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Sunday, October 05, 2008
A penny saved is a penny earned
When is a penny worth more than a penny? When it costs more than a penny to make a penny.
Canada's venerable penny now costs more than a cent to make, according to secret documents obtained by Canwest News Service.
The documents, obtained through the Access to Information Act from the Bank of Canada, say that "due to rising labour, metal and other manufacturing and distribution costs, each penny now costs more than one cent to produce."
The line was contained in a "Facts-on-the-Penny" section, which was marked secret in notes, from a tripartite group of government officials - which include the bank, the Finance Department and the Royal Canadian Mint, a Crown corporation.
Sheesh.
Posted by P.M. Jaworski on October 5, 2008 in Canadian Politics | Permalink
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Comments
I don't think this is unusual. Most of our currency costs more than face value to produce. Currency represents transactions, and pennies used to change hands frequently. Nowadays they seem to be ignored on most transactions.
My question about dumping the penny has to do with rounding prices. There's an old Richard Pryor movie about an accountant that shaved all the fractional amounts from a big corporation's transactions. Wouldn't it be even easier to shave margins without the penny?
My business runs on fairly simple invoices, and there is minimal rounding of numbers. None the less, after a year, there are still discrepancies between the columns of revenue, and GST. If the penny were eliminated, these discrepancies might exceed the standard accounting tolerances.
I'm not sure if they're suggesting pennies just be removed from cash transactions, or every one.
If it's only about cash, you might see retailers trying to find a way to sink a couple of extra pennies into the "no tax" register.
I suppose the government will have to study the problem for a couple of years. They'll hire a consulting firm to research it for about $500,000.00, or a similar even dollar amount. They'll set up a watchdog agency to make sure retailers are rounding their prices fairly. They'll have a 5 year amnesty for collectors to turn in their unregistered pennies. The pennies will have to be recycled, and since they're an alloy, they'll cost five cents apiece to process.
Still think it'll save money to get rid of the penny?
Posted by: dp | 2008-10-06 2:36:12 AM
BTW, my comments are based on the suggestion that we round everything to the nearest five cents.
Posted by: dp | 2008-10-06 2:46:45 AM
As most commerce is now electronic, the penny can still form part of pricing so that absolute amounts, which may be material, can still be realized.
Rounding retail cash transactions to the closest nickel is really only rounding off margins of 2.5 cents at a maximum. Who cares about 2.5 cents? Rounding off to the nearest dime is better.
Epsi
Posted by: epsilon | 2008-10-06 10:15:19 AM
What about a national penny registry? Followed by penny acquisition certificates, required penny safety training, etc. A big government solution we can all enjoy!
If they really wanted to keep the penny so we could say we had a "true" decimal currency system, they could just stop minting the damned things. I have a pickle jar of otherwise-useless pennies sitting here, and I can't imagine that a penny is really that fragile that you need to make more every year. I would bet that the main culprit for the need for new pennies is just that people like me hoard them - as they (the pennies, not the people) are valueless.
Or they could make them out of a less valuable material than copper... or make them smaller/thinner.
Truthfully though, we can probably go do the dime as the smallest practically-useful coin and save time.
I'd also like to see more 50 cent pieces in circulation...
Posted by: Ross | 2008-10-06 10:33:21 AM
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