And this shift upward of overall monetary values is why the “one dollar” (or equivalent) coin has come back in much of the world: single dollars circulate now the way spare change might have before.
The Federal Reserve has blamed the COVID-19 coin shortage on simple interruptions to the supply chain at every level. There are fewer workers everywhere, including the ones who typically circulate rolls of coins to and from banks. (Piggybank-owning consumers know it’s been more and more difficult to find a bank that will accept change at all for years.) Combine that with temporary and permanent closures of many businesses and there’s an overall lack of all tangible currency, not just coins. But the Fed says it believes the shortage is contextual and temporary.
The penny may be most notable in 2020 for its use as negative space: the penny difference between 99 cents and $1. While the psychology of the $9.99 price has been touted for years, in practical terms, the U.S. sales tax on even the least taxed items like groceries tip these prices over to the next dollar value. (For a wild time, talk to someone in a country that has sales tax built into its display prices about the mental math you do if you have exactly $10 to spend in a U.S. store.)
There’s a mathematical angle to all of this. The penny has lost its claim as a sigfig, or significant figure, in calculations about everyday finances. It’s worth so little that there’s no practical way to produce a durable emblem of it that doesn’t lose money. But the cent, itself a short form of the word for one hundred, does have psychological power.
Even if changing the bottom-most denomination to five or even 10 cents results in values that round and average out overall, people will imagine the two cents they’re missing while ignoring the two cents they’re gaining. Money is psychological, first and foremost.
You Might Also Like
