A couple of months ago, one of my fellow authors on TheRichest ran an article arguing that America should ditch the penny. Not so long ago such an article would have come across as, at best, satire or, at worst, the ramblings of a madman. However, recent years have seen Canada, Norway, Australia, and several other nations make the transition to penny-free economies. As of 2013, it cost the U.S mint just short of two cents to produce one cent. With that in mind, ditching the penny seems like a no-brainer. Let's take a look at some of the points for and against eliminating the penny.
One often suggested reason for getting rid of pennies is that they fail as money; so few products cost less than a nickel that you'd never find yourself missing pennies if items were rounded up or down to the nearest five. In theory, it's very easy to say that. In practice, however, we kick up a huge fuss when inflation or changes to import duties change the price of a beer by even a single penny. Here's what Americans For Common Cents, an organisation opposed to ditching the penny has to say on the matter -
Eliminating the penny is a losing proposition because it will result in rounding to the nearest nickel and higher prices for America's working families. This increased cost to consumers will be felt in everything from the grocery store to the gas pump. Pennies add up to millions of dollars every year for charities across the country. Simply put, the penny plays an important role in our everyday lives and in our nation's economy.
To middle and upper class spenders, seemingly minuscule alterations to the price of goods don't make much of an impact, but for low income families, even a few pennies can make all the difference.
Leaving the penny to one side for a moment, there's an elephant in the room when it comes to coins in general - counterfeiting. The days of flashing (the act of shaving imperceptible amounts of precious metals off the edges of coins) and melting down coins are all but gone, but modern coins are just as vulnerable to counterfeiting. Vending machines and self-service payment kiosks rely on weight and shape to determine the value of the coins that have been inserted. Although, to be fair to machines, inattentive checkout clerks are just as likely to miss coin fraud.
The problem is so severe in the UK that a new pound coin is being introduced in 2017, and has been billed the most secure coin in the world. It's necessary because there are currently an estimated 45 million fake pound coins in circulation. That's around 3% of all the pound coins out there!
However, as with eliminating the penny, there are some pretty sizeable costs associated with replacing currency. Although modifying things like vending machines and shopping carts to accept the new coin isn't particularly expensive (costing less than $20), their sheer numbers mean that changing ALL of them will cost up to $30 million. The British Parking Association also estimates that modifying parking machines and meters will cost another $70+ million!
An idea: why not abolish cash completely? With contactless payment cards picking up traction and the ability to make payments by text message already in play, we're not as far away from this sort of thing as nay-sayers would have you believe. Disney theme parks recently introduced Magic Bands, a smart bracelet that operates as a room key, admission ticket and payment method. Granted, this sort of technology is in its infancy, but wearable technology is already seeing mass adoption - Nike's FuelBand community already has over 20 million members.
So what's holding back advances in the financial space? In a word, banks. The technology banks use is generally outdated and sluggish, something you'll know all too well if you've tried to set up an account recently. Of course, their caution is understandable - they are looking after millions of people's life savings, after all. Anyway, all is not lost - cryptocurrencies and companies like GoCardless and Stripe are shaking up the digital payment space so much that it's not difficult to imagine a future in which tech savvy individuals forgo using banks altogether.
With all of that said, would you really want to live in a world without cash? It may be tempting to bundle your ID, keys, finances etc into a bangle that fits on your wrist, but if losing your wallet is a pretty big annoyance, then losing something like that would be absolutely dire. Plus, cash is very useful for minimizing risk.
Say, for example, you're staying in a sketchy area and don't want to take your wallet out with you; just make sure you have a couple of tens or twenties with you and you're good to go. Not to mention the fact that it'd be virtually impossible to create a network compatible with the infrastructure of every city, state or even country and transfer everyone in the affected area(s) over to that system.
It seems that, for now at least, we're stuck with cash. And that's probably a good thing. But what about those very small denominations of change? Think about when the last time you found yourself wishing you had a penny or two. Chances are, you were five years old and standing in a sweet store. Obama has been talking about retiring the penny since early 2013, but it remains to be seen just how much time the penny has left!