Another Article to Get Rid of the Penny

So here is another article by CNN to get rid of the penny.  I like the point that even if pennies were made out of thin air they'd still not be worth it.

More on the Penny Debate

There is a new article here by economist Henry Aaron about the benefits of dropping the penny and the nickel.  Though he rehashes some of the same arguments, he does a good job of chewing holes in the main arguments of the penny lovers. In response, there is a new article here by Brian Domitrovic bringing up the glory days of the gold standard in our coinage.  I like some of his points, but trying to go back to the way things were back in the good old days are a fiscal and monetary impossibility.  Though I do agree that the government needs to turn off the money printing machine for a while. We're in a dangerous downward spiral which the current actions are not helping to turn around.

Penny Soccer and Penny Basketball

With Thanksgiving tomorrow, it's time to play a few games once you get the table cleaned off.  Why not try these ideas with your pennies. Challenge one of your relatives to a spirited tabletop sports game with pennies!

Penny Soccer
With this game, use three pennies.  Stand at one end of the table, and have your opponent stand at the other.  Flip one of the coins, to see who goes first.  The first player takes the pennies and makes a triangle with the pennies about 6 inches apart at their end of the table with the point closest to them.  The point of the game is to flick the back penny in between the two other pennies, moving your pennies closer to the other end of the table until you can flick one of the pennies into the goal, which your opponent makes with his fingers formed into a U shape and laid on the table. Use the index and pinky from one hand, with the other fingers bent down for a smaller goal,  use the thumb and index finger from each hand in an L shape with the tip of your thumbs together for a larger goal. There are just a few rules for maneuvering the coins down the table.  1) You must "flick" the coin, you can't put your finger on top and slide it. 2) The flicked coin must completely pass the imaginary line drawn between the other two coins (the flicked coin coming in contact with the other coins is OK as long as when all the coins stop moving that the flicked coin has passed through the final imaginary line). 3) The flicked coin must be closer to the far end of the table than before it was flicked (no moving backward). 4) If any coin falls off the table, or the flicked coin doesn't follow the other two rules, then your turn is over. 5) If you flick your penny into the goal you score a point and end your turn. 6) Once your turn is over, your opponent gets their turn.  Play to 10, or until you get tired of playing.
Advanced rules: 1) Drop the coins from 6 inches off the table to start your turn instead of placing them in a nice little triangle. 2) Limit the number of flicks for each turn, start at 5, and each subsequent turn go down by one until in round 5, you've got to score in one flick all the way down the table.

Penny Basketball
You just need one coin for this game.  The first player stands the coin on it's side and flicks it so it is spinning.  Before it falls, the player must pinch the coin between their two thumbs.  When the coin is held between the two thumbs, the player places their hands flat on the table, and lifts their thumbs (keeping their fingertips on the table) and releases the coin in an arc to fling it into the basket that the opponent has made with their two hands to form a circle about 4 inches in diameter.  The opponent also moves forward to use their chest/stomach as a backboard.  Their are a few rules for this game.  1) You only get one try to spin and catch the coin between your thumbs, if you miss it or it goes off the table, then it's a turnover, and it's your opponent's turn.  2) Once you catch the coin between your thumbs, you must fling the coin keeping your fingertips in contact with the table the whole time.  3) If you spin and catch the coin close enough to the basket, you can slam dunk it by lifting the coin and dropping it into the basket. 4) If your opponent moves their hands or body after the coin is shot, then it is goal tending, and the shooter automatically scores.  Play to 10, or until you get tired of playing.
Alternate rules: 1) When you spin and catch the coin, you may spin the coin one more time from that location to try and get closer to the basket (maximum two spins per turn). If you miss catching the coin though, your turn is over. 2) For smaller children, let them spin it several times each turn until they catch it.

Hope you have a great Thanksgiving Holiday!

The Definition of Currency

So, according to dictionary.com, this is the definition of currency.

cur·ren·cy
noun, plural cur·ren·cies.
1.  something that is used as a medium of exchange; money.
2.  general acceptance; prevalence; vogue.
3.  a time or period during which something is widely accepted and circulated.
4.  the fact or quality of being widely accepted and circulated from person to person.
5.  circulation, as of coin.

Do pennies fit in these definitions?  Let's see.  Definition #1: this describes what the penny is supposed to do.  Too bad there is nothing about its effectiveness in this role. Moving on to Definition #2: Well there is definitely a PREVALENCE of pennies.  There is an OVER-prevalence of these hated coins.  #3: Hopefully the penny will not fall in this category too much longer.  I definitely hope its on its way out. #4: It's widely accepted but I would debate the actual "circulation" definition. I don't think it goes from person to person. More like bank to retailer to person to garbage can.  And finally #5: I've already stated that the penny doesn't really circulate at all.  They all just get sucked into some mysterious invisible black hole from whence there is no escape.  Seriously, 90% of all pennies fall out of circulation immediately.  That's billions and billions of dollars that we willingly throw away each year.

Seriously, Why Does Anyone like Pennies?

Anyone that has to deal with pennies on a daily basis is probably a raving lunatic by now.  My brief dealings with these annoying little disks is enough to cause temporary insanity, and wonder what anybody sees in these worthless pieces of garbage.  Why, oh why, do we still have these stupid things?  When someone asks you how far it is from New York to Los Angeles, do you say "about 2500 miles" or do you say, "2576 miles, 83 feet and 4 inches"?  Seriously, using pennies is like saying the second option.  It's just way too much detail.  Way more than you could possibly ever need, and provides no additional benefit over the first option.  In fact the second option just serves to waste your time, sort of like the penny does now.  Rounding to larger denominations is a good thing.  Let's all start refusing to use or accept these worthless pieces of copper trash and move forward to the 21st century!

Halloween Penny Costumes

Here are some clever ideas for a penny themed Halloween costume.
Idea #1
Idea #2
Idea #3
Whatever you do, make sure you're safe and have fun.

Collapse of US Dollar?

