Canada serves as a useful laboratory for testing innovative policies that eventually make their way south and are adopted in the Unites States. Legalized gay marriage, open-service military and universal health care are all current policies whose success in Canada has helped to support a strong push for acceptance south of the border.
It will be interesting to see if (or when) America is ready to adopt Canada’s next bit of sensible fiscal policy.
A non-binding Senate commission is expected to recommend before the end of 2010 that Canada abolish the penny. This issue has been under discussion in Canada for years and has gained momentum based on the success of similar moves in New Zealand and Australia. Both countries abolished their penny almost 20 years ago with none of the problems that opponents had predicted. An additional factor pushing Canada toward a penniless society is that fact that a penny now costs 1.5 cents to produce, making it more costly than its face value.
Australia and New Zealand still frequently use retail prices with 1 cent increments but round off to the nearest nickel, and the same procedure will likely be used in Canada. The abolition of the penny is a popular idea on Canada, and almost certain to pass though parliament after the Senate makes its final recommendation.
The difference in small currency in Canada and the United States becomes quite obvious when you spend time in both countries. Canada no longer makes dollar bills, instead using a gold-tone dollar coin called the “loonie” in reference to the image of a northern loon on the obverse. The loonie was first introduced in 1987, followed by the “toonie” (a two-dollar coin) in 1996. The Canadian mint says each coin costs about 16 cents to mint and lasts an average of 20 years. Paper currency cots 6 cents per bill and has a lifespan of 1 year.
The toonie has always been popular but the loonie was strongly disliked by the public at first. People complained they already had enough change in their pockets, and thought the loonie would be inconvenient and bulky. That feeling has completely changed and Canadians now love their loonie. It is convenient for use in vending machines, at the car wash and the parkade, and greatly reduces the bulk in people’s wallets. Ten one-dollar bills form a substantial wad in a billfold, while ten loonies can get lost in the bottom of a pocket.
In fact, most people find the lack of bulk one of the major charms of their loonies and toonies. A brief search through your jacket pockets, your change purse and the coin dish in the kitchen can come up with forty or fifty dollars you didn’t even know you had…and that’s always a nice surprise. It’s good to find you’re richer than you thought.
Once Canadians are finally penniless, they’re going to feel even richer.
This isn’t a new idea. Most Americans take the pennies out of their pockets, leave them in the car ashtray (if they don’t smoke) or drop them off in the change jar to be left with their banks when the end of the month looms before payday. It already costs more to make a penny here than it is worth. Yet to my amazement, the Treasury recently went to the trouble to redesign the back of it. Go figure.
We tried the two dollar bill a couple of times. Itbacame the brunt of songs and jokes. We tried the dollar coin a couple of times as well. Didn’t fly either. One thing you can say about Americans; we’re pretty obstinate.
Besides, we could no longer charge a penny for our thoughts. That would be sad.
Never mind that we don’t have a penny anyway. England has pence; we have cents. But not much sense about cents, it seems.
The one thing that isn’t covered is gravity. More money is lost due to gravity than p?aper currency.
Airports; interesting place to people watch
The problem with eliminating the penny is that sales taxes and many purchase costs will be rounded up. In any case, we will end up inflating our way beyond the nickel and so forth.
Perhaps we should simply exchange four of the old dollars for a new dollar and then rationalize the coins by size with a quarter size dollar piece being the largest
I will certainly watch with interest to see how a penniless Canada works. I suspect it’ll work rather well…
What’s wrong with rounding up a couple of cents on a purchase now and then? We round up fractions of pennies already. (Oh, I’m sorry, you’re saying that multiplying prices by 1.0825 always comes out to a perfect round penny? Silly me.) According to one study I saw, customers would actually save on average about 0.025 cents per transaction if they didn’t have to deal with pennies. This was due to a variety of reasons, one of the obvious being that retailers will re-price things at $9.95 instead of $9.99 to keep that illusion of spending less than $10 intact.
On the other side of the coin, we could save the Treasury more than $200 million per year if we quit minting pennies. The most recent estimate I saw in the NY Times said the US Mint churns out about 12 billion pennies per year. At $0.017 (as of March 2008) per penny, that’s $204 million per year in wasted spending by our Government. I thought we cared about deficits!
Furthermore, economists have estimated the total cost to the economy due to dealing with pennies to be in the range of $300 million to $1 billion due to the time wasted counting, sorting, exchanging and losing those pennies. (See research by Research by Robert Whaples, an economics professor at Wake Forest University.)
So, while I get nostalgic for my copper Lincolns–I’ve got a collection of wheat pennies that’d make a numismatist weep, I could very easily be persuaded that it’s time to retire old Abe. We abolished the half-cent coin in 1857, so maybe the cent is overdue for the scrap heap.
And that’s my $0.02!
Oh, for preview and edit… I hate typos!
Well we could revalue the dollar to the purchasing equivalent it had immediately after WWII, approximately 1 to 10, before we let inflation work its evil way.
So, just lop a single zero off the dollar bill and at the same time require all prices and wages be reduces to 1/10th the current number. Only thing remaining the same is the tax code structure.
A penny would really be worth the penny many of us old farts remember. Back to buying that Coke for a dime. And a Hershey bar a nickel.
Sure, it’ll piss off the overseas folks, but what do they count, anyway?
Whadda ya say?
Max aka Birdpilot,
Eliminating the penny and nickel would have essentially the same effect, without all of the cash replacement costs, the hassles of currency exchange, and concurrent pricing problems that are necessary to re-value a currency. While lopping the zero off of all of the electronic funds is easy, it’s the hard cash where it gets tricky. Dollars don’t magically become dimes, so all of that old cash has to be turned in and converted to the new currency. The costs to redesign and reprint all of the cash in current circulation would be much, much higher.
