I am as much a traditionalist as most Americans. I grew up with pennies and nickels. When I was old enough to ride my bicycle to the local movie theater admission to the Saturday matinee was ten pennies or two nickels. A box of popcorn was ten pennies or two nickels and an all-day sucker was 5 pennies or one nickel – one needed an all-day sucker to last through the 30 cartoons that were shown in addition to a “double feature.” (Today, Bugs Bunny is too violent and young movie-goers have never heard of a “double feature”). In addition to the loss of Bugs Bunny we also should have lost the useless penny and the useless nickel.
The number of pennies in drawers or jars is astronomical. in 2013, the U.S. Mint produced 7,070,000,000 pennies and 1,223,040,000 nickels. While accurate figures do not exist, about half of these fall out of circulation within a year, ultimately finding their way to dresser drawers, jars and car ashtrays. This, together with the “take a penny, leave a penny” trays in retail stores, suggests that there are so many pennies in circulation that no one really cares to make change with them. By the best estimates I have been able to locate, there are somewhere between 200,000,000,000 and 250,000,000,000 pennies in circulation (or between $2 billion and $2.5 billion). Some even guess today that there are 300 billion pennies in circulation today that largely go unused. So, can we agree that they are USELESS!
But that is not why I am writing to you today. Would it take a leader of the caliber of George Washington to realize that it is fiscal madness for the US Mint to mint pennies? OK, Dr. Filly, what are you rambling on about now, ask you. Well, answer I, I am “rambling on” about the fact that it costs the US Mint 1.7 cents to produce a penny and 8 cents to produce a nickel. If every American demanded that we need pennies and nickels, this might be worth the ridiculous costs. BUT NOBODY WANTS THEM!
[Source: It cost 1.7 cents to make a penny this year, and 8 cents to make a nickel, by Christopher Ingrahamh]
It now costs $1.62 to make a dollar’s worth of nickels, and $1.66 to make a dollar’s worth of pennies. By contrast it costs only 36 cents to make a dollar’s worth of quarters, and 40 cents for a dollar’s worth of dimes. Paper dollar bills are even more cost-effective (see graphs below). Last year you and I, as taxpayers, were losing $105 million annually on penny and nickel production.
So who is against getting rid of pennies and nickels? Well, as you might expect, the metal alloy industries and Coinstar fiercely oppose stopping production. These companies make millions each year by helping people get rid of their unwanted change. In essence, you and I are paying $100 million-a-year to make coins that nobody wants, so that people can take them to a Coinstar kiosk and pay again to get rid of them. I strongly favor capitalism, but among the major beneficial effects of capitalism is “creative destruction” (see footnote). It is long past a time when pennies and nickels need to go the way of the buggy whip.
DEFINITION OF ‘CREATIVE DESTRUCTION’
A term coined by Joseph Schumpeter in his work entitled “Capitalism, Socialism and Democracy” (1942) to denote a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
INVESTOPEDIA EXPLAINS ‘CREATIVE DESTRUCTION’
Creative destruction occurs when something new kills something older. A great example of this is personal computers. The industry, led by Microsoft and Intel, destroyed many mainframe computer companies, but in doing so, entrepreneurs created one of the most important inventions of this century. In the previous century it was the automobile. Livery stables and buggy manufacturers went out of business. Schumpeter goes so far as to say that the “process of creative destruction is the essential fact about capitalism.”