Is the US Dollar on its way down? If you've been following the nation's fiscal policies and spending at all, you've no doubt seen articles such as this one, or this one, foreshadowing the possible forfeiture of the US dollar as the world's reserve currency.  I guess the dollar's only saving grace, is that there is no other nation's currency ready and able to step up and take it's place.  For many of us, the dollar has always been the world's reserve currency, but the older generation know that before WWII, the British Pound held that status.  After the war though, the pound's power declined, and the US dollar moved to the forefront.  Pretty much all of Britain's economic troubles from the 50's to the 70's can be attributed to this fact.  If and when the same thing happens to the US dollar, I'm afraid that the whole nation will be in a world of hurt.  Our most recent economic troubles will be just a drop in the bucket if the US government doesn't stop hemorrhaging money at the current exponential rate.  The recent government shutdown was a step in the right direction, but it is far from over.  If the US wants to stay as the world powerhouse that it is, even more drastic changes will be needed.

New $100 bills

So I've been able to check out a handful of the new $100 bills the government unloaded last week.  I have to say they are pretty cool.  The little blue stripe is awesome and the watermarks and detailed artwork are nice too.  Of course with the old $100's still in circulation, the counterfeiters can still try and duplicate the old 100, at least for a few more years.  It's sad that there are dishonest people out there, but at least they help us to have non-bland money.

Cashing in on Hoarded Pennies

So I found another online article here from a couple years ago about some penny hoarders and their stories.  I just had to laugh.  The guy about half-way through, who is selling the copper pennies at a premium is probably laughing too...all the way to the bank.  What idiot out there is actually paying a premium for these worthless copper disks?  Apparently there are a bunch of them.  And then the reporter asked him about if the penny gets discontinued, and they concluded that you could then melt the pennies and then smiled.  I'm sorry to say that his smile will soon turn to a frown, when he realizes that his conclusion is dead wrong. I've said it before and I'll say it again: Just because the mint isn't making a coin anymore, does NOT mean it's not legal tender or that it's no longer governed by the "no melting down" law. If and when the penny is discontinued, you'll only have two legal options: 1) turn in your pennies to the bank for face value, or 2) do nothing and get nothing.  Of course, it's the suckers who are actually buying the pennies from this guy that will be hating life the most. After all they just invested $176 into something that is only worth $100, and will always only be worth $100.  But I suppose this guy can continue to ride his money train as long as there are idiots out there willing to pay a premium for those pennies.

How Do We View the Penny Now?

A relatively new article from Fox Business News brings the debate of keeping or ditching the penny forward once again.  It's more of the same, but there are some post-Canadian-penny comments, and a little more from organizations that depend on donations to continue operating.

pennyfreebiz

So, pennyfreebiz.com is a website businesses can join to support not using pennies in their transactions.  Though there are thousands and thousands of businesses that don't use pennies, not all of them are members of this site.  The site does have some information on how to transition to a penny free business and a list of retail software that will round to the nearest nickel for you.  If you're a business owner and hate pennies, go check it out to get started on switching over, or join the movement to show your support.

Rounding Rules

Did you know that there are rounding rules in place now for all transactions in the US?  In fact, I'm sure every country has its rounding rules, but I'm not going to check them all.  The rounding rules are governed by the state in which you live, because there is no federal sales tax, only state and local sales tax. The basic rule is that for all taxable sales, multiply the total sales amount (rounded to the nearest cent) by the sales tax rate and carry it out to 3 decimal places.  If the digit in the thousandths place is 5 or higher, round up to the nearest cent. If it is 4 or lower, round down to the nearest cent.
In fact, your listed prices don't even have to be in whole cents. You could sell items for $3.46309 if you wanted.  But then you must subtotal the entire bill, rounding to whole cents and apply your sales tax to that amount and then round the grand total to the nearest cent.  The final price always has to be in whole cents, because that is the lowest denomination with which someone can pay.  Go look at your local gas station and see the price per gallon at $3.699 or some other amount with 9/10th of a penny on the end.  Or check your natural gas or electric bill.  Your price for natural gas most likely includes some fractions of a cent per CCF (100 cubic feet), and your electric bill includes fractions of cents per kWh (kilowatt hour).  But of course, your bill is always rounded off to the nearest cent.
Since we are rounding already, why not round to a denomination that is more convenient for consumers and retailers?  Like the nearest 5 cent increment, or even better the nearest 25 cent increment. We need to lay the penny to rest, and relegate it to a nice bit of nostalgia.

Do you pick up pennies off the ground?

So, we've all heard the phrase about having good luck when we pick up a penny off the ground. The phrase has been around almost as long as the penny has.  Of course as the purchasing power of the penny declined, additional superstitions were added, such as only "heads up" pennies were lucky, and the "tails up" pennies should either be turned over to "heads up" so the next person to come by could receive the luck, or given immediately to someone else so that they could receive the luck, or other variations.  Now you'd have to find a $5 or $10 bill to get the same purchasing power as the penny of the 1800's.  No doubt you'd feel lucky if you found that much money on the ground.  Way back then, it was almost unheard of to find money on the ground, so it was indeed lucky.  Now you can find pennies every day just by walking down the street.  So, do you receive the same amount of luck and gratification today, as the people back in the 1800's had when they were fortunate enough to find a penny and pick it up?  Do you even bother stooping down to pick up those pennies?  If I'm not in a hurry, I'll usually pick up those pennies.  Not because I think they are worth so much, but because each penny I return to circulation, is 2 cents I save the government (and myself) paying to replace it. So does anyone else pick up pennies out there and why?

So does anything cost a penny anymore?

I can't find anything that costs a penny.  Amazon has a few things, like cheap earrings and necklaces or stuff no body in their right mind would ever purchase, but the shipping is usually $5 or more, and all of them are from the Amazon marketplace (sold on amazon.com by other vendors).  There is nothing directly from Amazon that costs a penny that I could see.   Wal-Mart and other online retailers don't have anything for a penny that I could find.  But seriously, if anything is listed at a price point of $0.01 then it's probably grossly overpriced. We round now. Why don't we round a little more and get rid of those pennies?

