Transterrestrial Musings

Comments

Ok... maybe we can have North Korea print $100 bills for us. Sorry Sam, but stick with ending the penny. The privatization concept is unreasonable.

Posted by Leland at July 28, 2006 07:36 AM

AARGH!!! When will idiots stop reporting this as news!?!

"For the first time, it costs the U.S. Mint more than 1 cent (1.23 cents to be exact) to manufacture each penny,"

WRONG! The FIRST time it cost more than 1 cent to manufacture a penny was in May, 2006, when it cost 1.4 cents.

I mean, I suppose that the fact that a bill was introduced this month might bring this kind of story to mind again, but it's not NEWS any longer.

Where are all the stories about Romex prices doubling, or Copper pipes for water supply lines in houses?

The fact is, until the metal in the penny costs more than 1 cent (it's still at .6-.8 cents), this bill won't gain any ground.

But hey, it must give these "journalists" a fuzzy feeling to know that they can misinform the public and pass old stories off as "news" every couple of weeks...

Posted by John Breen III at July 28, 2006 07:45 AM

Sorry Sam, but stick with ending the penny. The privatization concept is unreasonable.

I disagree. The US has privatized its money before and (IMHO) it worked out reasonably well.

Posted by Karl Hallowell at July 28, 2006 11:19 AM

Karl, can you please provide an example?

Posted by Leland at July 28, 2006 11:35 AM

The penny is no longer viable as coinage. It buys nothing, and costs more than it is worth.

Years ago, 1976 to be exact, I managed a pizza delivery company. We did away with pennies in our shop entirely. We looked at the menu and rounded up or down that part of the 2.5 cents necessary to get to even totals. It cost us nothing as far as income was concerned, it increased tips to our drivers, and we NEVER had a customer complaint.

If the heathens of late 20th century America could learn to do without the penny, surely the highly evolved citizens of the 21st century can do so. What with our flying cars and wrist radios, why do we need pennies?

Mr. Lincoln has out lived his numismatic life time, thanks Abe, but it's time for you to go.

Posted by Steve at July 28, 2006 12:02 PM

Steve,

I had a few friends purchase and attempt to run a roadhouse burger joint in college. I think they did fairly well at the beginning. Most people would go, get a burger, buy a drink, sit around for a few hours playing cards/dominoes or video games, and buy drink refills. The place primarily made money off the drink refills.

Things went fine, until they got the idea to continue selling drinks at $.75, but raise the refill cost from $.25 to $.30. That extra nickle killed them, because people didn't have anything to do with the nickle or dimes. They couldn't use them in the video game, they didn't want them in their pocket, and nobody was going to give a $.20 cent tip for a $.30 refill. So people quit getting refills. If the rate was $.26, I think the downfall would have been faster, while $.50 probably wouldn't have hurt the venture.

Posted by Leland at July 28, 2006 12:15 PM

The other option, of course, is to lop a zero off our dollar to cover for the inflation of the last few decades. 8)

Wouldn't that be fun?

Posted by Alfred Differ at July 28, 2006 01:03 PM

What's wrong with letting banks mint their own pennies? Some people like them and the bank can put their own logo on one side to make it worth the extra few tenths of a cent. Personally, I just leave pennies in the leave-a-penny jar.

Posted by Sam Dinkin at July 28, 2006 01:27 PM

Sam,

There's a BIG difference between "let people make their own" and "letting banks mint their own pennies".

Banks aren't people, and people aren't banks.

To suggest that private citizens should be able to make their own pennies (as your original post implied), is ludicrous. Allowing banks to mint them isn't quite as insane, but still doesn't make nearly as much sense as just phasing them out.

Posted by John Breen III at July 28, 2006 01:49 PM

If a piece of material with intrinsic value can be turned out by someone and traded for the value of that material, I don't see why it matters who's stamp is on the side.

Fiat money, on the other hand, requires some sort of well established reserve (a bank) and a sane monetary policy (hasn't been done yet).

Posted by Aaron at July 28, 2006 02:42 PM

I don't think it would kill the open window at the Federal Reserve to take these private "pennies" at $25.00 per person per day to help keep them at a value of $0.01. That's enough of a reserve. Without private production, the reserve won't be meaningful. Scarcity will cause appreciation.

Posted by Sam Dinkin at July 28, 2006 02:47 PM

If they meet the mint's spec, why can't a non-bank entity like Duracell mint a penny? Maybe someone would mint one that has a fuse built in. If the point is the cost, then let's let everyone be empowered to mint pennies. Open source money like Paypal. I am not advocating returning to the days of private bank notes, but what is the harm? The benefit can be quantified in billions of dollars a year in demand for pennies.

