The Penny: A Coin with Remarkable Staying Power

Photo: coins.nd.edu. The Bermuda penny features a hog.

Introduction to the Penny

President Donald Trump has ordered the U.S. Treasury to stop minting the penny, whose cost to make exceeds its 1-cent value. But despite ongoing efforts to abolish it since the 1990s, the penny has had remarkable staying power.

The penny (1-cent coin) remains in use mainly because removing it would be unpopular politically and challenging practically.

Reasons for the Penny’s Staying Power

Many people and businesses still rely on exact pricing, and eliminating pennies would force rounding prices up or down. This makes some customers worry they might pay more.

Additionally, some groups benefit from producing and supplying pennies, which helps keep them in circulation. Despite costing more to make than they’re worth, pennies remain because of tradition, convenience, and economic concerns about pricing.

Potential Consequences of Eliminating the Penny

Eliminating the penny could lead to cash transactions being rounded to the nearest five cents. This change might encourage a shift toward digital payments, where exact amounts can still be processed without rounding.

However, studies suggest that such rounding in cash transactions would have a negligible impact on prices and inflation.

Comparison with Other Currencies

The smallest legal coin in St Kitts and Nevis is the 5-cent coin. This coin has a diameter of 23.11 mm, weighs 1.74 grams, and is made from aluminum.

However, the Eastern Caribbean Central Bank (ECCB) decided to withdraw the one-cent and two-cent coins from circulation starting July 1, 2015, due to their low purchasing power and the significant cost of producing and handling these coins. This suggests that the production costs of smaller denomination coins were substantial relative to their value, which might also apply to the five-cent coin.

The coins are manufactured at the Royal Mint in London, so there will be shipping costs involved.

Source

Source: VOA.

Conclusion

The penny has managed to remain in circulation despite its high production costs and low value. Its staying power can be attributed to its convenience, tradition, and the potential impact of its elimination on pricing and inflation. While some countries have withdrawn smaller denomination coins from circulation, the penny remains a widely used coin in many countries.

Frequently Asked Questions

Q: Why is the penny still in circulation despite its high production costs?

A: The penny remains in circulation due to its convenience, tradition, and the potential impact of its elimination on pricing and inflation.

Q: What would happen if the penny were eliminated?

A: Eliminating the penny could lead to cash transactions being rounded to the nearest five cents, which might encourage a shift toward digital payments.

Q: Are there any other countries that have withdrawn smaller denomination coins from circulation?

A: Yes, the Eastern Caribbean Central Bank (ECCB) withdrew the one-cent and two-cent coins from circulation in St Kitts and Nevis due to their low purchasing power and high production costs.