An expensive nuisance?

[Figleaf]

Senate ponders the future of the penny
By BRYN WEESE, PARLIAMENTARY BUREAU, May 26, 2010

OTTAWA - The noose may be tightening around Canada's beloved penny.

The Bank of Canada's Deputy Governor Pierre Duguay told a Senate Finance committee studying the future of the one-cent coin Wednesday the penny is all but worthless.

"Since the coin was first produced by the Royal Canadian Mint in 1908, the penny has lost 95% of its purchasing power," Duguay said. "In other words, the penny then had the same purchasing power as 20 cents would today.

Indeed, in 1908, you could buy your daily newspaper for two cents, and a loaf of bread cost five cents."

Beverley Lepine, chief operating officer of the Royal Canadian Mint, confirmed there are about 30 billion pennies in circulation right now, and the Mint makes 500 million more new ones every year.

The problem with pennies, according to Wayne Foster with the Department of Finance, is that people hoard them, taking them out of circulation, and forcing the mint to make more.

To get one penny into circulation costs 1.5 cents, Lepine said, but they last on average 25 years. (Lined up flat side-by-side, there are enough Canadian pennies in circulation to go around the world more than 12 times.) NDP MP Pat Martin has been calling for the penny's proverbial head for the past six years, and with the Senate studying the copper (now plated) coin's future, he smells blood.

"I think we're witnessing the death-rattle of the penny. The jig is up and everyone agrees it's just an expensive nuisance," he said. "I have no doubt the Senate committee will recommend to the Minister of Finance to scrap the penny."

Martin has a private members bill on the order paper to stop producing the penny, phase it out of circulation, and round final sales to the nearest nickel.

A Wilfred Laurier University study from 2007 found using the penny costs the Canadian economy more than $100 million a year in lost productivity counting it, rolling it, waiting in line while other people count them, and so on.

Duguay said no one should be concerned about inflation, either, if the penny were scrapped because prices would stay the same.

Rounding up or down to the nearest nickel would only apply at the final sale  which could include many items ‹ and also would only apply to cash purchases anyway.

Credit card and debit transactions would not be rounded because, as Duguay said, pennies don't physically exist now in credit or debit transactions and nothing would likely change on that front.

Sweden scrapped its two lowest denomination coins in the early 1970s, and New Zealand cut out its one- and two-cent coins in 1989, and scrapped its nickel in 2006.

Australia dropped its one- and two-cent coins from circulation in 1992, and is currently considering dropping its nickel as well.

The Senate finance committee is expected to report to Parliament on its findings - whether to keep or kill the penny - later this year.

Source: Toronto Sun

[translateltd]

When I saw the topic header I thought it was going to be a continuation of this thread:

http://www.worldofcoins.eu/forum/index.php/topic,6596.0/topicseen.html

[Austrokiwi]

I can see no good reason for countries to produce  1 cent(penny coins)   I see New Zealand was used as an example.  When NZs monetary system was decimalized (1967) the coins were 1, 2, 5, 10, 20, 50 cent pieces.   Now NZ has  10, 20 50 cent pieces and $1.00, $2.00, pieces.   Theres an interesting parallel to 1967.  All that has to happen now is for NZ to introduce a NZ$5.00 coin... and then just divide each coins denomination by 10.  The wheel turns!

[Figleaf]

Just wondering if this will have any influence on the same debate in the US, but I guess not. The introduction of the loonie (dollar) and the toonie (2 dollars) seems to have had no effect on US attitudes either.

Peter