Redenomination

An alternative to removing the smallest denomination of a currency is a process called redenomination. Redenomination is not the same as revaluation. Though the terms are similar and both deal with money, revaluation deals with exchange rates and pegging a currency to another.  We are talking about redenomination which is changing the currency itself into a new currency.  Redenomination typically happens when inflation or hyper-inflation has eroded the value of a currency so much, that everyday transactions are expressed in thousands, millions, billions, or even trillions of units of a currency.  Eventually, like they did in Zimbabwe, nations will drop a bunch of zeros off the end so that a unit of the "new" currency, for example, will be worth 1,000 or 1,000,000 units of the "old" currency.  In relatively stable economies, usually this causes only a temporary decrease in stability, after which things go back to normal.  But, in highly volatile economies, this is usually the beginning of the end.   Most recently, most of Europe has gone through a redenomination, converting to the Euro.  Of course the main problem with redenomination is that you have to print currency in the new denomination, mint coins in the new denomination, and have a transition period where people can trade in their old currency and coins for the new, and where everyone can spend either the new or the old or both.
Would this be a good idea for the US? Probably not yet. Maybe when the dollar is about as valuable as the penny is today. Sort of like the Japanese Yen. It's worth about one cent. I think Japan needs to start thinking about redenominating their currency.  Maybe they already are.
The problem with redenomination is that there is usually a brief spike of inflation after the transition period, especially if the new denomination has the same name.  Let's drop only one 0 from the current prices.  Your old salary of OldUS$30,000 per year is now NewUS$3,000.  If you make OUS$100,000 now you make NUS$10,000.  But now gas instead of being OUS$4.00 a gallon, is now NUS$0.40.  OUS$60.00 video games, now only cost NUS$6.00.  Initially we are in the same position as before, only things are valued a little differently.  Now after the transition period ends, throw in a quick spike of inflation where everything costs 10 to 20% more than before within a couple years, but your income only goes up by 5%.  Hello recession! This is usually why redenomination is not a good idea.  Especially to drop only 1 or 2 zeros. I think we have quite a long time before we need to think about redenomination.  Eventually we can get rid of cents and fractions of a dollar.  Then when a dollar becomes a lot less valuable than the penny is today, we can think about redenomination.  Retiring coins like the penny has virtually no economic impact.  Redenomination goes for the economic jugular.  It's only for when the currency can no longer handle the current economy.
So let's just drop the penny and move on.  The economy is not going to deflate anytime soon, so we've got nothing to lose, we'll only be saving billions of dollars.

How Heavily Loaded are Your Pockets?

Well, one penny weighs 2.5 grams, so $1 worth of pennies weighs 250 grams or just over 1/2 a pound.  $20 in pennies weighs 5,000 grams or about 11 lbs, and $100 in pennies will weigh about 55 lbs. But to be more accurate, the pennies before 1982 weighed 3.11 grams, so if you have $100 worth of those pennies, then your looking at about 68.5 lbs.  Compare this to $100 in nickels which weighs 22 lbs, $100 in dimes, quarters, or half-dollars which each weigh 5 lbs (hey, I think they planned it that way!), or $100 in dollar-coins which comes in at a trim 810 grams or 1.8 lbs.  Of course, each bill made by the US government only weighs about 1 gram, so you wouldn't even notice if you had a $100 bill in your pocket or not.  Since you won't notice that $100 bill in your pocket, you may as well just give it to me.  😉

Weird Penny Ideas

Wow there are some pretty crazy and artistic uses for the billions of pennies out there.  Pinterest is sporting a few pages (here and here) for the different ways to use these useless copper disks. My favorite is probably the shower tiles.  Either that or the donkey head!

Penny Battery

So you probably already knew that you could make a battery out of pennies.  You'll need a bunch of zinc pennies with the zinc exposed on one side (file or sand the copper coating off on one side).  Cut some cardboard or paper towels or other absorbent material into penny sized pieces and then soak them in an acidic solution like vinegar or lemon juice. Once the pieces are saturated, stack the pennies (all zinc side down) with a piece of the saturated material in between each one.  Then touch the wires from an led light to each end, or attach each end to a small calculator or watch.  As long as the cardboard stays wet, the penny battery will work.  Once the pieces dry out, you'll have to saturate them again. You probably couldn't power your cell phone or DS with it unless you had a big old stack of pennies, but it's still a cool little experiment.  Here is a youtube video that explains the process very well.

Coppers

So the US one cent coins and British pence were originally made of all copper, thus giving them the nickname of "coppers".  We also have police officers who may be referred to as "coppers".  Since we know pennies are worthless, what does that say about our boys in blue?  Just kidding.  I think our police officers should be commended for the difficult job they do.  I know I never want to be a cop.  Kudos to those that do.  It is a difficult and thankless job sometimes.  Just think of all the kinds of people they have to deal with on a daily basis.  I think it would be mentally and physically taxing to deal with people who are breaking the law, all day long. Next time you see a police officer, thank them for the service they provide.

Pennies repel bugs

So there is an article  here explaining how pennies in a plastic bag with water will repel flies and other insects from your outdoor activities.  How true is this?  I don't know.  My wife has tried it, but I never gauged the results.  It seems a little hokey to me.  But even Snopes has been unable to confirm or deny the validity of this.  If it does work, then this is one use you can put your useless pennies to.

Penny Pinchers

So, if we get rid of pennies, will we still have penny pinchers? Definitely.  But we'll probably refer to them as tightwads, or cheapskates or other synonymous phrases, until the phrase "penny pincher" falls entirely out of use.  That's the thing about language; it is always evolving.  New words and phrases appear and obsolete words fall out of use.  It's just the way things are.  The same with phrases like "a penny for your thoughts" and "find a penny, pick it up..." and others.  They'll never replace the word in such phrases, and say "a nickel for your thoughts," but the phrase itself will become obsolete and be replaced by another word or phrase that conveys the same message.  There is almost always several ways to say what you mean, and I'm sure hundreds of words and phrases become obsolete each year.  Just as I'm sure hundreds of new words and phrases appear each year.  Language continually evolves; our monetary system should evolve as well.