Posted by Sam Dinkin at July 28, 2006 02:54 PM

To reflect the effect of a century of inflation, eliminate pennies and nickels. Express prices with only one digit to the right of the decimal point. Also, develop a dollar coin that actually works. So instead of pennies, nickels, dimes, and quarters, we'd have dimes, quarters, and dollar coins. As a bonus, we get a huge political fight over whose face to put on the new dollar coin.

Or we could eliminate the quarter as well and use a √1000¢ piece, and develop a $√10 note ...

Or maybe we could start using these ...

Posted by Jay Manifold at July 28, 2006 03:47 PM

In the 21st century I think the role for physical coins in general is limited. What's the point? To whom is balancing accounts to the nearest penny worth the inconvenience of carrying around a pocketfull of metal? Who even routinely buys in cash anymore? I go a month or more without handling a bill or coin, thanks the ubiquitous zap card and automatic bill paying...

On the other hand, the world is absolutely crying for "electronic" coins and stamps, i.e. some good, cheap, trustable system for micropayments. You want to send me a high priority e-mail that my Sooper Nospam Secretary program will route to my ReadRightNow inbox? A one-time micropayment of $1 will get you my prompt attention M-F, rising to $2 on the weekends and $25 on vacation.

Stopping at the parking meter? No handful of quarters, and not sure when you'll be back anyway? Just activate the automatic micropayment system, and every 20 minutes until you return you get debited a quarter. If the city wants to encourage you not to park too long, then after 2 hours it rises to $1 every 20 minutes.

Got a competitor to Wikipedia that's filled with painstakingly-researched facts and devoid of emotional venting? Micropayments to the rescue! I bet plenty of people would pay 5 cents per informative page-view if it were completely painless to do so. Same thing if you've got movie, restaraunt and tech reviews to sell, political opinion columns, yadda yadda. Any kind of small morsel of information on which it's more plausible to make $millions if you can charge ten million people 10 cents each than if you must charge 100,000 people $10 each.

Posted by Carl Pham at July 28, 2006 04:30 PM

It is not that people "like" pennies, it is that we are leery of the slippery slope. Do away with them and the nickel will become the smallest coin: how long before it, too, is useful only in making change? OK, it already is, but you can see where this goes.

Pennies need not be made of copper, WWII shows us that with a couple years of "steel" pennies.

Mostly, stores end up depending on pennies because of tax computations, [state] licensing, etc.

A couple of places I go to, mom-and-pop stores, keep a small dish with some pennies in it by the register: if a customer is a couple short, rather than making change from a dollar (or a ten, or twenty...) the cashier just takes the pennies from this dish. And customers can drop the pennies they get as change into the jar.

Posted by teqjack at July 28, 2006 08:05 PM

Most coinage is no longer viable as currency, actually. Except perhaps the quarter and the rarer half-dollar and dollar coins.

The best proof is the existence of CoinStar. Their machines are widely used at a large number of retail outlets and grocery stores. Their motto is "turn change into cash!". They charge an 8.9% processing fee. Think about that for a moment. Change ALREADY IS cash. And yet it is such a hassle to deal with it might as well be some sort of bulk grade ore. Indeed, CoinStar's fee is much higher even than that of many check cashing stores, who run high risks of fraud and forgery. So a hunk of change is a much more questionable value than a possibly fraudulent check.

Posted by Robin Goodfellow at July 28, 2006 08:14 PM

Leland,
I don't know the exact situation your speaking of so I can't doubt you saying it contributed to their downfall. You never said how long ago this happened. But two things stand out,

The word COLLEGE

Food businesses around colleges are hard anyway. Great when schools first open, drops off over the year, the holidays are terrible, exams times are never great annd THEN school is out for 3 months.
Wouldn't wish it an enemy!

and then this caught my eye,

The place primarily made money off the drink refills.

I'm no expert, and I learned restaurants from the ground up, or rather from the dish sink out through the kitchen to the front office. That profit margin was razor thin. If a penny or two is life or death, in most businesses it'll come up death soon anyway. Restaurants are notorious for killing peoples dreams a penny at a time. They won't die much quicker if they die by the nickel.

Most people carry around SOME mixed change. But I've never met anyone who cared if it contained more, or fewer nickels, pennies or dimes. Anytime I've seen articles about the penny, most people don't know why we still have them. It's an easy transition from, "...why do we still have them", to,"I didn't realize they were gone!"

Who cares if a shirt is $24.96 after tax, or a full $25.00. If the 4 cents will break you, you probably shouldn't buy the shirt!

As the prices of goods go up the penny becomes less important. Your new car is $35,676.94. Will you pass on the deal because the penny dies and it's 35,676.95. What if the pennies work to your favor and it's $35,676.90, would you tell your friends you got a deal? Nope, the penny is dead.

