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The E-Sylum:  Volume 10, Number 7, February 18, 2007, Article 8

CANADIANS CONSIDER ABOLISHING CENT COINS

Dick Johnson writes: "The Desjardins Group, a financial services
organization in Canada, issued a 12-page report this week (February
15, 2007) that came to the conclusion that Canada should abolish the
cent coin.

"This is similar to a recommendation by Chicago Federal Reserve Bank
chief economist François Velde published in the February issue of Chi
Fed Letter that this should transpire in the United States as well. 
(Reported here in E-Sylum, January 28, 2007).

"The Canadian report revealed the limited usefulness of the cent in an
expanding economy, that Australia and New Zealand had already abolished
both the cent and five-cent coin without problems, and continuing the
use of the cent in Canada is costing at least $130 million a year, just
over $4 per person.

"Their solution in Canada (as proposed in the U.S. and that which has
taken place in other countries) is to round off to the nearest multiple
of five cents after abolishing the cent. It also noted that it was a
false claim that all retail firms would round off to their advantage
in a competitive retail climate.

"'Consumers would benefit from the elimination of these costs,' stated
the report, 'while private sector businesses would, in terms of margin,
neither realize gains nor suffer losses in the long term.'

"The well-organized and detailed report by the financial services
organization is supported by testing a model of the function of money,
a historical review of the use of the cent in Canada since its introduction
in 1908, and a 44-item bibliography. The latter was also supplemented by
four web sites in the banking and minting fields.

"The Toronto Star carried a news item of the report on the day of
publication and noted the report’s statement: "the figures show clearly
that the one cent coin is not very useful and that consumers hoard or
throw it away rather than deposit it and put it back into the
distribution system."

"The full text of the Desjardins report is located at:
Full Story

"The Toronto Star news article is at: Full Story

 FRANCOIS VELDE'S STUDIES ON SMALL CHANGE
 esylum_v10n04a12.html

  Wayne Homren, Editor

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