Pennies and Electricity

Do pennies conduct electricity? Well, all metals do, and the metals in pennies are no exception.  Copper is found in almost all US coins and is one of the best conductors of electricity. Silver and Gold conduct electricity just as well, so if you've got a Silver or Gold coin, electricity will easily pass through them.  The Zinc in pennies and Nickel in other coins conduct electricity too, but not nearly as well as the Copper.  The worst conductor in any US coin is the Manganese which is about 3.5% of the Dollar coin. So out of all the US coins, the newer mostly-Zinc penny is probably the worst conductor, but since all of the Copper is in the outside coating of the penny, there is less resistance than you might think.  In the other coins, the copper makes up the core, and is not present in the outer coating.  There is your chemistry lesson for the day. Now don't go out and stick your pennies in a light socket or anything like that.

Can a penny kill you?

It is possible, though not likely.  If you're walking by the Empire State Building and someone throws a penny off the top, and this penny falls and hits you in the head, it will not kill you, though it will hurt for a while. It won't be moving fast enough to break the skin or crack your skull.  The idea that this could be deadly was busted on a 2003 episode of Myth Busters.

Another way a penny could harm you is if you swallow one.  If it doesn't get lodged somewhere along your digestive track, then it should pass through with no real permanent damage.  The post-1982 mostly-zinc pennies will cause a little more alarm, since the zinc is more easily eroded by stomach acids, and as it becomes more pitted, can easily become lodged in the stomach or intestines.  If you leave it, stomach pains and ulcers are in your future.  But you'll probably go to the hospital long before it actually kills you, so even in the worst case scenario, a visit to the ER will put you back in order.

I'm not sure if there are any other ways that a penny could harm you, unless you're walking crooked because you've got a pocket full of them.  So you should be safe using and spending your pennies.

Pennies and Trains

So, I saw the Lone Ranger in the theater yesterday to celebrate the USA's independence day.  I thoroughly enjoyed the movie, though the others in my group said it was not as good as they had hoped.  Oh, well.  But all the trains and train crashes got me thinking about pennies on railroad tracks.  Will a penny on the tracks derail a train?  What do smashed pennies look like?  Is it dangerous out there on the tracks? There is a good Snopes article about this practice.  In summary, no, the penny will not derail the train, but make sure you are well clear of the tracks long before the train comes rumbling down the tracks, so that the train doesn't flatten you, along with your penny.  Now I do not recommend engaging in any train-track-penny-flattening endeavors, though admittedly, flattening a penny won't change its value. It will still be as worthless as a normal one.
Another thing you can do with your pennies is use them to clean up the metal rails on your model electric train and car sets.  The gunk that builds up on the metal contacts easily comes off when you rub the flat side of your penny along them.  It will also keep the tracks nice and shiny without scratching everything up, like traditional cleaning items might do.

Brief History of the Penny

The United States has had a one-cent coin since 1793.  Originally this coin was larger than our current $1 coin, but smaller than the half-dollar coin. It was made entirely of copper and featured various depictions of "Lady Liberty" on the front, before it was discontinued in 1857.  It was replaced by the smaller penny in 1856 which first depicted an eagle, then an American Indian in headdress, before good old Abe's profile appeared in 1909.  If you have one of those pre-Lincoln pennies, consider yourself lucky.  They are definitely collectors' items.

Penny Joke

What did one penny say to the other? Let's get together and make some cents.

It's too bad that pennies make no sense at all! OK, I'm sure back in the 1920's they had value, but seriously, why do we still have them?  You used to be able to by a hundred 16-penny nails for 16¢, now you can only by 3 or 4 for that amount.  Penny candy now costs a quarter or more.  Even a piece of paper costs more than a cent. They cost at least 2¢, and that's only if you can get a ream for $10.  The only thing less than a penny are staples, and who only wants 1 staple?  Seriously, anything you find out there, that as a single unit, costs less than a penny is sold in bulk where you buy hundreds or thousands at once anyway, and thus have to pay $5 or $10 for them anyway.  So let's stop with them.  But until they're gone, I guess we have to keep as many of them in circulation so the mint doesn't have to make as many as they have, throwing the taxpayers money down the drain.  Maybe we should all tell our congress members to get rid of the penny for us.

Penny Hoarding

It's interesting that the number of penny hoarders has increased so much.  More and more people are hoarding the pre-1982 pennies for their copper content.  The post-1982 pennies made with zinc are not worth the trouble yet.  But if you're a penny hoarder, you've got to buy hundreds and hundreds of dollars of pennies from local banks, then unroll them and sort through and pull out the mostly copper ones, and then re-wrap the zinc ones and turn them back into the bank.  With the price of copper making these little discs worth more than their face value in metal content, you'd think this was a good investment.  Unfortunately, the government has made it illegal to melt down any coins. So then you may think that maybe there are some coin collectors out there who'll pay a premium for them? Nope. There are very few "special" pennies worth more than a penny to a collector, and after buying thousands and thousands of dollars worth of pennies you might come across 1.  Or maybe you'll think, when pennies are discontinued their value will increase? Nope.  They'll still be worth a penny, even to collectors.  There is basically only one thing that makes a coin valuable to collectors; scarcity.  Does anybody really think that we have a scarcity of pennies?  Even pre-1982 ones?  Even if we got rid of the penny tomorrow, the pennies collected by penny hoarders will not appreciate in value during their lifetime or their children's or their grandchildren's.  And guess what else?  They'll never be able to melt them down legally for their metal content.  Just because something doesn't circulate, doesn't mean it's not legal tender.  And hopefully they're not waiting for the government to collapse, because then they get hosed from the other side.  Maybe one day they will realize and say to themselves, "Hey, as a taxpayer, I'm paying the government more than 2 pennies so they can make 1!"  Now, I have no problem with coin collectors collecting their coins.  They can do whatever they want with their time and money.  It's the hoarders that completely disrupt the natural coin circulation, or worse, the people that throw the coins away, that are costing the US taxpayers so much money.  Not only did they just throw away the more than 2 cents it cost per penny to make in tax dollars, we have to pay for the government to replace it, so that they can throw it away again.  Please, please, please...don't throw away your coins or remove them permanently from circulation by hoarding.  It's costing us all billions and billions of dollars.
I have a proposal for all.  If you don't like spending coins, then collect them in a jar and then every few months, go into your bank and deposit them into the little coin counter.  In 30 seconds, all the coins will be counted and you can take your receipt and deposit it (usually the full amount without fee) into your bank account.   If everyone will do this, then at least the mint won't keep spewing out so many pennies.  We will have reduced the negative seigniorage by a huge margin.

