Canada ponders a penniless future - Macleans.ca
 

Canada ponders a penniless future

Senate finance committee to review fate of the much-hoarded one-cent coin


 

Canada could face a penniless future as Finance Minister Jim Flaherty is openly musing about the end of the one-cent coin. Documents obtained by the Toronto Star reveal officials from his department have been in discussions with the Royal Canadian Mint to consider a penny-free society, and have talked to officials in Australia and New Zealand—both countries have axed the penny—about the logistics of cash purchases. One briefing note from the Mint says Ottawa could withdraw the penny from circulation but still allow them to be accepted for commerce. Or it could end production of the penny and “demonetize” the coin on a specific date, meaning they could no longer be used to pay for purchases. Thirty billion pennies have been produced in Canada since 1908, many have which have ended up in Canadians’ bedroom drawers, piggy banks and kitchen jars. But Deputy Governor of the Bank of Canada Pierre Duguay told a Senate committee in May the coin has lost 95 per cent of its purchasing power. It also costs 1.5 cents to produce and distribute each coin, meaning production is costing taxpayers. The final decision to remove any coin denomination rests with the government, and a spokesperson finance department said the fate of the penny is being reviewed by the Senate finance committee.

Toronto Star


 
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Canada ponders a penniless future

  1. Something would have to be done about prices, how taxes are charged, if we get rid of the penny. I lived in England and all taxes are baked into price you see on tag/label/sticker so you know exactly how much you are paying and don't have to add 15% when trying to figure out total.

    • Agree. Same goes in France IIRC. Also, in France, the tip is included in restaurants bills. One can decide to give a tip for exceptional service, but if you don't you're not made to feel like a cheapskate. I'm sure there are those that disagree with this.

      • Many countries in Europe automatically add the tip. Given that service varies so much I don't necessarily agree. I should be able to indicate my displeasure if service is shoddy by lowering the tip.
        Yes, I would like to see the end of the penny. They have become a nuisance to use and we have thousands of them at home. All the work required to roll them and get bills for them is a huge task and not worth the effort.

  2. I detest getting pennies – or any change of any sort – so much that I've taken to using my debit or credit card for nearly every transaction that I know will result in a handful of change.

  3. I rarely have any cash on me at all, as I hate having to find a place for change or bills. I use my debit card for everything. However, I'm not sure that getting rid of the penny is a good idea. It will most likely cause more inflation, as prices will increase. If it was $19.98 before, it will now be $20.00 and so on. This is something that has happened in a number of countries in Eastern Europe.

    • The two cents are a bribe for consumers who only watch the price in front of the decimal point. $19.99 still reals them in better than $20.00. Given that your taxes are paying for the money losing penny I doubt the 1 cent in savings makes "cents".

      • I ¢ what you did there.

  4. If you've ever been to Australia long enough to make purchases you will applaud this decision. No more pennies!

    Retailers simply round up or down to the nearest $0.05 and be done with it. Sticklers will tell you that you lose that miniscule amount when $0.03 rounds up to $0.05 – but that is a negligible amount. Once again with the chorus- no more pennies, no more pennies!

  5. Enough already….how long has this been discussed? Seems like forever for what should be a "no-brainer."

    Having said that I'm sure some people will claim that the world is about to end without the penny around.

  6. "It also costs 1.5 cents to produce and distribute each coin, meaning production is costing taxpayers."

    If it only cost .5 cents to produce and distribute each coin, it would still mean production is costing taxpayers. I'm so smart.

    • Well spotted. Of course though the author probably meant that production is costing taxpayers more than the face value.

  7. Don't just stop at the penny. The 5 cent coin is also nearly useless. Canada should have only the following coins: 10 cents, 20 cents, 50 cents, one dollar and two dollars. All these coins should also be made lighter and smaller so one isn't weighed down like a sherpa every time change is received.

    • I agree, and like to bring it up on my blog once in a while because it's an issue the government could actually save money on without harming business or consumers. I've long wanted the 50 cent coin to be in circulation instead of the nickel and penny.

      As I understand the rounding, it would only be on the final total of a bill, not with each line item. So the "loss" for the retailer or buyer is only going to be a negligible couple cents.

