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The E-Sylum:  Volume 9, Number 41, October 8, 2006, Article 18

DAVE LANGE ON ABOLISHING THE CENT

Dave Lange writes: "Whenever the subject of abolishing the lower
value coins comes up in conversation, I use the following argument
with those who claim it would be inflationary: The lowest value
coin in the USA for the past 150 years or so has been the cent.
If one factors in 150 years of inflation, it's easy to see that
the purchasing power of the cent at that time is likely equal to
or greater than that of the quarter dollar today, so we should
easily be able to manage our commerce with no coin valued less
than 25 cents. This typically brings all further discussion to
a halt.

When Gail Baker sent out an email recently, asking individuals
to comment on the question of whether the cent should be abolished,
I sent her a fairly long answer. As it is, the ANA newsletter
reproduced just one line of this to summarize my position. I
would like to resubmit the entire text here, since I put some
considerable thought into it:

"The cent is a useless coin that has possessed only sentimental
value for the past 30 years. While it may be permitted to continue
as a unit of account, much as the mil does with respect to gasoline
prices, no coin of this denomination should be manufactured.
Transactions ending in odd cent values should be just rounded
up or down to the nearest five cents.

"A timeless measure of a coin's utility is the following simple
question:  Can any item or service, however small, be purchased
with just a single coin of this value? If the answer is no, then
the coin is too valueless to be practical. Under this rule, the
cent ceased to be an effective coin with the double-digit inflation
of the 1970s. The nickel and dime are likewise condemned by such a
test, though the latter should continue for a few more years as
the smallest coined division of the dollar.

"It is impossible to manufacture one-cent pieces made from any
material, no matter how valueless, and still process and distribute
them for less than one cent per unit. It has already been established
that the actual cost of doing this is well over the coin's face value.
This has been true for many years, but the loss was somewhat hidden
within the seignorage (profit) realized from coining of the higher
denominations.

"The cent remains in production today due to a combination of
government inertia and vested interests within both the government
and private industry. It is likely that the U. S. Mint's staffing
requirements would be reduced by elimination of the cent, and the
letting go of federal employees is a rarely sought solution to any
problem. Lobbyists for the zinc industry (this being the major
component of our current cents) operate behind a confusingly titled
group whose name was carefully selected to sound like a public
interest organization. By soliciting surveys that utilize questions
phrased in such a manner as to manipulate the resulting answers in
its favor, this group can proclaim that Americans still want their
pennies.

"Other nations have successfully eliminated their smaller coins,
while simultaneously replacing the lower-valued paper notes with
coins of equivalent value. By doing this these countries have
provided a useful mix of coins over a range of values that enable
purchases to be made with the fewest number of coins. Contrast this
to the USA, where just buying a soft drink from a vending machine
typically requires the use of numerous, small value coins. The only
alternative is to feed dollar notes that are frequently rejected by
the machine for wear or damage.

Coins that more closely represent the range of prices found for
such commonly vended items would solve this awkward situation and
speed up all cash transactions in general. As for the lowly cent,
it has been many years since these were accepted by vending machines
and parking meters at all.

"The coining of cents for circulation should be terminated very soon,
though they may continue to be included in the U. S. Mint's sets made
specifically for collectors. This would in no way impeded the issuance
of the commemorative cents for the bicentennial of Abraham Lincoln's
birth in 2009. Such coins would likely be hoarded by collectors and
speculators in any case, preventing their general circulation.

"There is simply no point in maintaining the illusion that the cent
is a useful component in commerce. It is now just a historic relic
of America's past."

  Wayne Homren, Editor

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