David Owen of the NEW YORKER writes why we should get rid of the US CENT COIN!

[comicAL]

Hi, All

 

Here is a very long article by David Owen of THE NEW YORKER on why we should get rid of the lowly US Cent coin and while we are at it the 5 and 10 cent coins while we are at it. Take the time to read this interesting look on this subject.

David Owen article in The New Yorker

 

AAJ

[TJ'S Coins]

It was an interesting article. While we are evaluating coin denominations, we might as well look at the paper bills too. If we are serious about re-thinking our money. I do not expect major changes anytime soon.

[pendragon1998]

Won't happen for a long time. People are stupid and lobbyists are rich.

[DC Dawg]

If the cent is obsolete and economically infeasible with little buying power, then why is the Federal Reserve ordering so many for circulation?

 

(read more: here)

 

Scott

[Keleum]

In finland you can use your cell phone to buy from a vending machine, and a lot of retailers. Smart cards have just about taken over in Europe and will (hopefully) break the hold Visa and MasterCard have here in the US.

 

I'd say circulating money is doomed, not just pennies or nickels. Mints all over the world are already finding that buillon makes up more and more of their production. Only 4-5% of the money in the fed is hard currency.

 

I don't see it happening in my generation, people change slower than technology. But look at much ATM cards have taken over checks, etc.

[WoodenJefferson]

Gee, more and more times as I leave the local convience stores, I see cents just strewn around in the parking lot...are people that lazy that they can't even put those few extra cents into the "Need a Penny, Take a Penny" tray?

 

Since my reflexes have dimished considerably and the flick of the gas pump handle registers .03, I really need those extra cents at the counter.

 

Let's have some consideration here

 

Hey, first time I can put the same reply into two different threads and it still makes sense...well, at least to me.

[DC Dawg]

The 2006 Gross Domestic Product (GDP) of Finland was calculated by the International Monetary Fund (IMF) as US$209,771,000,000 ($209 Billion). The IMF reported the US's 2006 GDP as US$13,194,700,000,000 (over $13 Trillion). Moving the 33rd largest economy in the world in a certain direction is easier than moving the US's economy--the world's largest. Finland also uses the concept of the central bank to control monetary policy whereas the Federal Reserve System in the US decentralizes control of the banking industry.

 

Finland also has laws and torts that help protect their citizens from the security and privacy issues that would come with using cell phones to support commerce. Their laws place the liability on the provider. When something happens, the provider takes the blame, not the consumer. In the US, it's up to the consumer to perform the due diligence and report the issues. In the US, it is possible for the consumer to be hurt more than the business. Consumers do not adapt products with significan downside risks!

 

The US Dollar is different. It is the most circulated currency in the world. While it has been beaten down a bit, it still supports most of the world's commerce. In fact, 65-percent of the currency that is delivered to the New York Federal Reserve is shipped overseas. I do not see that happening to the Finish Euros.

 

Instead of comparing the United States to some country with a middle-tier economy, why not compare what is being done in the US with similar economies. What is England (British Pound Sterling), Japan (Yen), the European Union (Euro), and China (yuan) doing?

 

Scott

[Conder101]

Owens had a good article, well written, engaging, and it pointed out some compelling arguments against the "people will lose money because the merchants will round up" stance. One thing it fails to consider in the argument for eliminating the five cent pieces is that the other countries that have done so have a 20 cent coin, not a 25 cent piece. If you get rid of cents and five cent pieces, if something cost a dime an a quarter is tendered, how do you make change? To get rid of the five cent you would either have to eliminate the dime as well, or replace the quarter with a 20 cent piece. Frankly making the quarter the smallest coin wouldn't b a bad idea, as the article pointed out it has about the same purchasing power as the cent did in 1940. Do we really need coins with purchasing power less than that?

 

As for the Coin Collectors Blog, as an aside it has a total misunderstanding of the size and values of the early coins as compared to their British counterparts. The half cent was the size of the farthing no the half penny and the cent was the size of the half penny. There was no such coin as a penny at the time and there hadn't been for almost 150 years. And then it is been a silver coin the size and half the thickness of our current dime. There was a copper penny a few years later, which weighed almost two and a half times as much as our cent. The half dime could not have been the size of the three pence because I don't believe they had a circulation three pence at the time, just a small Maundy coin used as apart of a gift to selected members of the poor on Maundy Thursday. Our coinage was designed more in keeping with the Spanish coinage than the British.

 

To a large part the British didn't provide coinage for the colonies because they were having a difficult time even providing it for their own home country.

 

I will agree that eliminating the half cent had almost no economic impact, and therefor I have difficulty seeing why there would be a large economic impact today in the elimination of a coin with one twenty-fifth the purchasing power the half cent had.

 

You talk about the $643,000 the 2006 penny harvest raised for charity, How much would have been raised if they were nickels? Obviously,not five times as much since more than likely fewer coins would have been donated, But even if only 1/3 as many coins were given it would have meant an INCREASE of $428,000 for the charity. I think when the penny is finally eliminated charities that depend on their "penny drives" will actually find their donations will increase. The "penny" is probably holding them back.

 

It says that years ago many collectors started with the penny boards because pennies were easy, well because of the falling value of the dollar, the nickel board of today is even easier on the pocket today than the cent board was back when I started.