      • Even better. However, making them lighter might not be the answer. Too easily replaced with slugs in vending machines and other places where cash payment is accepted such as on buses, subways, etc.

    • I agree whole heartedly, we've had the same denomination of coins since 1937. For our 150th birthday the gov't should revamp our entire coinage. 10 cent, 50 cent, 1 dollar, 2 dollar and 5 dollar coins.

  8. Just stop producing them, but allow them to be accepted. They'll slowly become rarer and their value will increase until nobody will want to part with their pennies anymore and voila.. mission accomplished.

    • What can you possibly be talking about? A penny is by definition 1/100 of a dollar. If the price of a penny doubled to two cents, what exactly would you buy one with?

      • Tell you what. You find me a 1911 Canadian Silver Dollar. Now, let's say we throw on inflation, etc. Ah screw it, I can't be bothered to calculate it. You get me a genuine one of those in decent condition and I'll pay you $100.

        Should be a good deal, eh? 100:1?

        Hint: denomination != price or value in all cases.

        • That coin's value comes from its metal (gold) and, I presume, numismatic value (ie, collecter's item premium) because it is rare, there aren't billions of them about. What do you think the melt value is of the modern Canadian Penny?

          I must add that it is extremely encouraging to see a Socialist appreciating the value-retaining qualities of metallic-based money.

          • Very good. Because it is rare.Now consider what happens if they stop producing the penny. Does the penny supply remain constant? No pennies ever lost down drains, taken out to the dump in the back of a couch, just plain wear from being in people's pockets etc? No. The penny supply slowly drops. As it does, stores adapt. It becomes a pain to stock pennies, they start adjusting prices to the nearest nickel and so on.

            Meanwhile, no changes in legislation need to be made, no efforts to "recall" the pennies that are out there, etc.

          • The penny cannot appreciate in value and be circulating, legal tender at the same time. Either the penny is worth1/100 of a dollar because the government says so, or it is worth more as a non-fiduciary, collector's item. If a penny is worth more than its exchange value, people will not use it for exchange (Gresham's law: bad money drives out good).

            Of course, all of this is based on the assumption that the penny would appreciate in value if supply ceased to increase — presumably due to the precious historical value people will attach to it. This could happen, but it might take about a million years.

            Take, for example, the Canadian fifty-cent piece. Relative to the penny, these things are virtually non-existent, but if you find one, the best return you can get for it is using it in a vending machine that mistakes it for a loonie (I am, of course, talking about the ones made after they stopped making them with silver). They have (almost) no value because they have no reason to. They are made of cheap metals and are simply not rare enough.

            If you're trying to get rich by saving your pennies, I suggest throwing them in a wishing-well instead.

          • Keep in mind that, at present, just about everybody has a Scrooge McDuck swimming pool full of pennies. It's going to take some awfully big time and some awfully big sofas to shrink the supply enough to give pennies a scarcity value.

    • In Europe some countries change their coinage and if you don't use the old coin by a certain time, they are refused by shops. You have to take them to a bank for exchange. Putting the onus on shops to process isn't totally fair is it? Bank are the primary distributors of legal tender.

      • s/b "Banks"

  9. "It also costs 1.5 cents to produce and distribute each coin, meaning production is costing taxpayers."

    Huh? Production would cost taxpayers even if its price was less than one cent. Minting coins does not return a profit, that is, the face value of the coin (or bill) minus the cost of production does not represent a profit (or loss) to the taxpayers. If it cost 1.5 cents to produce a million dollar bill, would you say that taxpayers are earning $999 999.985 on each one?

    • That is a case of The Need-to-Know Writer Strikes Again!

      It's at least good for comedic value.

    • I believe this is what you call seigniorage. A little less smugness next time, perhaps.

  10. may as well just got to tenths of a dollar and only have dimes ..then you can ger rid of the nickel, quarter, and penny ..and then they can add a $5 coin too!

  11. Its a no brainer. Dump it now. But what I take issue with is a " a senate committee", A totally useless bunch of patronage appointments costing us millions monthy discussing the fate of the penny. We cannot afford these bottom feeders. They produce nothing and achieve nothing.