The penny has out lived its usefulness. When penny candy is 3, 4 or 5 cents, round up the first two, give the man 15 cents instead of 12 cents and move on.

Posted by Steve at July 28, 2006 08:48 PM

Robin,
the other reason CoinStar does such good business is the banks SUCK when it comes to change.

Several years ago I decided to cash in a 5 liter pyrex beaker full of change. I went by the bank to get wrappers they wanted to sell them to me. They also informed me they wanted all the wrappers marked with my name, signature, address and account number. Can't I use just my account number, aren't my name, address and phone number tied together in your computer? Not good enough.

I took the jug to the Kroger, fed in the coins, got my ticket, the CoinStar machine charged me $16.00, I got my $170.00 at the Customer Service desk and left.

$16.00 on demand as opposed to counting, wrapping, signing and dealing with the bank was a small price to pay.

Posted by Steve at July 28, 2006 09:00 PM

Several years ago I decided to cash in a 5 liter pyrex beaker full of change.

The notion of ever having such a thing is completely alien to me. I use my change at every opportunity, and never collect it.

Posted by Rand Simberg at July 28, 2006 09:55 PM

It's funny how many comments these coinage topics generate.

Rocketry, warfare: meh. Coinage, fight!

Personally, I use my debit card for >95% of purchases, usually using cash only in the rare situations where it is more convenient.

Posted by Robin Goodfellow at July 28, 2006 11:48 PM

I like the Octopus cards in HK. Why not do away with cash all together?

Posted by Chris Mann at July 29, 2006 02:12 AM

I spent 4 or 5 years filling that beaker. I use my change too, then and now. At that time I was traveling for work. Many places we entered we had to empty ou pockets to get into. I'd dump my change in a my hotel room or into the cup holder in my van. It built up.

Since then I might have $6.00 or $7.00 around collected. I use it to pay the grandsons for helping with minor chores. It's regular tender and they like the coins for their banks.

I concede it was an unusual situation. But I rarely go to the store that somebody isn't hitting that CoinStar machine. I wish I'd thought of that.

Chris Mann is right, kill the cash. I use my debit card and have stopped any "real" money transactions almost completely.

Posted by Steve at July 29, 2006 04:56 AM

Leland, you wrote way back when:

Karl, can you please provide an example?

Back before the Civil War, many private banks issued their own money with various degrees of quality. As I understand it, some coins were minted as part of this, but the vast majority was just a promise, often unfulfillable to pay a certain amount of silver or gold at a later time. While a lot of this money was near worthless and easily counterfeitable, we have to remember that the banks in general were pretty shaky during this time as well. So given who was dishing out the money, I think it worked out reasonably well.

John, you wrote:

I think the reality of enforcement would mean that only entities that had considerable assets or was backed by some sort of insurance would work. After all, what happens if a poor machinist produces thousands of dollars of substandard pennies? You can jail him, of course, but that still means a bunch of bad pennies now in the market, screwing up transactions. There's no assets to seize to make up the cost of getting this currency out of the market.

Posted by Karl Hallowell at July 29, 2006 07:39 AM

Leland,

There was a private mining concern in (I think) North Carolina) that mined gold and minted coins early 19th century.

Posted by Brian at July 29, 2006 08:39 AM

So printing of money occurred back when banks loaned money on the Gold standard? How might a private organization handle circulation amounts of minted coins that are backed by the full faith and credit, not of the private organization, but of the United States? Or is the idea to return to the gold standard?

Posted by Leland at July 29, 2006 10:56 AM

Pennies need not be accepted for goods and services. http://www.treasury.gov/education/faq/currency/legal-tender.shtml What's wrong with letting a person or a company produce pennies at a profit? As long as they meet the specification, they are providing a valuable public service, allowing some businesses to keep their same accounting system, and probably would pay the Treasury for the privilege.

Posted by Sam Dinkin at July 29, 2006 11:58 AM

Money is a substitute for barter. Anybody can barter, therefore anybody can come up with a substute for a penny. The problem is whether people will accept them as a form of currency.

There are thousands of example already where they do (coupons and air miles are different forms of currency.)

The next question is what happens if the government stops minting pennies. I think the only reaction would be a glut of news stories.

Remember Y2K?

Posted by ken anthony at July 29, 2006 02:55 PM

Sam, the problem isn't the ability to reproduce a penny to US government specification. The problem is who controls the amount of currency produced. Previously, the control was based on the amount of gold the bank had in reserves. We no longer have that standard. As Ken points out, any barter system can replace coinage. However, our current economic system has the penny representing not the banks ability to pay but the US governments ability. What you are calling for is a return to the gold standard.

Posted by Leland at July 30, 2006 06:09 AM

Post a comment