Wednesday Morning Rant

In my day-to-day commerce, I usually pay cash. If I am not doing something for which I need plastic, I usually don't use it. I get some odd looks sometimes, but it's my preference. It also makes splitting the bill at restaurants easy. Recently, I've noticed that some computerized cash registers stopped reflecting reality. If the bill came to $15.02 and I put in a $20 bill, the computer changes the total deposited to $20.02 and then returns $5.00 even. Or if the bill comes to some other fraction - say $5.27 - the bill changes to $5.25 as soon as I put in cash.

I missed it, but the US Mint has decided to stop producing pennies. They ordered their last set of blanks this year and have apparently finished - or are about to finish - the final run of pennies. The reason is cost. Pennies cost nearly a nickle to produce and the Mint expects to save in excess of $50 million per year by ceasing penny production. But the oddity to me is how rapidly stores are front-running penny scarcity.

Pennies are still legal tender and there are still more than a billion of them in circulation. There is no penny shortage and there probably won't be for quite a while. "Production has ceased" doesn't mean "not available," but some major retailers are moving more or less immediately to do away with the penny. So far, I have seen differences of one to three cents round down, with four-cent remainders rounding up. I have probably seen a net savings of about a quarter in the past couple of weeks on rounding.

Credit card transactions still settle to the (virtual) penny and I know that cash transactions are distinct minority of all transactions, but I strongly suspect that all the rounding adds up. If I have put $0.25 in my pocket in fairly short order, that has to scale out in a pretty meaningful way. If retailers are moving this fast on phasing out the penny, manufacturing costs are probably not the only consideration. The costs of handling pennies must be pretty high, too, if a retailer would rather just write it off at the first possible moment they could get away with it.

Pennies may be in circulation and legal tender, but all of this rounding is going to drive them out as it spreads. So far, I've only seen this at a couple of major retailers and one fast food restaurant but it's also very clear that they were primed and ready to put the hammer down on pennies and started rolling it out aggressively. I strongly suspect that it will move out from there and I'll know it's more or less finished when the local diner does it. The US Mint stopped producing pennies, but it didn't kill them. It did, however, apparently provide "air cover" for retailers to do it. The penny will be legal tender forever, but will likely be effectively useless within a year or two.

I understand it. Pennies are expensive to manufacture (they have cost more than their face value for nearly two decades) and probably an expensive pain in the butt to deal with at scale, with the costs of managing them far outstripping their value on both fronts. Nonetheless, it's the end of something that has always been there. Those little copper-colored pictures of Lincoln will no longer change hands. Most will be gradually scrapped and recycled, with a non-trivial number remaining in collections, junk drawers and vacuum cleaner bags. In day-to-day commerce, the penny will not be missed. It will, however, become a symbol - loud through its absence - of the ravages of inflation and movement of technology.

So long, Abe. At least you still have the five.

posted by Joe Mannix at 11:00 AM

| Access Comments