  12. Shoot – if we lose the Penny (my nickname) I'll lose more money playing Rummoli :-)

    Seriously tho, when the Euro became the currency in the France, everything went up. Recall my PILs complaining. And when the GST decreased by 2 cents, most retailers rounded up on small items to consumers.

  13. How about we just revalue the dollar to be worth 5 of today's dollars? Then the penny automatically becomes worth a nickel, and nobody has to change anything in terms of coinage. All that changes is price tags.

    Renormalize, in other words.

    • Revaluing the dollar just to keep pennies in circulation is one of the worst ideas I've ever seen. I assume you were being facetious. ;-)

      • Half facetious, in response to the suggestion above that we drop pennies/nickels/quarters and come out with a $5 coin. In fact if we dropped the dime as well, we'd be back where we started except that the smallest unit would be called the "dollar" instead of the "cent"….

        But seriously, what would be the problem with renormalizing (assuming that all loans etc. were renormalized accordingly)? The "dollar" is just an arbitrary unit of currency. If everyone, including foreign investors/borrowers, agreed to it I can't see what would change other than the numbers used to denote prices and balances.

        • From a completely practical perspective (ie getting buy in from 35 million citizens, as well as from affected foreigners) just dropping the penny is the way to go.

        • There would be enormous problems and costs associated with renormalizing the dollar, and I'm not just talking about bank software and vending machines. Imagine the hoarding of cash that would happen. People who hoard currency under the mattress would suddenly find that they're five times richer, while people with money in the bank or invested elsewhere would be out of luck.

          All in all, a ridiculously draconian solution to a minor problem.

          • Yes, I guess you'd have to change all the paper/coinage as well to denote the new valuation, which would kind of defeat the purpose.

            Ah well, I suppose that means the Mint probably won't be beating a path of gold to my door after all.

          • Yes, I guess you'd have to change all the paper/coinage as well to denote the new valuation, which would kind of defeat the purpose.

            Bingo!

            The penny is doomed. It's just a question of time.

        • But we wouldn't be back where we started. The point is not to have no smallest unit coins. The point is that carrying and shuffling through coins that have virtually no purchasing power is pointless and a waste of time. The penny's purchasing power is about 1/100 of a newspaper, 1/125 of a can of pop, 1/280 of a carton of orange juice, etc., that is, very, very close to nothing. The only reason some people (not me) still carry these things around is because businesses keep pricing their wares with two digits after the decimal. If prices were rounded to the tenth instead of to the hundredth, no one would notice the difference to his bottom line — because there wouldn't be one.

          Thenceforth, the only useless, inconsequential items Canadians would ever put in their pockets would be voting cards.

          • Well put.

            I was going to give my two cents worth as well, but I realized I'd need another three to make it worthwhile, so I won't bother! :D

            (I'll get my coat.)

          • I meant "back where we started 130 years ago", not "back where we started before revaluing". In other words, the lowest unit would be worth enough to make sense (cents? sorry).

  14. Nickel whistles?
    Nickel loafers?
    Nickel Lane?
    Nickelwort?

    Where does the madness end?

  15. How much time is lost with cashiers and customers fumbling around for pennies that in the end get thrown into some jar when one gets home, and then thrown into the garbage later on when that person decides they can't be bothered to wrap up the 938 pennies for 10 bucks.

    Totally inefficient. Dump the penny, round to nearest nickel.

  16. It'd be nice if they do it this time, instead of just talking about it.

    • Agreed, it is time.

      Although after we do that, I wonder how long it will be (a decade or two from now?) before we start the whole process over again with the nickel. ;-)

      • Not sure how long it would have to be, before the concept of carrying around strange metallic ores and biohazard grade pieces of paper is seen as quaint.

        • Apparently the Mint has plans to switch to "plastic" bills very soon; they are cheaper and cleaner. I tried to include a link, but no go this evening, for some reason….

  17. In particular, copper one-cent pieces (those dated prior to 1982 and
    some 1982-dated coins) now contain about two cents worth of copper.