While cleaning out my mother in law’s house my wife came across container after container of coins.
One old purse came filled with pre-Euro German, French, and other European coins. Many containers held American coins from various eras, with the majority of those saved being pennies.
This did not surprise me. When cleaning out a friend’s home a few years back I found stash after stash of coins. The most interesting? A large Nestle’s Quik tin full of quarters from the 1980’s. The most plentiful? Pennies.
Pennies, alas, cost more to make than they are worth. Actually, over three times what they’re worth. Still, billions upon billions upon billions of pennies fill up containers all about America.
So, Donald Trump’s decision to stop minting new pennies does not mean the immediate end of the coin. Those wanting pennies can stay supplied for many years. And, since America has never repudiated any United States currency or coins (unlike most of Europe when the Euro appeared) pennies will not lose value. Ten pennies will always be worth a dime.
When President Barrack Obama proposed ending penny production economists came out with two views. One side said that pennies won’t be missed. The other side said the end of new pennies would yield a burp of inflation, perhaps 2% or so for a year or two.
That burp traced back to the “one and three” expectation. Say an item, with tax, came to $1.01. The retailer would round down to a buck. However, if the item came to $1.02 or $1.03 or $1.04 the cost became $1.05. From the retailer’s perspective that actually makes sense. Extra untaxed profit is always better than losing money.
Still, those pennies add up, especially in small transactions.
That reality and nostalgia persuaded Obama to back away from killing the penny.
Not Trump, he readily endorses the end of the Lincoln coin. With the federal budget trillions of dollars out of balance, the penny’s death would save a bit less than $100 million a year. With just 20,000 more such savings they’ll find that $2 trillion they want to cut.
The Trump/Musk administration may not be done: several articles today noted that it costs around 13¢ to make a nickel. Without 1¢ and 5¢ coins prices get rounded to the nearest 10¢ increment. Would that result in a “two and seven” rule?
Stay tuned.
Glenn Koenen