As of 2013, it cost the U.S. Mint 1.99 cents to make a one cent penny. We aren't economists, but that seems like a good way to lose money. Since its invention, money has gone through a lot of changes: it started as stuff, then became coins and paper to represent that stuff, and now those coins are representative of nothing. Add to that the rise of plastic cards and digital currency like Bitcoin, and we have to wonder why the penny's still even here.
Many countries, like Australia, New Zealand, and Canada, noticed this trend and have bid farewell to the once useful denomination with virtually no negative side effects. But the penny remains in the US, its survival fueled more by sentiment than frugality and practicality. Pennies have a cult-like following, with people saving rolls of them for future deposit, for collections, or to simply fill jars with.
We want to look past all this and ask the more important question: what purpose could the penny possibly still serve? The answer: not much. At all. Pennies are a great way to take up lots of space in pockets for little value, and they make excellent good luck charms, but the usefulness ends there. Not only are they the most useless part of an aging system, but they actually cost more to make than they're worth. That seems like the nail in the coffin for any currency.
Because it is the biggest economy in the world and it still uses this black sheep of coinage, we're going to focus on the USA. We'll briefly look at where the penny came from for some context, and then dive into why the penny is just, well... useless.
6 A Short History Lesson
The one cent coin came into being in 1793, a year after the US Mint. At that time, it was made of 100% pure copper and roughly the size of today's US $1 coin, about 2.6cm across (a little more than an inch, for our Imperial readers). It was substantial, it was big, and it was useful.
Pennies first featured the head of Lady Liberty, and were stamped with the word “LIBERTY.” Pennies featuring Honest Abe appeared in 1909 after they had shrunk to their present size. Over the years, the penny has become less copper and more zinc (in an effort to save money). Today, the penny is 97.5% zinc with a thin copper coating. You can already see the penny is losing some ground.
5 Kill The Penny Reason #1: It Fails As Money
The purpose of money is to represent a value comparable to other currencies and things. To do that, it has to be divisible so that we can manage it. If you want to buy a $100,000 house, you can't truck in the 10 million pennies needed to do that. In the same way, it won't work to cut a one dollar bill into quarters to buy a 25 cent candy. In this light, the penny seems to make sense as the smallest divisible part of a money system. If we get rid of the penny, how do we buy things that cost less than 5 cents?
We can't argue that in these situations the penny is totally useful, but what costs less than 5 cents nowadays? Nothing we can think of that's useful. And if there happened to be something that cheap, rounding down or up to a nickel hardly seems unreasonable. This is what Canada, Norway, Denmark, the UK, and many other countries do, and they do alright.
This useless-as-money situation has happened before in the US with none other than the half cent, a long-forgotten coin that at its death actually had the buying power of a dime in today's dollars. At that same time (around 1857) the penny would have been worth about a quarter. Why did the half cent cease to be? Because it cost more to produce than it was worth and it couldn't buy anything.
4 Kill The Penny Reason #2: It’s So Unbelievably Not Cost Effective
Let's ignore the fact that the penny is no longer practically useful as an actual form of money and focus on the cost. We already saw that the penny costs almost twice as much as it is worth to make. Keeping with those 2013 figures, the US Mint minted 7.07 billion one cent coins last year. That's roughly 22 pennies per person, and comes out to about $140 million to produce pennies. With that money, you could purchase 560 Virgin Galactic flights, or any of the following: 17-and-a-half Maybach Exeleros, an Airbus, an original Van Gogh, one whole Angelina Jolie, or seventh tenths of a whole Brad Pitt. The point: Holy Unnecessary Spending, Batman.
So the penny can't really buy anything, failing its main function as money. Not only that, but it costs and wastes way too much to make them. Despite these obvious reasons, the penny lovers of the world still fight for their right to fill jars and pockets with zinc. What other reasons do we need to see the penny die a graceful – albeit overdue – death? We can think of at least three more that even the most ardent of penny enthusiasts must accept.
3 Kill The Penny Reason #3: No One Actually Uses Them, Do They?
First, fewer and fewer people take the time to count out exact change anymore. The only role pennies play in an actual transaction are to make it possible to keep charging non-rounded prices on stuff. And in every transaction that you break a bill or larger coin, pennies just appear and multiply and spread, wasting more pocket space and necessitating more impossible-to-fill coin rolls. Then you lug all those pennies back to the bank so they can be sent back out to stores to continue the vicious penny cycle.
2 Kill The Penny Reason #4: Pennies Are Just The Tip Of The Iceberg
Also, pennies are just part of the bigger problem of cash altogether. We don't want to say all cash is useless, but plastic payment cards are increasingly more convenient, secure, and necessary for everyday banking. Not only that – and this may seem slightly defeatist – but inflation makes things more expensive every day, and the dollar is always buying a little less. This means that for the same reason the penny is now useless, the near future may see the end of the nickel and the dime, and then who knows?
1 Kill the Penny Reason #5: Cash In General Is Pretty Gross
Lastly, and it ties in a bit with the last point: cash, from penny to Benjamin, is pretty much disgusting, when you think about it. There's no sure way to know how many hands a bill or a coin passes through in its lifetime, but the average lifespan of a dollar bill is estimated by the Fed to be about 5.9 years. That's a long time to be going from hand to floor to street to ATM to hand.
To give some perspective, one study found that through all those transactions, about 90% of dollar bills in the US had traces of cocaine on them. Obviously there isn't enough on there to be of any harm, but still. We like to think that Wolf of Wall Street type lifestyles had something to do with it. Who knows, maybe some long lasting bill even made it into the personal use of Jordan Belfort himself. That still doesn't mean it’s not disgusting... probably means it’s time to buy some hand sanitizer.