War on the penny: Mission accomplished

The government announced in the budget that they'll be phasing out the penny after 2012.

I was going to write a blog post declaring success in my campaign to eliminate the penny by hoarding it, but so damn many people are tweeting about it (and not about the actual news in the budget) that I don't want to add too much to it. Instead I'll rant.

Back when I wrote the post in December 2010, 55% of Canadians supported ditching the penny, which means that at least 15% of Canadians wanted to ditch the penny and weren't Conservative voters. I've seen panhandlers fish the pennies out of their cups and toss them on to the sidewalk, which leaves only penny-drive charities to cry and whine (who should have taken a hint from the march of dimes in 1938.)

Now that the news is out, people are getting the idea that prices will no longer end in anything but a 0 or a 5, which is stupid. Individual items will still have stupid prices like $14.97, and round-number prices will still be thwarted by prime-number tax rates. Only once the bill is totaled and tax is applied will the number be rounded--and even then only if you're paying cash.

People also have it in their heads that the cruddy 1998 penny in their pocket would be worth something to somebody, some day. Check the eBay listings for currency and think about it for a minute. People are selling brand new bills and coins from as recently as this year. Well, they're trying to. Brand new $50 polymer bills, launched earlier this month, can be yours for only $59.55 plus $9 shipping! Or walk into any bank and get one for $50.

By sheer coincidence, last night I sorted through the old pennies I've been collecting (as well as the newer ones in good condition). I reopened my coin book after many years of neglect to discover that many of the pennies were corroding, especially the parts of the coins that were exposed to the air. I'm still going to hold on to them, but I'm not going to delude myself into thinking that they'd increase in value any faster than if I'd deposited them into a savings account.

People are also selling old bills, like the old $1 bills. Not too many takers for those, so imagine how popular your penny will be (there are mint condition uncirculated pennies from the 1980s currently going for the grand price of a dollar). There's a $20 bill form the 1954 series that is currently bidding at $22.50 (plus $4 shipping). That's less than a quarter of a percent, simple interest, over 58 years (0.20% compounded). Compare that to inflation, where $20 in 1954 would be worth $170 today.

If you look at how the sales are going (also take a look at the different quarters the Mint has made in the last decade), you'll notice that it doesn't matter whether a denomination was discontinued. What matters is if there's something special about it. That can mean scarcity, like this Silver and Niobium 2012 $5 commemorative coin, or age.

An old penny is an old penny whether or not pennies are still in circulation. And now that everyone's hoarding them because they're going to be out of circulation soon, they're not going to be scarce. Hell, there's only an hour left on this 1958 penny in very good condition. The penny was circulated, but there are no takers for the $1.99 price tag (plus $1 shipping). How much is your tarnished 2006 penny worth?

To close off the rant, I'd like to take a swing at coin collectors. In theory, coin collecting is about ascribing added value to items that were used historically. Like the Yap stones, as they age and pass from person to person they appreciate in value due to the richness of their history. In practice, the only coins that collectors give any significant value (aside from very old and very rare ones) are ones that have never been circulated, or proof coins weren't even ever intended for circulation! Or limited-edition collectible coins made of precious metals sold for much more than their material or face value. Like the ridiculous replica of Samuel de Champlain's astrolabe created for the sole purpose of being stashed in the space shuttle's cargo hold on a trip to the International Space Station, an inordinate amount of value is given to trinkets whose sole purpose is to imitate and detract from items with actual historical value.

Having a coin collection for one's own amusement is fine, but the money that people put into it--and some people aim to get out of it--is just bonkers.

After 2012, there will be no new pennies. Just as there will be never be any new 2011 pennies, or 2010 pennies, or 2009 pennies, and so on. There will still be millions of them, in people's closets and shelves and couches. The vast majority of them will still be worth only a hundredth of a dollar, even though they cost more than that to produce. It will still be illegal to melt it down for the materials.

And it will still be fun to collect them, but fun is all it is. Don't buy into the delusion that you'll make a mint from the copper-plated coin you got in your change; it's still just a penny.

- RG>