So what coins should we have in circulation?

I've been thinking about this for years now.  What coins and bills would be the most beneficial for US citizens to have in circulation?  Let's get down to the nitty gritty here. Despite its nostalgia, the penny has outlived its usefulness for at least 50 years.  Since it wasn't dropped in the sixties, then at least there should have been a public outcry 30 years ago, when the cost of minting the penny exceeded its face value.  But there wasn't.  Instead they made it out of cheaper materials. Then the same thing happened again almost 10 years ago. Now the penny costs more than twice its face value to mint. Why are we kicking this dead horse and then dragging it through the mud? The penny should be put out of its misery!

The nickel is suffering the same fate as the penny.  It costs more than twice its face value to mint. We should have gotten rid of the nickel at least 30 years ago. But we didn't.  Instead we're burdened with two completely worthless and useless coins.  But if you ditch the penny and the nickel, now you have a bit of a dilemma.  You now have to round everything to the nearest 10 cents, but we have a 25 cent coin, not a 20 cent coin like many other countries, and since the quarter is a multiple of 5 and not 10, you'll have to get rid of one other coin when you get rid of the nickel.  You have basically three options: (1) drop the quarter and force the gigantic half dollar back into circulation despite its limited utility (it won't fit in most coin slots) and perhaps end up having to redesign it because nobody wants to count out or receive 9 dimes as change, (2) drop the quarter and create a new 20 cent coin to replace it, or (3) drop the dime and keep the quarter and round all transactions to the nearest 1/4 of a dollar. The easiest by far is #3, because there will be no coin changes or redesigns and people can continue to use coins they are familiar with. Therefore, if the nickel is useless, the dime becomes obsolete as well.

Now, do we drop the quarter, half dollar, and dollar coin as well?  Just do away with the mint altogether?  I don't think so.  I believe coins still have their usefulness in limited quantities.  So we should probably keep the quarter at least.  The half dollar and dollar don't circulate well now, so unless something changes, the only coin in wide circulation would be the quarter.

We also have the dollar-coin/dollar-bill dilemma to deal with as well.  If we are making the money producing entities more efficient, then we need to get rid of one of these. We can see from the last fifty years that they do not circulate together.  We need one or the other. The most logical in my mind is to drop the bill and let the coin replace it. That way the quarter can have a friend.

So, what is my proposal?  It's simple. Congress should vote to immediately remove the lowest denomination coin (1¢) and bill ($1) from production and distribution. They should also recommend that business begin using the $2 bill and put it in the slot that use to hold the $1 bills.  This will appease the coin haters, since they'll have much fewer coins in their pocket with the $2 bill in regular circulation.

Next, Congress should put in motion to be accomplished within the next 5 years to remove the nickel (5¢) and dime (10¢) and the $2 bill from circulation, and start minting a $2 coin instead (one that's much smaller than the $1 coin).  They should also reduce the size of the half dollar so that it can circulate as well.  This will give us four coins; a $0.25, a much smaller $0.50, a $1, and a small $2.  We'll have 5 bills as well; a $5, a $10, a $20, a $50, and a $100.  This is what the circulation numbers show will work.  You'll have a significantly lighter pocket, with coins which you will actually spend, and your wallet won't be full of ones! (Don't you hate it, when all you have is a bunch of useless $1 bills in your wallet?) You feel rich, but in reality, you're not.

So Congress, let's get moving.  You're already 50 years behind.  Let's not make it 60 or 70. Unfortunately, this advice has fallen on deaf ears for a long time and I'm probably just beating a dead horse.

Why do we have so many pennies?

We have a lot of pennies compared to the other coin denominations.  Why do we need so many?  Well, there is a simple reason.  For each step up in denomination there is a multiplication factor.  So you need 5 pennies to make 1 nickel, you need 2 nickels to make 1 dime, you need 2.5 dimes to make 1 quarter, and you need 4 quarters to make 1 dollar.  This multiplication factor tells you the approximate proportion of a certain coin you'll need in comparison to the others.  So in an ideal world, for every 10 pennies they mint, they should mint 4 nickels, 5 dimes, and 8 quarters.  As you can see, I'm only factoring in the most widely circulating coins.  Obviously if the half dollar circulated the same as the others, we'd only need half the number of quarters.  This presumes that one denomination of coin lasts (or stays in circulation) just as long as any other denomination.  If the dime, for example, was not as resilient a coin as the others, or got lost more frequently (and thus was removed from circulation) we would see the mint making a lot more dimes than necessary to replace the ones that were taken out of circulation.
Of course, this doesn't happen with the dime quite as much as it happens with the penny.  That's why 60 to 70% of the coins coming out of the mint are pennies, instead of 37% as would be the case in ideal circumstances.  The mint has to keep up with the demand! The penny is the only coin in circulation that doesn't circulate!  Retailers get pennies from their banks in order to keep pennies in their registers so they can give them out as change.  So the banks have to get more pennies from the mint so they can supply the retailers.  And what do we do with the pennies when we receive them as change?  Do we use them to purchase other goods?  Do we deposit them in our bank accounts?  The numbers say that we don't.  The numbers don't lie.  Those pennies end up in sofas, drawers, piggy banks, or landfills...and never return to circulation. So the mint keeps cranking them out, due to this false demand.
The penny lovers think that getting rid of the penny will enforce a rounding tax on the consumers and cost Americans billions of dollars.  Actually the reverse is probably true.  Instead of flushing the billions of dollars in pennies down the proverbial toilet, instead we would actually spend or save it!  That is putting billions and billions of dollars back into our pockets!

Lower case "o"

So here is a little known fact about the Lincoln Memorial Pennies.  Above the Lincoln Memorial it says "THE UNITED STATES oF AMERICA" with a small "o" in "oF".  All other Lincoln Pennies have the country's name in all caps except for the last design for the 2009 pennies, which has "of" all in lower case and everything else capitalized.  Why did they do it? I don't know, but it wasn't a mistake, it was designed that way.  I guess you'll have to get inside the head of the guy who did it.  He did borrow the idea from the pre-Kennedy half dollar coins in circulation at the time, which also had a small "o" on them.  But who knows why they thought it was a good idea?