 

It is true that the Citizens for Retiring the Penny's major argument is that it cost too much to make them, but the Americans for Common Cents counter arguments boil down to "People don't want to change" (They didn't want to change from silver to clad coins either, should we have continued making them out of silver even though they were all just being hoarded and creating a severe coin shortage that was causing havoc with the economy?), and that it would (MIGHT) cost people more. (But the Owen article show that people are willing to pay MORE then rounding would cost them just to not have to deal with the cents.)

 

And to answer the final question as to why the Fed is ordering so many, it is because since they have so little purchasing power no one is bothering to continue circulating them. A great many of the cents go from Mint to transaction to jar or garbage a one way flow, and if we are going to keep insisting on pricing to the cent then we will have to keep making more to throw away.

[Keleum]

I missed you guys!! Great conversations...

 

I like conder's discussion better than mine, so I'll continue his...

 

So what's the magic factor that drives this change, is it only the price of the base metals outweighs the "price" of the change.

 

I don't see the mint doing anything to move in that direction, quite the opposite with the new lincoln penny coming out. I would expect several years of increased demand with no impact on the economy.

 

And with even more buillon (gold) coins coming out of the mint, is this money policy or good old fashion supply/demand?

 

btw, who buys all this gold back in 5 years when the "gold bubble" bursts.

[DC Dawg]

Owens had a good article, well written, engaging, and it pointed out some compelling arguments against the "people will lose money because the merchants will round up" stance. One thing it fails to consider in the argument for eliminating the five cent pieces is that the other countries that have done so have a 20 cent coin, not a 25 cent piece. If you get rid of cents and five cent pieces, if something cost a dime an a quarter is tendered, how do you make change? To get rid of the five cent you would either have to eliminate the dime as well, or replace the quarter with a 20 cent piece. Frankly making the quarter the smallest coin wouldn't b a bad idea, as the article pointed out it has about the same purchasing power as the cent did in 1940. Do we really need coins with purchasing power less than that?

The comparison Owens makes is to what was done in New Zealand, whose dollar is worth less than the US Dollar. Owens even points out that the impact was minimal because of the valuation of the currency. Again, we're comparing a mid-tier economy with the economic needs of a country whose currency is used for international transactions.

 

As for the Coin Collectors Blog, as an aside it has a total misunderstanding of the size and values of the early coins as compared to their British counterparts. The half cent was the size of the farthing no the half penny and the cent was the size of the half penny.

I based the sizes and description on a paper that was written by Alexander Hamilton about setting up the original US monetary system. I concede that things could have changed from when Hamilton wrote the paper and the actual minting of coinage.

 

There was no such coin as a penny at the time and there hadn't been for almost 150 years.

The British Penny began its minting again in 1714. It was being used as Maundy Money in the 1750s-60s but was used as circulating currency prior.

 

To a large part the British didn't provide coinage for the colonies because they were having a difficult time even providing it for their own home country.

That was the case in the beginning, but when Cecil Calvert was granted his charter for the Maryland Colony, a trading act was enacted that forced all trading through England. The colonies were not allowed to trade with others. The Englished fixed the prices. Prices were paid to the colonial governors, like Calvert, who then used minor coinage to pay the merchants, per the requirements of the crown.

 

Obviously, the colonies resisted and traded with the Dutch and Spanish. The Dutch were willing buyers and the Spanish had control of the silver production in Mexico and to the south. The colonist found other ways of paying for items, including barter and other metals-based items--such as copper nails. Pillar dollars were then being used as the backing of currency. That lead to the British outlawing the production of currency in the colonies in the 1760s.

 

Continually, the crown used its economic power to try to control the colonies only to have the colonies openly defy the editcs.

 

You talk about the $643,000 the 2006 penny harvest raised for charity, How much would have been raised if they were nickels?

Have you read the information about the Common Cents organization? They used Benjamin Franklin's lesson of "a penny saved is a penny earned" to teach the value of money and the impact of even the smallest gesture. It is an educational process as much as it is a fund raiser.

 

(But the Owen article show that people are willing to pay MORE then rounding would cost them just to not have to deal with the cents.)

The Owens article is anecdotal. The last formal survey was performed by the New York Federal Reserve in 2000 that showed a very mixed reaction to the question. Consistently, those in more affluent areas want the cent withdrawn, those in less affluent areas wants to keep the cent. How do you reconcile this type of response?

 

And to answer the final question as to why the Fed is ordering so many, it is because since they have so little purchasing power no one is bothering to continue circulating them. A great many of the cents go from Mint to transaction to jar or garbage a one way flow, and if we are going to keep insisting on pricing to the cent then we will have to keep making more to throw away.

If you stop cent-based pricing, then the call for the coins would be less. Raise the taxes to 10-percent and not the 6, 7, and 8 percent that exist in most states. Stop .99 pricing and call it $1. Like eliminating the half-cent when the 8 Reale coin was demonetized and the 12 1/2 cent bit was not used, find some way to deal with 1-cent pricing and I will agree with eliminating the coin.

 

Scott

[World Colonial]

Was it a convenient oversight or did Owens mention that perhaps the reason New Zealand decided to discontinue the cent is because they debased their currency so badly?

 

I do not have a chart of the Kiwi dollar available to me now, but I do know that at one time the NZD (previously Pound) was worth more - and I believe a LOT more - than the USD. I believe at one time it was over $2 USD. It fell at one point to 34 cents and today is just at 80 cents.

 

So here is a novel idea, we can stop debasing the currency then this not have been necessary.