Author Topic: Economics for making small denomination coins  (Read 9896 times)

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Offline Abhay

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Economics for making small denomination coins
« on: March 20, 2011, 04:09:58 PM »
Many of the countries are still minting the small denomination coins like 1 US Cent, 1 Euro Cent, while many countries have stopped minting the small denomination coins. The reason for discontinuing could be due to intrisnsic value of the metal being more than the coin value itself or the costly manufacturing/minting cost etc. Another reason could be that due to high and rising inflation, the small denomination coins have lost their value in the market for purchasing anything worthwhile.

In India, many small denomination coins were melted down by the public (Although illegal) as the value of the metal in coins was much more than the value of the coins itself.

My question - What is the economics in minting small value coins by these countries? I am sure, the minting cost or the metal cost for 1 US cent or 1 Euro cent must be much more than the value of the coin itself.

Abhay
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Offline Bimat

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Economics for making small denomination coins
« Reply #1 on: March 20, 2011, 04:21:28 PM »
In Finland, 1 and 2 cent coins are struck only for collectors. They are legal tenders but you can't spend them. Their mintage is small (1 million or so) so they don't spend a lot on their production, unlike other EU countries.

In case of US, the only reason why they are struck even when they don't have any purchase power is the pressure from copper suppliers' lobby on government. They issue billions of 1 cent coins every year for which they need thousands of tons of copper which is a source of definite income for suppliers..

Aditya
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Offline Coinsforever

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Re: Economics for making small denomination coins
« Reply #2 on: March 20, 2011, 05:09:54 PM »
My question - What is the economics in minting small value coins by these countries? I am sure, the minting cost or the metal cost for 1 US cent or 1 Euro cent must be much more than the value of the coin itself.


AFAIK  in these countries the transaction of small denomination is not at all by cash , payment mode is credit/debit cards at all the shopping places & malls.

Moreover price are fixed with bar code on any product  , also there is  no MRP lable tag on any of the commodities /products

(for example in China price as per bar code 3.67 yuan (RMB) while paying at super market they deduct from 10 RMB & return 6.33 yuan (RMB)  and in most populated country of world still small denomination  coins are minted &  widely accepted & being transacted )
unlike India where we have Selling  price & Maximum Retail Price of products and some time we find sellers put price tag to make it round figure which is illegal practice & due to no govt steps to control this system & withdrawing small denomination coins lead to encouragement of such malpractices .

If there is transparency in pricing of products   without passing benefits to wholesellers & retailers . Uniform pricing of same product all over India with actual acceptance of lower tender will certainly increase the demand for small denomination coins.


Economics is that these countries are still maintaining the purchasing values  of all small denomination coins in conjunction to higher denomination coins .

Cheers  ;D





PS: Moderators please review to move the thread to appropriate topic instead of living room
« Last Edit: March 21, 2011, 12:55:58 AM by aan09 »
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Offline <k>

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Re: Economics for making small denomination coins
« Reply #3 on: March 20, 2011, 05:25:31 PM »
Governments and mints always lag behind on these matters. Any changes to denominations or metals first have to be agreed - all the interested parties have to be consulted. Then laws have to be passed, and the changes made. This all takes time.

In England, when I was a child in the 1960s, the lowest coin was a predecimal halfpenny, but I could still buy a halfpenny chew for that. Today, the lowest coin is a decimal penny, but you can't buy anything with it, you still need a 20p coin to buy a tiny stick of fudge. I believe that it is not possible to buy anything cheaper. That is why the Royal Mint this year started making the five and ten pence coins out of nickel-plated steel. However, even these coins on their own cannot buy anything, so I think they should be changed to copper-plated steel to show their low value.

A good idea would be to change to Swedish rounding, which is used in New Zealand and elsewhere. The lowest coin in New Zeland is now the 10c coin, but in the shops, everything is priced down to the cent. At the till, the total is rounded, so that one dollar five cents becomes one dollar ten cents, and that is what you pay; but one dollar four cents becomes just a dollar to pay. So, if you are a penny-pincher, you can ensure that you never pay a rounded-up price - only a rounded-down one! This also saves the country lots of money - the mint does not need to produce useless little coins, or transport millions or billions of them all over the country.  8)
« Last Edit: April 05, 2011, 09:45:18 PM by coffeetime »
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Offline chrisild

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Re: Economics for making small denomination coins
« Reply #4 on: March 30, 2011, 12:59:05 AM »
That is what also done in Finland and at most stores in the Netherlands. Except they don't call it "Swedish" rounding. ;) Makes a lot of sense to me. Problem is, in many countries people believe that such rounding rules will increase inflation, will be a disadvantage for poor people, and so on. Such perceptions, n matter how irrational they are, will be hard to counter ...

Christian

Offline villa66

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Re: Economics for making small denomination coins
« Reply #5 on: May 16, 2011, 02:39:23 AM »
...In case of US, the only reason why they are struck even when they don't have any purchase power is the pressure from copper suppliers' lobby on government. They issue billions of 1 cent coins every year for which they need thousands of tons of copper which is a source of definite income for suppliers..

The American cent is actually a zinc coin, with a little copper plating. (Has been for almost 30 years.) And the real reason it's still around is the genuine affection Americans have for their cent, despite its impracticality.