Mega Penny Project

There is a website from Kokogiak Media called the Mega Penny Project which shows you just how big a stack of millions and billions of pennies would be.  It's actually pretty cool.  I wouldn't mind having 1 quintillion pennies (electronic ones of course) in my bank account.

Compelling Reasons to Hang on to the Penny

The penny lovers have a friend down in sunny Florida.  An article from April 2012 in the Sunshine State News pleads for the US to not follow in the footsteps of Canada.  And though she mentions that there have been several attempts in the last 10 years to get rid of it, the debate has been going much longer than that.  In the late 70's and early 80's we were having the same problems as we are now, with the penny costing too much to make.  That's why in 1982 they stopped making a mostly-copper penny and switched to a mostly-zinc penny, drastically reducing the material cost for the one cent coin.  The debate started decades before that, but this was the point that it began to gain momentum.  As we move forward though, if they do change the material content of the penny, what will they use instead?  Steel? Canada's penny was made of steel and it cost too much for them.  Aluminum? I put aluminum in my recycle bin, I don't spend it.  Plastic? I can already get plastic money at the toy store.  Seriously, the material options for the penny are dwindling rapidly, but the loss on minting the penny needs to stop, I believe.

She does bring up the UK's decimalization 40+ years ago.  Now I realize there was some inflationary situations back then, but it wasn't due to the decimalization.  It was because the Pound lost its status as the world's reserve currency and was replaced by the all powerful US Dollar. After 20 plus years of adjusting to the new economic status, their inflation has been under control. If the US were to remove the penny, there would be no change, conversion or adjustment needed at all.  Retailers wouldn't change just because there is no more penny. Retailers adjust prices for one reason: to stay in business.  Overall, I think the article produced the desired effect.

As a bonus, have a laugh here.

US Government and the Penny

So what is the current status of the penny, you ask?  Well, let me tell you.  In December 2010, The Coin Modernization, Oversight, and Continuity Act was passed so that the Treasury could research using alternative (this means less expensive) materials to make the penny.  They were given 2 years to accomplish whatever it was they were going to do.  The mint reported in December 2012 that they needed more time.  So basically what happened is that they were given MORE money, and they didn't do anything with it that they were supposed to do.  Will there be any follow up on this?  Well, they have another 2 years to file another report.  This could take a while.

Another law that currently affects the penny is the Prohibition on Exportation, Melting, or Treatment of 5-Cent and One-Cent Coins passed in 2007. This law makes it illegal for anyone to take anymore than a nominal amount of change out of the country, and also makes it illegal to melt pennies down for their composite metal content. I guess they don't want anyone to take the money that the mint is throwing away by producing the penny in the first place.

Penny Pranks

Here are some links to the more funny penny pranks on Youtube. Enjoy!

Tollbooth Pennies
Paying Bill with Pennies Backfires
Paying Restaurant Bill with Pennies
Buying a Car with Pennies
Paying Ticket with Pennies
Paying with Pennies to Get Car Back
Paying Tax with Pennies

There are a bunch more videos of people paying with pennies, but these at least got a little chuckle out of me. And contrary to popular belief, no individual, business, or government agency is required to take pennies. Only the currency (bills) says they are "legal tender", but even though pennies are still legal tender, nobody has to take them as payment.  "Legal Tender" only means that it MAY be used to pay debts.  There are no federal or state laws or regulations, requiring any person or entity to accept any coin or currency as payment.  I could start a business and take payments in waffles if I wanted, but I might not get many customers.  Money is there for one purpose, and one purpose only: CONVENIENCE.  If it's not convenient for you, then you won't want to, and don't have to accept it.  If you don't believe me, maybe you'll believe Snopes. The funniest part about some of those videos is that the people actually accepted the pennies as payment!  They should have told them to come back with a more convenient form of payment.

Making Pennies Benefits the Economy!

This idea is expressed by penny lovers in various forms.  Whether it's creating jobs, facilitating purchases, or whatever, penny lovers feel that the world is better off with the penny.  As far as creating jobs, I think this is a valid point.  After all, over half the coins that the mint produces are pennies.  If pennies were no more, the mint would have to lay off half of their production workers, unless they start producing something else, like a $2 coin. Plus the zinc producers would have to find someone else to buy all their zinc. But if the US Mint is your biggest customer, then you will have to do some lay-offs and restructure your business.

Another concern arises if they switch the composite materials used to make the penny.  If they switch from zinc to steel or some other cheaper material, then all the zinc workers that produced the metal for the mint, have to go work for the steel producers.  Of course, the US has changed coin composition before, though not for more than 30 years.  The economy (jobs included) does adjust to these changes, but there are those individuals that are adversely affected. Of course, if they do switch the metal, then the pro-penny lobbyists will lose their biggest supporters, the zinc industry.  After all, they won't have a vested interest in making sure the penny stays anymore.

So, when changes are made, there is always a trade off.  Do the benefits of the change out-weigh the costs? Or are the costs way too high?  The penny lovers think the economic costs are way too high and the benefits too low, the penny haters think it's the other way around.

In all of this, make sure you don't see the US Mint as a "business".  They are a government agency set up to provide benefit to its citizens.  They should do that in the most efficient and cost-effective manner possible, but whether they are making or losing money is less relevant than whether the cost is worth the service they are providing.  Your local fire department doesn't "turn a profit" for your local government, but the service they provide is typically worth the cost.  They should provide what is needed and not any more (a town of 10,000 people doesn't need 600 new fire trucks, for example).  Similarly, the mint should be providing us the coins we need to transact business in the most efficient manner and no more.

