A Penny for Your Thoughts?

By Mark Lee
Special to the Journal

The watchword in politics these days (at least this week) is affordability. What screams affordability louder than… the fact that the American economy no longer needs pennies to function? To be clear, we haven’t needed the penny for at least two decades – maybe longer. A perennial argument for pennycide is that it costs more to produce pennies than they’re worth. Another is that there’s a stamping plant somewhere in mid-west selling penny blanks to the US Mint that has very good lobbyists.

The argument that we should ditch the penny because it costs four times more to produce and distribute than it’s actually worth has never held water. Such claims could be made about many American children – but no one’s proposing we adopt A Modest Proposal, Jonathan Swift’s 1729 suggestion that surplus offspring might most efficiently be dealt with at the table.

(He was kidding. Most likely.)

I make this inappropriate comparison because every time pennycide comes up, you’d swear we were proposing, well… you know. The strongest argument against eighty-sixing the one cent coin is that people simply won’t stand for it. Any more than they’d stand for a change in the meaning of kiddie menu.

 

Like many truths, the ones about pennies turned out to be wrong. Say what you will about Trump, he scissored red tape tied around pennies that stretched to the moon and back. And nothing has happened. Psssst: nothing’s going to happen. It seems like many large merchants are already rounding ALL transactions down, in your favor. If you’re having trouble sleeping, here’s a statistical lalaby.

• Less than 15% of retail transactions involve cash.

• Nobody spends pennies. There are over one hundred billion of them in circulation; most sitting in jars.

• They cost around four times what they’re worth

• People routinely toss them when received as change.

• Other people routinely do not pick them up.

Okay, those last two aren’t, strictly speaking, statistics. But they are true.

 

Pennies are mostly zinc and less than 3% copper. In finance terms they’re notionally overpriced. For the record – nickels and dimes don’t come out much better, but at least they circulate. People will pick them up off sidewalks. Apparently, at about at the quarter where the mint business starts to break even.

The only people who make money messing with pennies are the guys who own those green machines at the grocery store. Today, the primary mechanism for returning pennies into the banking system are private companies like Coin Star. These firms pay armored carriers to move millions of pounds of unwanted metal through a fractured supply chain – and scrape 13 percent to “reduce friction” on the transaction. That comes out to about a hundred million a year in their pockets. About five bucks per customer.

But when a mom needs a little extra cash for formula – or Otis is a few cents shy on a pint of Wild Irish Rose – pennies can come in very handy. There are three dollar’s-worth of pennies for every American. So, what’s going to happen to all of them? Basically, nothing.

At least for a long time. There won’t be any mad rush to the national Mason Jar. Why would there be? We don’t take paper money or coins out of circulation in North America – that’s South America where you have to turn in your dough for new dough every once in a while. There haven’t been any Canadian pennies since 2012, but you can still buy and sell them at any bank.

My sources tell me the Maple sphere has scarcely rippled.

That’s right, I have sources.

Experts say the Lincoln penny will hang on at the fringe of the US economy for decades. Some merchants will still accept them; all banks will have to accept them. The smallest units of the American Dream will retain an amount of value commensurate to their denomination. Even if it takes two kilograms of them to buy a cup of Starbucks.

But Starbucks doesn’t have to (and won’t) take 800 pennies for a Venti Latte made with oat-milk, extra hot. Just like convenience stores don’t to take hundred-dollar bills. But people don’t leave hundred-dollar bills lying around under the expired batteries in their junk-drawer. They’re everywhere. How will it take to us ‘legally tender’ the average 300 pennies each and every American owns, over and over until they all wear out. Never?

So, the penny isn’t really going anywhere, we’re just going to stop making them. That’s a big difference. Chances are, your great granddaughter will be able to take them to the bank. And maybe your grandson will find one of a the few hundred “wheat” pennies that are worth tens of thousands of dollars. Of the billion dollars in pennies lounging around in US homes and offices, there is probably extra $500 million in additional collector’s value. That may sound like a lot, but in your case, will mean nothing. Statistics, again.

My proposal on the occasion of the penny’s passing is that we just… forget about it and move on. I’ll bet a hundred-dollar bill against all the pennies in your change drawer – that’s precisely what we are going to end up doing.

The penny is dead!

Long live the penny!

No problem.