But I think it's fair to say some of the affection is fading, as newer users have less and less memory of the coin in its prime.

The cost of manufacturing the penny is in the news again--1.7 cents cost per 1 cent produced--and with the subject of serious cost-cutting gaining ground in the public discussion, who knows for sure?

 :) v.

Offline villa66

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Re: Economics for making small denomination coins
« Reply #6 on: May 16, 2011, 02:41:31 AM »
...In India, many small denomination coins were melted down by the public (Although illegal) as the value of the metal in coins was much more than the value of the coins itself....
Would you be kind enough to name some specifically? This subject is of great interest to me.

 :) v.

Offline Abhay

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Re: Economics for making small denomination coins
« Reply #7 on: May 16, 2011, 04:55:15 AM »
Would you be kind enough to name some specifically? This subject is of great interest to me.

 :) v.

The smaller denominations, earlier made of Copper-Nickle or Brass, of 1 Paisa, 2 Paisa, 5 Paisa, 10 Paisa and 20 Paisa were mostly melted down for the metal content of these coins.

I still remember, the Brass 20 Paisa coins had some rumours that it had a little gold content, and that it never gets tarnished. You will find it hard to believe that most of these 20 Paisa Brass coins were converted into BANGLES.

Abhay
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Offline villa66

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Re: Economics for making small denomination coins
« Reply #8 on: May 16, 2011, 05:27:39 AM »
Thank you! I hope not to abuse your patience too much, engipress, but will ask three quick questions and maybe, if it’s convenient, you’ll answer them if you get some time. But if not, that’s okay, of course.

1) These are private meltings, not by the government?

2) Bangles?! As in for use on belts or bracelets or skirts?

3) A few years ago I made the following listing in my coin note-book:

10751: The Indian experience–like the American–is with a “quartered” currency unit, so it should have been clear that a 20-paise piece, while constantly championed by purists as more decimally correct, was a poor fit for India. This 1969b 20-paise, of the first type and only the second year of the new denomination, wasn’t a popular coin, or so I’ve read. The 20-paise denomination must have been pretty handy for something, though, because despite its unpopularity, it lasted until the mid-‘90s. (97)

Was there some specialized use for the 20-paise?

Any additions or corrections to the above note-book entry are also most welcome.

:) v.

Offline Abhay

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Re: Economics for making small denomination coins
« Reply #9 on: May 16, 2011, 01:24:23 PM »
1) These are private meltings, not by the government?

2) Bangles?! As in for use on belts or bracelets or skirts?

3) Was there some specialized use for the 20-paise?

Any additions or corrections to the above note-book entry are also most welcome.

:) v.

1) Yes, these coins were mostly bought by scrap dealers, who in turn, melted the coins to extact the metals from these coins.

2) In India, the bangles form a part of the Jewellery, worn by all the ladies, on the hands. You can find the Bangles made of all the metals - Glass, Plastic, Brass, Silver, Gold, Platinum and many of them studded with diamonds. I have included am image of the Indian Bangles.

3) I don't remember that there was any specific use for 20 Paisa coin. However, for me personally, the 20 Paisa KITE was just the right size for me. So, I have spent many 20 Paisa coins on purchasing the Kites. :) :) :)

Abhay

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Offline villa66

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Re: Economics for making small denomination coins
« Reply #10 on: May 16, 2011, 03:18:45 PM »
Thanks again, engipress. These things will find their way into my coin note-book this evening.

If in the future you do find there was a specialized use for the old 20-paise, I'd sure appreciate it if you'd let us all know.

 :) v.

Offline villa66

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Re: Economics for making small denomination coins
« Reply #11 on: May 16, 2011, 05:19:11 PM »
3) I don't remember that there was any specific use for 20 Paisa coin. However, for me personally, the 20 Paisa KITE was just the right size for me. So, I have spent many 20 Paisa coins on purchasing the Kites. :) :) :)

I forgot to ask--the 20-paise coins you used to buy kites--the round aluminum-bronze pieces or the hexagonal aluminum version? Or both?

Want to make sure I assign this anecdote to the proper coin!

 :) v.

Offline asm

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Re: Economics for making small denomination coins
« Reply #12 on: May 16, 2011, 06:17:24 PM »
I forgot to ask--the 20-paise coins you used to buy kites--the round aluminum-bronze pieces or the hexagonal aluminum version? Or both?

Want to make sure I assign this anecdote to the proper coin!

 :) v.

Both the coins were current so what could be bought with one could also be bought with the other.

Amit
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Offline Abhay

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Re: Economics for making small denomination coins
« Reply #13 on: May 17, 2011, 04:39:43 AM »
I forgot to ask--the 20-paise coins you used to buy kites--the round aluminum-bronze pieces or the hexagonal aluminum version? Or both?

Want to make sure I assign this anecdote to the proper coin!

 :) v.


I used the round Al-Bronze coins, as the time period of my purchasing the Kites would have been around 1975-1978, when I was 11-14 years of age. The aluminium hexagonal coins came much later, around 1982.

Abhay
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Offline villa66

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Re: Economics for making small denomination coins
« Reply #14 on: May 17, 2011, 05:36:55 PM »
Thanks again, engipress; I have my notebook entry now. And thanks also to asm--whether the two coins circulated concurrently was a question I was also curious about.

 :) v.