The Penny Has No Value

Well…not really, but titles are supposed to be attention-getting, right?  Canada is discontinuing their penny because it’s more of a pain to keep them in circulation than to continue minting them.  The nickel, then, becomes the smallest unit of currency.   This shouldn’t blow your mind, but a lot of people are confused that the basic unit of money will be gone altogether, and although the dollar is one hundred pennies, you’ll can’t actually count out a dollar in pennies anymore.  People forget that it wasn’t too long ago that pennies were more valuable, and fractional currency had more options.

If you’re an old fart like me, you remember when gas prices were 0.99 and 9/10ths, so the gas signs said something like 0.999.   When I was a kid it seemed like teasing: just make it a round number, already, who actually has a tenth of a cent?   Well, Missouri did.  A Mill is one tenth of a penny, and mill tokens were quite common through most of the 20th century to give a quantity smaller than a penny for percentage calculations on taxes and other incremental amounts.   The average person on the street got things rounded to the nearest penny by the retailer, but when the retailer paid the state, they could use these tokens to get an exact amount and save a little bit of money in the process.

Missouri made so many of these that you can still buy them on eBay by the bagful.  This gives some perspective about the concern that pennies cost more to mint than their metal is worth, which is one of Canada’s main excuses.   There was a time when precious metals were used to make a coin worth its weight in gold, so to speak, but even back in the 19th century low-value coins have always been made out of something different than their value.   The whole “silver plug” thing was a poor attempt at adhering to a currency of precious metals, because even back then precious metals were…well…precious, and worth money, it was difficult to get a few cents’ worth in a coin.  So, there was paper fractional currency, there were postage stamps used as money, they made pennies out of bronze and steel, and Missouri made their tax tokens out of cardboard and plastic and zinc.  The problem with the penny isn’t that they cost more to make than use; the U.S. Mint has no problem making coins out of cheaper materials to save money.  What’s stopping the mint from making a bunch of tiny pennies out of zinc for a tenth of the cost of the current penny and putting those into circulation?

Aside from the legal hula-hooping to change the existing laws about the coin’s content and appearance, nothing at all.  The problem is that, regardless of what the coin is made out of, the current penny of today is worth about a mill in 1950 dollars, depending on your calculator.   Who wants to deal with such small increments, other than beancounters and tax collectors?  Other than to buy unspeakable power, there’s not a lot of use for coins that have a fractional value.  Uncontrolled inflation causes all sorts of devalued small-currency coins around the world, and compared to other nations, a change in value to 1/10th its original value over a half-century isn’t too bad.

We live in a world today where, economically, the difference between $3.74 a gallon and $3.75 a gallon is  the same as that 9/10 on the old gas signs when gas was 50¢ a gallon.   Is that tiny amount worth the counting, the banks shipping bagfuls from building to building, the national banks weighing and replacing and distributing, the untold jarfuls in dresser drawers? The problem is that a mill isn’t worth the time to stop and pick it up off the street these days. It’s not going to eliminate penny transactions where it counts, like electronic transactions and in calculating those final totals, just like when the mill was an impactful portion of sales tax calculations in Missouri, but for the rest of us this is about simplicity and convenience.   The penny is expensive, but not purely in minting and seigniorage — it’s about the length of time to transact the exchange, wasting time over amounts that are soo small as to be insignificant.   Let the penny go; it’s not worth what it used to be.