With the distribution of Canadian pennies to financial institutions being permanently stopped on Feb. 4, Canada joins the growing list of countries that have decided to eliminate their smallest monetary denomination. Over the past 20 years, Mexico, Australia and Brazil, among other counties, have removed their smallest coins from circulation. The United States should follow suit sooner rather than later.
The cost of producing a penny is 2 cents, and the cost of a nickel is 10.09 cents. Although these costs have dropped from the previous year, a $109.2 million loss was still incurred for producing and distributing these two coins for the 2012 fiscal year. In his 2012 budget proposal, President Obama proposed to find cheaper ways of producing pennies and nickels to alleviate this loss.
While this seems like a good solution to some people, there is one major problem: The Treasury has yet to find a cheap alternative to making the coins. It would be more efficient to phase out pennies, like Canada has done, than to spend money on researching cheaper metal mixtures.
Much of the public does not want to see coins eliminated because of sentimental reasons or the belief that inflation will occur. However, in other countries that eliminated coins, inflation did not occur at a troublesome rate. Also, people do not remember the half-cent and two-cent coins that were in circulation at one point. Fifty years from now, will anyone wish they had pennies back? Probably not.