No, We Won’t Need More Nickels

Just so you know, the claim by the penny lovers that we’ll need more nickels if the penny goes away is NOT true.  Let me give you a straight forward example here.  Let’s say you have 100 ten dollar bills.  Over the next 100 days you make 1 cash purchase each day and use the $10 bills to pay for them.  The total of each purchase (whether you buy one or many items, or if there is tax or not, is irrelevant) is somewhere between $9.01 and $10.00.  Now the purchase amounts are evenly distributed, so one purchase is $9.01, one is $9.02, one is $9.03, etc. all the way up to $10.00.  Are you with me so far? Good.  Now let’s assume you only use the $10 bills for purchasing, and get between $0.00 and $0.99 in change each time. How much change will you have at the end of the 100 days? Answer $49.50, and assuming they give you the largest denomination of coins possible (there’re a lot of assumptions here, but don’t worry, I’ll handle it), you’ll have 150 quarters ($37.50), 80 dimes ($8.00), 40 nickels ($2.00), and 200 pennies ($2.00).

So now, what if we rounded each of these transactions to the nearest nickel? What would happen?  In this example, you’ll still have $49.50 (since the amounts are evenly distributed, you get an equal number rounded up as you do down), but more importantly, how is that change distributed? Amazingly, you’ll still have 150 quarters, 80 dimes, and 40 nickels, but instead of having 200 pennies, you have 2 one dollar bills. The purchases for $9.01 and $9.02 would get rounded down to $9.00, so you’d get dollar bills for those two transactions. 

But what if the rounding doesn’t go in your favor? What if you get rounded up most or all of the time?  Then you could potentially lose some or all of that $2.00 in pennies/dollar bills, and instead have an extra couple nickels, dimes, or quarters.  Conversely, if the rounding does go in your favor, you’d still have those 2 one dollar bills, plus a couple extra nickels, dimes, or quarters.  Basically when it comes to rounding, think of it this way:  For every 100 pennies you would’ve gotten in change, instead you’ll have a $1 bill.  Or if you want to include an error for rounding:  For every 90-110 pennies you would’ve gotten in change, instead you’ll have a $1 bill.

This data shows another interesting fact.  If this is how change is given out (43% of coins given in change are pennies, 9% nickels, 17% dimes, and 32% quarters, error due to rounding), then it stands to reason that similar percentages should be used by the mint in producing the coins.  In reality, this is not the case.  Over the last 3 years it’s been 63% pennies, 12% nickels, 19% dimes, and 7% quarters (error due to rounding again) for coin production by the mint for the four most widely circulated coins.  The glaring discrepancies are the penny and the quarter.  I would guess that the reason they produce 20% more pennies than needed is because the coins are falling out of circulation too rapidly, meaning that people are not using them to purchase, they’re only getting them as change, and then taking them out of circulation by hoarding them or throwing them away.  On the flip side, the quarter (with 25% less) seems to be regularly circulated, and used both in purchasing and for change, and therefore the mint doesn’t need to make more, because they are not being removed from circulation as rapidly as the other coins.

I look at it this way.  Each and every coin that the mint produces, minus the coins that are returned to the mint and retired (this number is extremely small), and minus the extra coins needed each year because there are more businesses, people, transactions, etc. (this number is relatively small too), is money that we as consumers are hoarding or throwing away.  In other words, it is money that we are WASTING!

There are only two ways to stop the gross coin hemorrhage that is going on in the country.  Either we as consumers need to stop hoarding and start spending coins, or the government needs to stop making them!  If one of these two things happens, then the other will follow automatically. I really don’t see consumers changing to spend MORE coins, so it will have to be Congress that initiates the change (no pun intended).  Either way, the mint would go to making just a few million coins, instead of several billion!

But no matter how you look at it, we won't need more nickels or any other coin. The only way we would need more nickels, is if people start treating them like they do the pennies now, and remove them from circulation at a much faster rate.  Of course, then I'll have to change the name of my blog to US Nickel Info. 😛

Penny Videos

So, the penny debate is quite heated, even on Youtube.  Click and watch the links below, and comment on your favorite. I wish there were more good pro-penny videos, but they are pretty scarce.
Funny Goodbye to Canadian Penny
I Hate Pennies Video
Death to Pennies Video
Canada Gets Rid of Penny
Stan Lee Penny Rant

Why does Coinstar support keeping the penny?

This is something I've been trying to figure out for a while now. On the surface it seems logical. More coins equals more money right?  But wouldn't they spend the same amount of time sorting a penny as they would a quarter? Yet they make 25 times more money off of that quarter.  I would think their costs on processing the pennies would make it a counter-productive endeavor.  Without pennies, they could conceivably eliminate 60-75% of their variable costs, while only taking a 15-20% hit in revenue.  That's a 50% increase to their gross margin. Now that the company is firmly established and they are not expanding as rapidly as in the past, their fixed costs (like the cost of the actual coin-counting machines) should be more manageable.  Now I don't know the ins and outs of Coinstar's financials, but from what is posted on investing websites, their variable costs are about 70% of revenue. Therefore I would conclude that they would probably be better off financially if and when the penny's demise becomes a reality. What are your thoughts?
Coinstar's income on Yahoo! Finance (no longer available)
Coinstar website

Issues with the Anti-Penny arguments - Part 2

It's interesting that in one of the main arguments against the penny, the haters state that "we've done this before" or "other countries have done this before" all with little or no affect on transactions or the economy, etc.  I find this to be a bit of a stretch.  Converting registers, accounting systems and other purchase tracking software will be a major expense to businesses, and there will be a learning curve to get through, along with fighting off all the penny lovers, etc.  I happened to be in Australia in 1992 when they first changed over to a rounding system, and I can tell you that I heard a lot more complaints than praises.  Even in 1994 when I was there, I still heard a few derogatory comments about no 1 and 2 cent coins. While I was there, the exchange rate was about AUS$1.20 per US$1.00 if I remember correctly.  Now it's nearly a 1 to 1 exchange. And yes, I know exchange rates have little to do with purchasing power, or the strength of a currency within its own economy, but at least it gives us a starting point.  I'm sure that things are just fine there now, but at the time it was a big deal to a lot of Australians.  Now Canada is going through the same thing.  I'd like some feedback from Canadian business owners on transition costs and other headaches they're running into with this. I can't believe it's going off without a hitch.

