I’m glad that co-blogger Scott Sumner took on one of many fears about ending the manufacturing of pennies.
His put up made me notice that I had uncared for to put up on my article on the demise of the penny that I printed at Hoover in March. The article is “Ideas for Your Penny?“, Defining Concepts, March 13, 2025. No, I didn’t provide you with that nice title. My editor did.
Some highlights:
The US authorities makes a reasonably penny (pun meant) on seigniorage. It’s not as a lot because it was as a result of increasingly more folks use bank cards and even cryptocurrency to purchase items and providers. Nonetheless, it’s a great quantity.
The most important acquire from seigniorage is on the $100 invoice. Printing one prices the federal authorities simply 9.4 cents. So, when the feds spend this $100, they make a pleasant revenue of $99.90. Not unhealthy. Printing a $1 invoice prices the feds 3.2 cents. So even on a $1 invoice, the feds make 97 cents.
However minting small cash loses cash for the feds. In its 2024 Annual Report, the US Mint studies the price of producing every coin denomination. The price of producing a penny was $0.03. In different phrases, the price of producing a penny was thrice the worth of the penny. Apparently, the feds went underwater even on the nickel, whose price, at $0.11, was over twice the worth of the nickel. That’s why I said earlier that the federal authorities ought to cease producing nickels additionally. It isn’t till you get to the dime that you simply discover a coin that the feds earn money on. Apparently, the price of producing a dime, at $0.045, is lower than the price of producing a nickel.
That stunned me at first, nevertheless it shouldn’t have. First, the nickel is larger than the dime. Second, the nickel and the dime are made up of just about the identical metals. The nickel is made up of 75 p.c copper and 25 p.c nickel; it’s really an alloy known as cupronickel. Apparently, since 1866, apart from a interval throughout World Struggle II, when the US authorities wished nickel for army makes use of, nickels have been fabricated from cupronickel. The dime is made up of a copper core inside an outer layer of cupronickel; the general composition of a dime is 91.67 p.c copper and eight.33 p.c nickel. Not like with the nickel, the dime’s composition has modified dramatically. Earlier than the Coinage Act of 1965 eliminated silver from dimes, dimes had been composed of 90 p.c silver and 10 p.c copper. I nonetheless have some silver dimes and quarters hidden away in my sock drawer. It needs to be apparent why the feds modified the composition of the dime: with will increase within the value of silver, producing a dime the pre-1965 method was a shedding proposition.
And:
As a result of the larger positive factors would come from eliminating the penny, not the nickel, that’s what I’ll give attention to right here. How would we make the transition?
First, no actual transition could be obligatory for the overwhelming majority of transactions. Most individuals use bank cards or debit playing cards to purchase gadgets. In case you purchased an merchandise in your Visa card for, say, $19.99, the service provider may cost you $19.99. No penny would want to vary palms. Let’s say that that’s the one factor you got that month and that you simply repay your bank card in full every month. You’ll pay the bank card both by transferring funds out of your financial institution electronically, or, as is uncommon now, writing and sending in a verify. Once more, no pennies could be obligatory.
So, the one transition required could be for individuals who pay money. How would that work? We are able to look to Canada for steerage. Below Conservative former prime minister Stephen Harper, Canada’s Royal Mint stop producing pennies in Could 2012, and Canada’s authorities stopped distributing them in February 2013. I’m going to my cottage in Canada each summer time and the few occasions I’ve paid money, it has been seamless. If the invoice got here to, say, $19.97, the money register rounded all the way down to $19.95. But when the invoice had been $19.98, the money register rounded as much as $20.00. Apparently, pennies are nonetheless authorized tender in Canada, however for the previous ten years, I’ve not seen anybody utilizing them. Gone are the times with the little dish on the retail counter labeled “Take a penny, depart a penny.” There’s no want.
Learn the entire factor.