"> (Answered) you think that some day we will abolish the Penny? Why do you feel this way? What would be the biggest obstacles for keeping or abolishing the Penny?... - Tutorials Prime

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(Answered) you think that some day we will abolish the Penny? Why do you feel this way? What would be the biggest obstacles for keeping or abolishing the Penny?...


you think that some day we will abolish the Penny? Why do you feel this way? What would be the biggest obstacles for keeping or abolishing the Penny?...


After reading the article do you think that some day we will abolish the Penny? Why do you feel this way? What would be the biggest obstacles for keeping or abolishing the Penny? Do you think we will need physical money in the future? Or will electronic be the only method?  Please discuss any other thoughts you have as well. The Hassle of Small Change About eight billion US pennies were minted in 2006, and about 140 billion pennies circulated. That's nearly 500 pennies per US resident. About 60 percent of pennies are resting in change jars, drawers, or other gathering places for the lowly coin. Pennies are abandoned in the tiny bins and donation cans at store counters. Many people will not bother to pick one up on the sidewalk. The penny, like all US currency, has been robbed of its exchange value by inflation. Today's penny buys only one-seventh as much as it did in the 1950s. Pennies can not be used in parking meters, vending machines, or pay phones, and penny candy has been long gone. To avoid the hassle of small change, some restaurants, such as the Vanilla Bean Café in Pomfret, Connecticut, charge prices exactly divisible by 25 cents. That way, pennies, nickels,The exchange value of the penny has been declining as the cost of minting it has been rising. For more than a century, the penny was 95 percent copper. In 1982 copper prices reached record levels, so the US Mint began making pennies from zinc, with just a thin copper finish. Then the price of zinc quadrupled, boosting the metal cost of a penny to 0.8 cents. Add to that the 0.7 minting cost per penny, and you get 1.5 cents per coin. So the government loses half a cent on each. The government lost $ 41 million minting pennies in 2006-this, for a coin headed for the change jar. Nickels are also money losers; They cost 5.5 cents to make.Has the penny outlived its usefulness? In the face of rising metal prices, the government has some options. First option: mint them from a lower cost alloy. This would buy some time, but inflation would eventually drive the metallic cost above the exchange value of the coin. Second option: abolish the penny. Take it out of circulation. Many countries have eliminated their smallest coin, including Australia, Britain, Finland, Hong Kong, and the Netherlands. The United States abolished the half-cent piece in 1857, at a time when it was worth 8 cents in today's purchasing power.Third option: decree that the penny is worth five cents, the same as a nickel. At the same time, the government could withdraw nickels from circulation. With pennies worth so much more, there would be no incentive to hoard them for their metallic value (a current problem), and it would likely be decades before the metallic value caught up with the exchange value. Rebasing the penny to 5 cents would increase the money supply by about $ 6 billion, to drop in the bucket compared to the total money supply exceeding $ 1 trillion, so the move would virtually have no effect on inflation. If the penny gets so little respect, why did production increase from 6.8 billion pennies in 2003 to 8.2 billion in 2006? As noted, some people are hoarding pennies, waiting for the day when the metallic value exceeds the exchange value. For example, one hoarder accumulated 700,000 pennies (about two tons of them). Another source of demand is the sales tax, which adds pennies to transactions in 44 states. The sales tax helps explain why efforts to abolish the penny go nowhere. Charities also collect millions from change cans located at check out counters. And zinc producers lobby heavily to keep the penny around, since it's a major user of the metal. Thus, the penny still has its boosters. That's why retailers continue to order pennies from their banks, these banks order pennies from the Fed, the Fed orders them from the Mint,SOURCES: Austan Goolsbee, "Now That the Penny Is not Worth Much, It's Time to Make It Worth 5 Cents,"  New York Times , 1 February 2007; Floyd Norris, "A Penny for Your Thoughts, and 1.4 Cents for the Penny,"  New York Times , 22 April 2006; "A Penny Unsaved,"  Wall Street Journal , 20 July 2006; And Thomas Sargent and Francois Velde,  The Big Problem of Small Change , (Princeton University Press, 2002) .View the rounded prices on Vanilla Bean Café's menu at http://www.thevanillabeancafe.com/ 

 


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Jan 02, 2020

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