Issues with the Anti-Penny arguments - Part 1

OK, let's switch gears to the penny haters.  I hate it when people convert time into a monetary value.  The penny haters say we're wasting 2.5 seconds every time pennies are used in a transaction, then if we do that twice a day, that's 5 seconds, and if the average wage is $17 an hour, 365 days a year...blah, blah, blah...all of a sudden we're losing billions of dollars every year, all because of pennies!  Hello people, I'm not getting paid while I'm shopping, so my time is free. But what about opportunity cost, you ask.  There is an opportunity cost for everything.  But the best example is with a business.  Let's say a company has $50,000 dollars to invest in improving their business.  What should they buy with it?  A new fancy widget to sell? Upgrade their retail facility? Pay their employees more? Open a new location? We could go on and on, but you get the point.  The company's options are limited by the finite resource of cash.  So they analyze each option and estimate how much more money each option will make them in the short- and long-term, etc. and then they go with the option that is best for the company (or makes them the most money).
Similarly, time is a finite resource for each of us.  But it does not have a monetary value for us.  If you want to make money, you'll find out how to make the most money with the time you have. But you'll find that there are certain times that are more productive for you and times that are less productive.  So you'll always be working during peak earning times, and not working as much during the low earning times. There will also be times where you can't make any money at all, no matter what you do, so you don't work at all during those times.
So as for wasting time in the checkout line with the rest of the penny users, hopefully you can gain it back on the drive home by catching all the green lights.  Seriously, 5 seconds is nothing, 10 seconds is nothing. Heck even 10 minutes is nothing.  Come on people, pennies don't waste our time.  And the only way they cost us money is because they're not cost effective for the government to produce.

Issues with the Pro-Penny arguments - Part 2

Warning: most of my comments will have a touch of sarcasm this time.

I like the claim that "the consumer" would be negatively impacted if we rounded to the nearest nickel.  Their backup for this argument; that 66% of Americans "feel" this way. You're kidding, right? Why don't you ask them if they "feel" they're getting shafted with the current rounding system too?  What's that?  66% of people feel they are negatively impacted by the current rounding system, too! Amazing.  Let's switch to minting the half penny again! Or better yet; let's start minting a mil coin too, worth a tenth of a penny! That way I won't get screwed when they round my $8.72 purchase plus tax of 8.25% from $9.4394 to $9.44.  I'm tired of losing .06 cents every time!  I'm not sure about your state, but the great state of Texas gives businesses a half percent discount on their sales tax when they file and pay on time.  This way the business don't get "negatively impacted" by rounding transactions to the nearest penny.  That's why businesses don't even worry about rounding.  I imagine if they had to round cash transactions to the nearest nickel, most business would continue exactly how they are now, except without pennies in their registers.

And the argument that the circulation of the penny helps keep inflation down and benefits the consumer price index?  If this were true, then the half cent and mil coins would be even more beneficial to keeping inflation down.  In reality, how the CPI is calculated would not change (pricing is collected from the sellers, not the buyers), nor would the rounding be included in the CPI calculation.

I'm the accounting controller at regional business.  I looked at our cash sales for the last few months. If we rounded all of our cash transactions to the nearest nickel: For $37,000 cash sales in April we would have made an extra 11 cents, for $38,000 in March we would've lost 7 cents, for $32,000 in February we would've made an extra 8 cents, and for $31,000 in January an extra 2 cents for the company.  That's a positive 14 cents for the company, negative 14 cents for our consumers.

The penny lovers have 1 point that I like, but they can't and don't back it up with any evidence.  They just say that it is "absurd" to say that not having pennies at the register will save time and increase productivity.  But I'll discuss this later when I lay into the penny haters.

Issues with the Pro-Penny arguments - Part 1

So I'll start by poking holes in the pro-penny arguments.  Don't worry penny lovers, I'll get to the anti-penny arguments soon enough.  After all, I believe everyone can make their own decision as long as they have the facts.

So first off we have their opening statement, "The penny continues to enjoy overwhelming support from a majority of Americans."  This assumption comes from their own "poll" in which 67% of those polled favored keeping the penny in circulation.  OK, let's assume you never worry or even hardly think about pennies. If someone asks you if you're in favor of keeping the penny in circulation (and they require a yes or no answer), what are you going to answer?  I would venture to say that the tendency is to stay with the status quo and so a majority of people will automatically say yes without any thought.  Since we use the penny now, that's what the majority will agree with.

I think a more telling argument would be to ask how they feel about the penny first, and throw out the answers to those that are indifferent.  You only want the data on those who have an opinion one way or the other, otherwise your data will be skewed toward the status quo.  Those that are indifferent will not care if we have a penny or not.  Of course, if you get an overwhelming majority of those that are indifferent, then your pro-penny argument will lose a lot of steam with that, too.

Another avenue would be to ask those you poll a bunch of similarly mundane-type questions and find the percentage that follow the status quo vs. those that go against it.  Then if your penny question is on the high end of the spectrum with followers, you'll have a good pro-penny argument.  If it's on the low end though, then you can conveniently ignore it, or just pick and choose the parts that help your argument.

I've got more, but I'll stop here for now.  Post a comment if you have any other ideas on the subject.

Penny Production

Here is the US Mint's preliminary production figures for all the US circulating coins. Pennies make up way more than half the coins minted so far.  These numbers should update regularly throughout the year.   US mint production

Here are some other years for your brain to absorb.  Look at all the pennies we have!
2013 - 7,070,000,000
2012 - 6,015,200,000
2011 - 4,938,540,000

With nearly 18 billion pennies minted in the last 3 years, and about 310 million Americans, that's 58 pennies per person.  They say pennies last for 30 years, so we probably have $5 to $6 in pennies stashed somewhere!  You could use that to buy lunch...if you can find someone to take them all!

The US Penny

The US penny has seen its share of lovers and haters.  In this blog I'll collect all the good, the bad, and the ugly about the US one cent coin. First up, I'll point you to the main pro-penny and the main anti-penny websites.  Then later on, I'll chime in on the pros and cons to their arguments.  I'll also be pointing you to interesting articles, videos, or anything else I can find online.  Eventually I'll collect info on what people actually do with their pennies and other change.
So for now here is the pro-penny website, Americans for Common Cents:
http://www.pennies.org/
And here is the anti-penny website, Citizens to Retire the Penny:
http://www.retirethepenny.org/