The United States Mint has recently decided to end the production of the penny, the country’s oldest form of coin based currency. The penny, which started its minting in 1972 and has recently reached its 233 year anniversary, has been decidedly cut from the minting process altogether as the cost of making a penny costs more than the face value, causing an estimated $85.3 million dollar loss annually for the United States. As the unit cost of a penny was approximately 3.7 cents per 1 penny, the government decided that the production of the coin was altogether unsustainable and unneeded. According to a Forbes article, the U.S treasury has claimed that the halt in production will yield close to 56 million dollars in annual savings for tax payers. While there are some potential downsides, the death of the penny can be seen largely as a late rectification of a long standing national inefficiency that should have been done sooner.
Consumer Impact
For the average American consumer, the only change that will be seen any time soon will be at the cash register. As the penny becomes more and more scarce, businesses all over the country will begin to adapt by rounding cash transactions to the nearest nickel. For example, if a sale of an item ends up being $10.02 at the cash register, it will be rounded down to $10.00, saving you money and removing the need for pennies as change. Further, it is important to note that these spending changes will likely only alter cash transactions, with digital and card payments still being required to pay to the exact cent. Economists all over the country largely agree that the change will not affect the consumer to a large scale. This conclusion is largely supported by the Canadian experience in 2012 when they stopped the minting of their currency’s penny.
What happens next?
While the minting of the penny has stopped, probably permanently, the penny is not quite dead yet. There are an estimated 250 billion pennies that remain in the circulation of our economic system, and they will continue to keep their status as legal tender indefinitely. You can spend them, banks will accept them, but it is expected that pennies will become near obsolete the further the country goes. As for further “deaths” of coins, the nickel will be the next likely coin to be removed. Although, the nickel is probably safe for quite a while as removing it will cost businesses and consumers alike quite a bit more than the changes from the penny.