If old cash isn’t converted, could you imagine how frustrating it would be? Dimes from this year are now suddenly worth a dollar, but dimes from last year are still only worth a mere 10 cents. Are you gonna check the dates on your dimes? Such currency transformations require that the entire population buy into converting their old currency. No more keeping cash in the cookie jar.
In some places (like Turkey a few years ago) where values were off by the thousands or millions, currency revaluation could make sense. But if you’re only talking about a factor of ten or 100, then it’s much easier (and cheaper) to just stop circulating the small stuff.
@Max… A penny would really be worth the penny many of us old farts remember. Back to buying that Coke for a dime. And a Hershey bar a nickel.
I’m pretty sure you’re kidding, but your post brings to mind one of the thousands of things I wonder about on a daily basis.
My son does contract welding for Caterpillar. He is paid $140 an hour. When I started teaching school, my first real job, I earned $140 a WEEK, or about $3.50 an hour. So my son earns roughly 40 times what I was making back then.
Does this just keep escalating? Will my grandson earn $5,600 an hour and pay $320 for a jug of milk and $80,000 a month on his mortgage? I assume at some point there’s an adjustment and the values of everything get recalibrated so it’s not ridiculously unwieldy, with money being carted around in wheelbarrows… but how exactly does that happen?
Indeed, Zero’s ~ Chunky’s ~ 3 Musketeers used to be 5¢.
Remember a grocery sale in the early ’60s ~ (10) loaves of bread for one dollar! My dad would give the gas attendant 😉 $5 and tell him to fill ‘er up, check the oil and they would clean the windows w/out asking, Gasp! 😀 and get change back.
I digress er my 2¢ …
btw, a brand new Ford cost $700 in 1940 and was built to last!
Actually the BIGGEST loser in such a situation (and why it WON’T be done!) is the government. Tax revenues would crash due to elimination of “bracket creep”. The Republicans wet dream!
Imagine ALL those people now earning 90% “less” in these “new dollars” falling out of the higher marginal brackets!!!!! Their spending power has now actually gone UP because of less taxes due to now being in lower brackets. Demand would rise. Companies would hire more workers to meet the higher demand!
@ mclever, I disagree. Note my premise, all wages and prices would reduce by 90% at the same time as the dollar. One dollar would be denominated the same tomorrow, just worth 90% less. At the same time, that 50c Hershey bar today would, by law, become a 5c Hershey bar tomorrow. The whole currency exchange is THEIR problem. Let them revalue THEIR money to make the allowance. They can increase THEIR prices by tenfold when selling to us.
Besides, >90% of “money” today is simply accounting and computer transactions. Hell, I have direct deposit and I pay >90% with a debit card! No cash changes hands.
Hey, I never said EVERYBODY would be happy!
Oh, and think how much interest the banks will lose!
When you buy that $2000 car @ 7% interest and pay it off over only 3 years like we did 45 years ago, take a look at the total interest charges they’ll collect.
$2000 @ 7% for 36 months = $223 interest charges ($62/month)
$20000 @ 7% for 72 months = $4554 interest charges ($341/month)
Man, will THEY be pissed!
All this gives all y’all a clue as to what inflation does to one’s “real” discretionary income.
seems like a good idea.
While I love the idea of getting rid of the penny, (most young people don’t even carry cash anymore), I think the loonie isn’t quite ready. We’ve tried the $1 coin before (Sacajawea anyone) and have for the most part, hated it. I can’t say why exactly, especially since everything I buy is on my debit/credit cards, but it doesn’t seem like we’re quite ready for that one.
But abolish the penny, save the government some money, sure. Wouldn’t bother me one bit.
Every other country that has successfully done this got rid of the note at the same time as issuing the coin. Their citizens hated it at first, too, but got over it.
I’m in favor of abolition of one cent and five cent coins, and the one dollar bill. It would save more Treasury money than you may realize, because of unique and subtle differences between the ways notes and coins are treated in the US.
I remember the first time we tried a dollar coin, the old susies (Susan B. Anthony was on them). They said (and they do know a lot) they didn’t work because they were too close in size to quarters. Then we tried the Sacajawea and they didn’t work either despite being larger and golden.
I think we just don’t want women on our coins, lol.
As to Max’s idea of lopping off a zero: Wouldn’t that effect our wages also? If you are making $20/hr (must be nice) then you would make $2/hr after the lopping. Therefore, interest would not be effected nor would it make it eisier or quicker to pay off debt.
Or am I misunderstanding this idea?
Maybe the real issue is that wages have not kept up with inflation over the years. That is why having two incomes in one family is the norm now.
At any rate, yep, get rid of the penny.
The Susan Bs and the Sacajaweas and the new President dollars are all the same size.
As long as the paper notes continue to remain in circulation, the dollar coins will not become the norm. There’s no real incentive to change.
Learn somthing new every day. I wonder why they seem larger then? Strange illusion brought on by the color?
I haven’t seen very many of the new presidential dollars. Had all but forgotten about them till you brought it up, but I do remember the big beef about them not having In God We Trust on them when all they had to do was to look at the edges, lol.
I DID leave off what would happen with outstanding loan amounts.
A loan is someone selling money to someone else for a specified period of time. So, yes we would cut all the outstanding loan and interest amounts by 90% as well, just as with prices and wages. Mutually agreeable by both parties would allow for a reduction in the remain length of the loan.
When they first came out, there were a few of those presidential dollars that didn’t have the text around the edges. Naturally, they quickly became collectibles.