What should we expect regarding prices when/if pennies are no more?

[pendragon1998]

I've heard people talking about a plan for four different reverses for the cent in 09. Does anyone know about that?

 

Follow some basic rounding rules:

If your total is...

.00 = .00

.01 -> round down to .00

.02 -> round down to .00

.03 -> round up to .05

.04 -> round up to .05

.05 = .05

 

Thus half of the time, you might lose 1 or 2 cents, but the other half of the time, you save 1 or 2 cents. That's if pricing remains the same. Probably won't even come to that. This ought to be handled at the retail level (i.e. no need for government involvement). They'll end up pricing things at 0.05 increments. Thus, Wal-Mart might be getting 2 cents extra from half their consumers, but they'll lose 2 cents from the other half. Revenue neutral. And really, what can you buy for 2 cents anyway? Anyway, I think we ought to go for the Fair Tax System

 

Edited for typo.

[Brotherman]

I used to be a bartender and later managed several bars. Every month we

did inventory and we counted all the open bottles on the bar by holding them

up and assessing the amount of liquor left in the bottles. We did this on a

10 point scale - 10 being a full bottle and 1 a bottle that was about 10%

full. Anyway, I did this this way too long before I realized that the laws of

averages would take care of this mess in the end. All of our bars had 120 to

140 open bottles - I added all the counts up divided by the number of bottles and

it came out to 5 every time. In other words the average bottle was ALWAYS

half full. Never got my bosses to believe that it would come out this way

every single time. They even did a study at corporate proved my “theory” and

still counted it like they always did.

 

My point to this boring story is half of the time you will round up and half of

the time you will round down. Nobody gets hurt.

 

Hays

[RGT]

How many of us pay in cash most of the time? When paying by check, debit or credit card there would be no need to round. Maybe the stores would always round down as a cash discount if you saved them the trouble and expense of a check or credit card.

 

Either way, on average the rounding would even out and no one would be loosing money.

[astrostu]

My answer to the original question: I think that, initially, there will be a scramble among the general public to just hoard these (for example, I know that if the proposed legislation were passed and signed, I would go to the bank every week and buy $100 in pennies). This would drive prices up. I also think that it would temporarily drive copper prices down.

 

After a few years, the craze would be over, and they would settle to low prices where average post-1959 pennies would be worth their bullion value plus a very slight premium. Pre-1959 Lincolns would be worth more. As hoards are cashed in over the years, prices would continue to remain pretty low (like for a low-grade wheat cent these days).

 

Decades later, I think the prices would start to increase as most hoards that were being liquidated are no longer there, and copper prices have settled and started to increase again. I think we would see them be something like pre-1965 dimes are now. Just my 2-cents ... or 5-cents ...or 0-cents since 2 rounds down to 0.

 

 

Even if they stop making the penny, I'm sure they would remain in circulation for years. And even if places stopped accepting them, not everyone would catch on immediately and the penny would continue for a while at least.

 

Just wanted to comment on this ... I think that places HAVE to accept them. They are legal tender within the United States, even if they're no longer made, and so a store is required to accept them. Granted I have no legal knowledge backing this up, but I'm pretty sure it's correct.

[pendragon1998]

Actually, no, a private store is not required to accept any form of currency. Your local Mom and Pop could suddenly decide tomorrow (albeit stupidly) that henceforth, all purchases there may only be made in stray cats (e.g. 15 stray cats for a stick of gum, 47 stray cats for a gallon of milk.)

 

Just because the cent and other US currency is intended to be used for "all debt public or private." does not mean that we are obligated by law to accept it as payment for debt. A purchase is an agreement between the two contracting parties to exchange goods or services for a payment agreed upon by the seller. For payment, the seller could opt for some form of goods in trade (give me two chickens for ten pounds of butter), a service (fix my oil leak and I'll give you a nice lunch), board (help me build this fence and you can sleep in the barn), or cash (US or foreign), check, or credit card, etc.

 

On the other hand, if the buyer wants the 10 lbs of butter, but the seller wants 2 chickens, the buyer cannot simply hand the seller $25 and say, "That's what 10 lbs of butter is worth, so you have to take it." While using US-issued currency is most convenient for citizens here (and in other countries sometimes), it is not - and should not - be the mandatory medium of exchange.

 

My point here, is that next time your clerk says, "You can't pay for that tank of gas in pennies," you don't have grounds for objection. (reminds me of a guy who had $2000 in credit card debt, and when his creditors ticked him off, he repaid it online in 1 cent increments - which cost them more to process than his debt was worth. They later changed their policy to only allow X number of payments per month)