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Saturday, September 27, 2008

Change? There is a problem with change

By Dick Hirsch

There is a growing group of people who should probably be worrying about other aspects of their lives, but, no, they are worried about the future of the penny. They just adore and respect the penny, and usually they have a coffee can or some larger vessel at home, brimming with pennies.

I deny affiliation with that group even though when I empty my pocket at the end of each day I do segregate the pennies and deposit them in a small container. What else is there to do with them? I understand that some people throw them away, but I cannot bring myself to take such an action. My collection never amounts to much because another family member will periodically empty the container, count, roll and exchange the pennies for some real money, perhaps as much as a dollar or maybe even two.

It isn’t the value of the penny that attracts those coffee can savers. It’s the lore, the mystique. They remember the display of penny candy at the corner store, and the wide selection it offered, and they occasionally recall innocent times spent long ago in a penny arcade, which was filled with various intriguing games and machines. Insert a penny or two in the slot, and wheels began whirring, lights began flashing, bells began ringing, and the action was underway. Others may remember their introduction to gambling, either pitching pennies against the wall to see who could get closest to the target or else learning the rudiments of penny ante draw poker.

Some others recall the wisdom that created an aura that surrounds the penny. I think of them still: “A penny saved is a penny earned,” is probably the one most often cited, but I always preferred: “Save the pennies and the dollars will take care of themselves.” There is real optimism in that axiom, but, even when practiced diligently, it is a long and sometimes disheartening road to wealth.

Yes, there are groups of people for whom the penny is a revered icon. From time to time, some congressman or Washington bureaucrat will suggest that the penny should be eliminated, no longer be minted. Abandon the penny, they say. It is a familiar proposal, a proposal made periodically by well-meaning individuals, and it never fails to unleash a storm of protest from the penny lovers. They want the penny preserved at all cost.

The preservation of the penny is a truly costly undertaking. Even though it has come to be regarded as somewhat irrelevant, the US Mint needs to produce more each year. It is a losing proposition, as you may have heard. Each penny costs about 1.7 cents to produce, so the government is losing $50 million each year by keeping pennies in circulation. The mint needs to produce about seven billion new ones each year---that’s billion with a “b”---partly because some pennies wear out or are lost or discarded, but mostly because people insist on hoarding them.

Because it is so beloved, there seems to be little chance the penny will be abandoned. It has too many lobbyists at every level. Zinc producers are among the leading supporters of the continued coinage of the penny, and with good reason. Once pennies were primarily a copper alloy, but copper became far too expensive; the copper in each coin was worth more than the penny. Various formulations were tested and the Mint in 1982 settled on a mixture that is 97.5 percent zinc and 2.5 percent copper cladding. Naturally, the price of zinc has been rising, creating the annual penny losses for the US Treasury.

The nickel is an even bigger problem. Each nickel costs the Mint about a dime to manufacture and you cannot stay in business very long with that kind of a structure. The Mint sells coins to the Treasury at face value. Nickels used to be good for parking meters and coin telephones, but those uses have faded with rising costs. Still, they still play a role in retail dealings.

If the penny and the nickel are loss leaders for the Mint, the dollar coin is a major profit item. It only costs about 20 cents to make, assisting the Mint in its obligation to break even.

As for my own approach, since it is still comforting to have some change jingling in your pocket, I seldom leave the house without a few quarters. In the current economy, they’re still good for some uses, but not for very many.


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