Making no cents

The demise of a coin shows the long-term impact of inflation

See article

Readers' comments


Jesse Lansner

"There have been calls for the American penny, which costs 2.4 cents to produce, to follow suit. But that would mean greater use of the nickel (five cents), which is even less economic to produce, at 11.2 cents for each coin."

Each nickel may cost more to produce than each penny, but relative to the coin's face value, the nickels are about 7% cheaper to produce. Producing $1 worth of pennies costs $2.40 (2.4 cents * 100). Producing $1 worth of nickels costs $2.24 (11.2 cents * 20). $1 of dimes costs $0.57 to produce; $1 of quarters is $0.45, and a $1 coin is $0.18.

The cost of producing dimes and quarters has been fairly steady for the last three years, while the cost of producing $1 coins dropped by 40% last year, with most of that savings coming from "Sales, General & Administrative".

See page 11 of
http://www.usmint.gov/downloads/about/annual_report/2011AnnualReport.pdf for all the numbers.


I'll be interested to see how the transitional period works. There will certainly be a period where some arbitrage is possible. If the price ends in 0.02 you can claim to have no more pennies but when the price ends in 0.03 promptly pay the extra pennies. Frugality FTW

Richard Sp

Your comment that “Canadian retailers will presumably want to exploit the psychological appeal of less-than-whole-number pricing, so many will opt for C$9.95 rather than the full C$10” will help to perpetuate the wide spread misconception that the end of the penny coin means the end of penny pricing. Items can still be priced at 99 cents, $1.99, or any other price a retailer wants. Anyone who doubts this need only look at gas prices, which are routinely set to one tenth of a penny, in spite of there never having been a one tenth of a cent coin. In most cases individual items are combined, and taxes are added, before the transaction total is calculated. I am currently in New Zealand, where they have eliminated not only the penny but also the nickel, and I can assure you that items are still priced to the penny. It is only transaction totals that are rounded up or down to the nearest 10 cents at the point of sale.

KCKY in reply to Richard Sp

The GST (VAT) in Canada is applied above posted prices, so more often than not, after-tax prices end in penny values anyway, whether or not posted prices end in .99, .95, or .00

Edmund SS in reply to Richard Sp

When dropping 5c coins in 2006, New Zealand also addressed the cost-of-production issue:
* the 10c, 20c & 50c coins -- previously quite large internationally -- were made smaller;
* the 10c coin, previously a cupronickel "silver" coin along with the 20c and 50c coins, became copper-plated steel;
* the 20c & 50c coins became nickel-plated steel;

KCKY in reply to Edmund SS

How did that affect automated coin collecting machines? We've had some complaints in Canada about parking meters not accepting new $1 and $2 plated-steel coins (though supposedly the Mint had given plenty of time for vendors to migrate their equipment)


Solution for the US mint: stop minting nickels as they are today, and make all pennies outstanding worth 5 cents. Thereafter: change the "1" on the penny to a "5", making them "new nickels". No one would object to a 400% return on their pennies, and the mint would stop producing coins at a loss (which no self-respecting business would continue to do).


It's going to be interesting to see how many US pennies migrate north.

T.Ware in reply to M_Evans

Canadian and American coins (other than the loonie and toonie) look very similar, aside from a dead president instead of the Queen on one side. Canadians have always accepted American coins in payment (and provided they look close enough the occasional coin from a different country or bit of metal has been known to cross hands with indifference). Americans have not been so accepting of non-American currency; even at times when a Canadian quarter is worth a penny more than the American counterpart.

Dr Kick

At some point, central banks, governments and treasuries should realise that it would be acceptable to set up a "new dollar" that is worth, for instance, 50 of the current dollars. At that point, coinage costs will recede and one might jingle a bit of money in their pockets again. Meanwhile, most money is in electrons, which cost little to manufacture, move, etc.
Let's see: A New Dollar for the US might be called the Buck, making Harry Truman's famous saying truly accurate.


Not only does the passing of the Canadian penny (I still have lots sitting in bowl on my dresser) signify inflation it also marks the switch during the 20th century from commodity based money (gold, silver, nickel, copper) to fractional reserve money based on credit.

When I took a course on economics of money and banking (before bank cards) we were told currency make up about ten percent of the money supply. I would guess that figure is now lower.

These days the main reason for using currency is for transactions one does not want recorded on a bank or credit card statement.


shaun39 in reply to 3SPKuHLzMC

Indeed - cash is used for a collapsing share of transactions.

At my nearest supermarket, there are 8 self checkout lines (where you can only pay by credit/ debit card) and only one staffed checkout line (where cash is still an option).

During busy times, you have to queue if you insist on paying cash - but can walk straight through if you pay electronically.

That is, if you didn't buy online in the first place... online retail is booming.

If I fill a car with gas, I can pay instantly (at the pump) with a debit or credit card - or I can put up with the hassle of going inside and queuing to pay with cash.

I haven't withdrawn any cash since last October - the last time I used cash was the last time I took a bus.

Surprisingly 54% of UK retail transactions were still cash last year.

As it becomes ever more convenient to use electronic and card/ phone money (and ever less convenient to carry cash), cash will incrementally vanish (it might take another 25 years, but it will happen).

T.Ware in reply to 3SPKuHLzMC

I wonder if the insurance systems, along with a perceived danger of being found with too much hard currency, has done more to cause this than anything else?
If someone uses your stolen credit card you can always get the money back but if someone steals your wad of cash you are SOL.

As a Canadian living in Japan I found it a little terrifying going back to cash and consistently needing to keep $3-500 in my wallet at any time.



Products and events


Take our weekly news quiz to stay on top of the headlines

