What is the end of a penny for the economy, pig banks, prices?
To talk about the end, the production of penny has been stolen for decades between government officials and economists. But when President Donald Trump ordered the Treasury Department over the weekend, the lecture became a policy Stop building new pennies.
“For too long, the US has been building pennies, literally costing more than two cents. This is a waste!” Trump posted Sunday night about his true social site. “I have instructed the US Treasury secretary to stop production of new penny.”
Trump’s attack on Penny comes after Elon Musk’s Doge had already targeted the coin for elimination. Of all the controversial battles in which the Trump administration and Musk are falling into government spending, this is something most economists and others in the financial ecosystem think they are not adding.
According to the Federal Reserve, distribution has 114 billion pennies, or $1.14 billion, or 0.006% of distribution. It costs $192 million a year to produce penny, which is about 4% of Mint’s operating budget but only 0.00003% of the US federal budget. According to economists, this cost makes it easier to consume pennies.
David Gully, a professor of economics at Bentley University, said the estimated cost of making a penny for around three cents is an economic burden. “
I’ll round up the price
However, expelling Penny could change the prices of many small ticket items.
“The price should be rounded to the nearest five cents to receive the cash payment and the correct change. That would be the end of the meal for the $6.99 fast food combo,” Gully said. Up or down.
That pricing decision is important, and while some cite the penny’s impact on inflation, it still appears to be minimal.
“They’re making the most of their business,” said David Smith, professor of economics at Pepperdine University’s Graziadio Business School. However, he added that studies have shown that the rounding price to the nearest nickel does not lead to significant inflation.
In Canada, which eliminated penny in 2013, cash transactions were rounded to the nearest five cents based on the total amount of transactions, not individual items.
According to Ajay Patel, a finance professor at Wake Forest University School of Business, cash consumers will pay the cost-effectiveness Trump and Musk want, as they occur more frequently than rounding. I stated.
Canada’s experience of eliminating penny shows that there are additional costs incurred by consumers. A 2017 paper by Canadian economist Christina Chen found that Penny Round imposed a “rounding tax” of about $3.27 million in grocery deals, from Canadian consumers to grocery vendors. However, for a typical grocery store, this amounts to an estimated additional revenue of $157, indicating a minimal impact on individual consumers.
The rest of the US cash consumers will be hit
Patel points out that eliminating Penny would only eliminate Penny itself and doesn’t necessarily cost $5.16. “People who write checks or use debit or credit cards can pay the correct amount because the actual cash does not change their hands.
There are still people who use cash for many payments. These consumers are most affected, but according to Gully, the effect is modest as more payments move away from the physical currency. As recently as in 2015, a third of US transactions were cash, but that is currently down below 20% and is expected to continue to decline.
But that’s probably the most likely feeling the most in the pinch for those at the bottom of the economic ladder.
“Individuals paying for this profit are those who use cash to purchase products and services and will continue as they have no access to debit, credit cards or digital wallets,” Patel said. says he.
Gates Little, CEO of Alabama-based Southern Bank, said the financial services division would not miss Penny.
“Eliminating US pennies wouldn’t make any difference to the economy,” Little said. “I can’t imagine how that could hurt.”
Patel noted that President Trump simply ordered the halt of new penny mints, not purges for use in the monetary system. Therefore, people can continue to use pennies until they are slowly reabsorbed into the banking system and eventually melt and recycle zinc and copper. Patel says that Penny’s actual elimination will be decades-long future.
A saved penny can increase in value
Still, Little said the value gradually increases as he stores in pig banks, sock drawers and hides under the car seat.
“The penny will become less and more over time and ultimately increase in value. In the short term, they may not be useful depending on how the Treasury treats them. Therefore, from the system, I’ll remove them,” Little said.
Both of these results have a pocket of populations across the country where important. Laura Miki of Burton, Ohio, points out that the Amish will feel in a pinch right now.
“We still use pennies regularly here in the Amish country in northeast Ohio,” Miki said of her area. “How does this work in cash-only transactions? It’s impossible to make accurate changes as a buyer or seller.”
But Miki is more bullish, in a world where the end of the penny means that existing penny increases value.
“Because there are wheat pennies sitting in the jewelry box, and when I found out they found them nearly 20 years ago, I knew they were getting more and more difficult to find,” Miki said.
In 1958, a penny depicting two bundles of wheat was cancelled in favor of today’s Lincoln version.
Smith said there are other benefits to removing heavy transport pennies.
“Eliminating penny will save taxpayers millions of dollars each year. Furthermore, penny production has environmental costs, including mining zinc and copper, and elimination of penny will have a positive impact on the environment. It could be,” he said.
Some Americans respond to Penny’s end with a sense of humor. “How do people give two cents?” said Eileen Kyleholtz, a retired Bright, Indiana.
But that’s not entirely a joke. Nate Throckmorton, an associate professor of economics at William & Mary, says it may be time to start keeping an eye on another coin in your piggy bank, nickel.
“It’s nickel that we need to worry about,” Throckmorton said.
It costs 3 cents to make a penny, but 11 cents to make a nickel.