Recently, those in the American government and beyond have decided, "Hey, do we really need the penny?" The American one-cent coin, commonl-known as the penny, was found to cost more to make than it actually is worth and so the elimination of it by a bill in congress was proposed by Arizona Rep. Jim Kolbe. The bill would eliminate the penny from transactions outside of digital transactions (ones using credit cards) and in place, all purchases would be rounded to the nearest nickel. http://money.cnn.com/2006/07/18/news/penny/index.htm
There are a few reasons why this move makes any bit of sense, and that is the fact that has already been mentioned: it costs more to make than it is actually worth. This can be attributed to the rise in zinc prices, which make up about 90% of the cost it takes to make a penny. Due to being over that one-cent in cost, being about 1.23 cents in production, we are losing money each time we are making it.
Conversely however, if we did change to using nickels, well, they have the same problem and cost more to make than they are actually worth, in fact, it costs 5.73 to make a nickel. So in truth, it actually would be more of a waste on money to switch to strictly nickels than to remain at the status quo.
http://www.usatoday.com/money/2006-05-09-penny-usat_x.htm
At the same time, the main supporter of the bill is Rep. Kolbe from Arizona, and one of Arizona's main resource is that of copper. http://www.admmr.state.az.us/Publications/ofr06-23.pdf Arizona supplies 65% of the copper used at the mint, this report states. The United States Mint states that while the penny uses about 2.5% copper in it's production with the rest being zinc, the nickel is 75% copper and 25% nickel. http://www.usmint.gov/faqs/circulating_coins/index.cfm?action=faq_circulating_coin This seems to be a conflict of interest for Rep. Kolbe. In this case, it makes sense why the penny should be eliminated while the nickel (which is more expensive to make) should remain, and that is simple, someone wants money of their own. If the penny were to be removed from circulation and transactions are rounded to the nearest five-cent, than that would mean more production of nickels. This instance would mean only good things for Arizona who happens to supply the bulk of the copper which the nickel is mainly composed of.
The final thing to consider is the simple fact that people use pennies despite the fact they seem useless to the common eye. They are good for charities who collect change, and also good for people to collect to build up money. Not only that, they can be used on the parkway despite the time it takes to use them as well as the fact the workers don't appreciate them. Still, they can be used, and some people use them often.
After seeing several sides of the issue it is safe to say that it is not possible to get rid of the penny without there being monetary and value losses.
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2 comments:
I agree that there are definetly pros and cons to getting rid of the penny. In a way though, I feel that getting rid of it would kind of be like erasing a part of American history and tradition. Also, the government is so concerned about saving money, maybe they should concentrate on not blowing money in other ways. I'm sure they spend alot more money things other than the penny.
Interesting topic! I knew it cost more to make a penny than it was actually worth, but you really took the time to explain it. I didn't know anything about nickels and agreed that pennies are definitely still useless!
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