July 20, 2006
jk Breaks with the WSJ Ed Page
Well, they like the drug war more than me. Other than that, it is pretty unusual for me to differ with Paul Gigot and the folks on the Ed Page.
But I will boldly assert independence and give two cents worth of punditry in favor of ditching the penny. WSJ Ed folk think that it sends a bad sign about our willingness to defend our currency.
A Penny UnsavedThe decline of the penny as a storehouse of value is a depressing lesson of the corrosive impact of the thief of inflation over time. (See the editorial above.) A penny now has one-eighth the purchasing power it did in 1950 -- and then the coin was 95% copper, versus 3% today. The penny's devaluation may explain why the slogan on the face of the penny reads "In God We Trust," not "In Government We Trust."
I don't remember much of Bretton-Woods when I was a lad, but it seems that some epochal inflation is normal. The Brits don't use the hay'penny anymore and the editorial cherry-picks an inflationary time period.
The US also stopped minting $10,000 bills -- was that an admission of deflation? The penny is a waste of government resources to mint and is a drag on retailers to process and manage. Boot it.
Though I am for stopping production, it will never happen in my life. Demagoguery will keep it around.
How else are you going to pay cash for items that cost 0.99 cents? Say you have 6% sales tax. That's item is now $1.06.
You need pennies to make change! Surely the governments aren't going to say, "You know, let's make that 5% sales tax."
They'd sooner say "Let's make it 10%! It'll be easy!"
Surely, JK wouldn't be for ripping off the poor!
Posted by: AlexC at July 20, 2006 1:58 PMWe can't get rid of the penny until we get rid of paper money.
You’re just sucking up to the WSJ Ed Page!
The secret is aggregation. One order comes to 1.52 and is rounded down, the next is 6.53 and rounds up. Everybody's even at the end of the day and the time spent not counting and fishing for things of no value is put in the bank.
Posted by: jk at July 20, 2006 3:12 PMDon't go pulling out the fancy math on me!
Besides, "A penny saved is a penny earned" will have to be altered to something ridiculous like, "In the aggregate a penny wasted on your early purchases will be earned back by you on your subsequent purchases. Except that said penny will never really exist in your hand."
You end up sound like John Kerry.
(and don't throw the "nickel or dime" bomb on either)
Posted by: AlexC at July 20, 2006 4:40 PMNo man. I quit. You win.
Posted by: jk at July 20, 2006 6:09 PMSweet. :)
Posted by: AlexC at July 21, 2006 2:05 AMSorry to be so late into this debate, but let's consider:
On one hand, I'm told American currency once included a coin called a "mill" equal to one tenth of a cent. I certainly wouldn't argue that we've missed this coin since its demise in the 1960's, but...
On the other hand, the penny completes our coinage system as the "unit" measure of coinage. It makes as much sense to eliminate the nickel AND dime as it does the penny. How would you like the quarter to be the only coin available for commerce? Don't like pennies? Don't use them!
One of the strongest arguments against minting the penny is that it's manufacture costs more than it's face value, but this only matters if the government mints coins for a profit (as they do with statehood quarters.) Besides the fact that while a penny costs 1.4 cents to mint, a nickel costs 6.0 cents. If you want the cost of coins to be less than their face value then get the government out of the manufacturing business. Snap!
Finally, regarding the $10,000 bill, it was discontinued in 1969 by Richard Nixon ostensibly as a step to fight crime syndicates. The ban also ensnared the $1000 bill. The largest bill now made is $100, and the bill includes a metal strip that, when aggregated in large numbers, will trip an airport metal detector. The purpose of this is ostensibly to fight drug money transport. It also effectively helps the government to control how citizens keep and move large sums of their own money. "All the better to tax you with, my dear."
Posted by: johngalt at July 22, 2006 11:41 AMI really am losing here; they're even disagreeing with me on other blogs.
When the "mill" was discontinued, merchants were green-lighted to round transactions up or down to the nearest penny (I always enjoy gas' costing $2.899 per gallon). Not minting the penny would telegraph retailers that it's okay to round to the nearest nickel.
I think that would help retailers and save the Mint. I expect it would be an inconvenience if we went all the way to the quarter.
I'll agree that the cost vs. value argument is specious. The currency's value relative to production cost is unimportant, just an interesting anomaly in the one cent coin.
Your "don't use them" argument, however, doesn't capture it. I am still given pennies at the drive through, I still pay taxes to mint them, and I presumably pay higher prices to the retailer who is handling them.
Posted by: jk at July 22, 2006 12:04 PM | What do you think? [7]