Rarely do we the people come across a policy that makes so much sense and has so many immediately positive effects as the latest Congressional issue of reforming the United States’ monetary system.
In 2010 the United States mint determined that the penny, cost 1.79 cents to produce and distribute.
Minting the annual average of roughly 3,487 million pennies across the United States that same year cost American taxpayers $27.5 million to subsidize the existence of the coin.
One proposed way to cut the cost of the penny is to make them from steel instead of zinc, but this is ignoring a bigger issue. Frankly, the penny is a useless coin.
Currency, at its core definition, is whatever is used to facilitate the exchange of goods and services. Pennies do not perform this task effectively. Think of all the places you use coins: parking meters, vending machines and laundromats, among others. None of these machines accept pennies because pennies are worthless.
There may be some that think that without a penny, our economy would go through turmoil or some unforeseen disaster.
These purveyors of the copper culprit may kindly point their attention to the Netherlands where their penny equivalent was long ago phased out and nothing happened.
Inflation didn’t go up, charity costs didn’t go down, literally nothing changed.
The nickel is in a similar situation. A single five-cent coin costs 9.16 cents to produce. Imagine, if you will, a situation where you walked into a bank and asked the teller if they would trade you nine cents for a nickel and the teller said, “Yes.” That’s the situation with the United States mint.
And why stop at coins? Thanks to the rising cost of cotton, it now costs 9.6 cents to make a paper one-dollar bill.
These are also a fleeting commodity, being in circulation only 40 months before being beyond use. Members of Congress have suggested the elimination of the bill and the introduction of $1 and $2 coins in its place.
These coins would not only be cost-efficient and remain in circulation for over 30 years, but also reduce the deficit by $5.5 billion over the course of 30 years.
Some have already proposed what the new coins would look like with ‘Ol George’s face on them, but even this is unnecessary; between the often under-appreciated golden dollar and Susan B. Anthony coins, we’re already covered for non-paper one-dollars.
The bills just need to be removed so people have to use them. People may be inconvenienced for a while, but those in Canada and Europe certainly got used to it after a while.
The denomination effect states that people are biased toward spending money in smaller denominations; i.e. we are more likely to spend 100 $1 bills than spend one $100 bill. It also states that people are more likely to spend coins over paper money.
In layman’s terms, the denomination effect tells us that with dollar coins in place, people would spend more money and consumer spending is the number one driver of economic spending in America.
There are a lot of hard choices to make, but the denomination effect shows us that there are a lot of easy ones as well and we’re not making them.
Reforming the monetary system in the United States makes sense. It does not step on any political toes, it does not hurt any group of people, it just makes sense.
It is the sort of thing that you would do if you were trying, say, cutting the budget and you were serious about doing it instead of just playing political games.