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The E-Sylum: Volume 11, Number 12, March 23, 2008, Article 14 COUNTERPOINT: STEEL CENTS COULD WORK Jeff Kelley writes: "I must respectfully disagree with some aspects of Dick Johnson’s latest commentary about eliminating the cent. He asserted that the introduction of steel cents would drive all existing copper and zinc cents out of circulation (and into Chinese melting pots) and that the Treasury would then have to replace the 100 billion cents that he estimates are currently in circulation. "While I agree with that it is possible that the Chinese or another rapidly industrializing nation (perhaps India) might be inclined to melt down our cents for their metal content, there are a few things to think about. First, replacing copper cents with zinc cents did not lead to a wholesale smelting of the older copper cents – they both circulated side by side quite seamlessly despite the fact that the copper cents were worth more than one cent and more than their zinc successor. Second, the current prohibition on melting one cent coins includes a prohibition against a person exporting more than a certain amount of cents (and the limits are quite low – somewhere in the hundreds, if I recall correctly.). Lastly, if all one cent coins disappeared tomorrow, the Mint would not have to replace all those currently "in circulation" simply because most do not actually circulate. The vast majority of cents sit in jars, cups, trays, piggy banks, etc. For many people, cents are essentially a single use coin – they are issued as change at the store, and it may be years before they re-enter the retail or banking system. "As for suggestions that rounding odd amounts at the register would make the cent obsolete, we don’t need legislation to implement that process. If people want, they can ask cashiers right now to round up their bill to the nearest nickel and say "keep the change", or they can simply refuse to take the odd pennies in change. "As to the advisability of eliminating the cent, I am not so sure the theory that makes it appear innocuous would become reality for the consumer. Eliminating the cent would require that some rounding be done, and I have some first hand experience with that. I was living in Germany when the euro replaced the mark, if there was any rounding to be done (and there always was), the price was ALWAYS rounded upward. I had friends who actually bought into the idea that it would somehow all even out for the consumer, that some prices would be rounded up and some down, but that was predictably not what happened. It was foolish, after all, to expect that the butcher would round his prices down in order to compensate for the fact that the baker next door rounded his prices up. I experienced exactly one instance where the Euro price reflected an amount that was lower than the equivalent of the former price in marks; that was a newspaper that had raised its price in the months before the conversion so that it could round down afterward. "There is one important thing to think about when comparing the United States to other countries, and that regards pricing methodology. While retailers in many other countries may make use of certain familiar price points (.99, 1.99, etc.), it is probably not as prevalent as it is in the US. There is also the critical issue of taxation – many other countries impost a "VAT" (Value Added Tax) which is included in the stated price of an item, not a sales tax that is added at the register on top of the total. Therefore, most items are priced such that the price is a round number of some kind. Retailers and restaurants in many foreign countries have done this for years as a way to simplify the payment process and reduce the need for handling minor coins. This approach would be problematic, however, in any US jurisdiction that imposes a sales tax at the register. "Whether or not the cent has outlived its usefulness is certainly a subject for serious debate, but it is important to consider all of the ramifications to eliminating it." Jeff adds: "There is one reason I can think of why replacing copper and zinc cents with steel cents would create havoc: the problem of expanding the tolerances for accepting cents and other coins in stamp vending machines at the Post office and coin counting machines at banks. Currently, these devices can be set to automatically reject any coin that has the magnetic properties of steel (at my bank, Canadian quarters don’t even make it down into the counting mechanism area – they stick to the magnets built into the coin tray). Once we introduce steel into our coinage, it will dramatically complicate the automated validation process for coins. (Of course, at current exchange rates, Canadian coins don’t represent a loss!)." Martin Purdy of New Zealand writes: "I've heard of lots of countries that have abolished their lowest denomination but never any that have actually revalued their one-cent coins to circulate as fives - if any country has, I'd love to have the details since it would make a great quiz question. "It certainly didn't happen here or in Australia, which simply set a deadline beyond which 1c and 2c coins would no longer be accepted in trade or given out as change. The same was done with our 5c coins in 2006 - they were simply called in, not revalued. "Velde's notion of revaluing all existing 1-cent coins to 5 cents sounds crazy - does he really want $1 billion (or thereabouts) worth of "pennies" suddenly given a face value of $5 billion by fiat?" [Dick wrote that Australia and New Zealand had eliminated their lowest denominations, but did not mention any country which had actually rebased their low denomination coins. There are many examples in history where countries have rebased circulating coins, usually by counterstamping them with a higher value. -Editor] DICK JOHNSON: STEEL CENTS WON'T WORK! esylum_v11n11a20.html Wayne Homren, Editor The Numismatic Bibliomania Society is a non-profit organization promoting numismatic literature. See our web site at coinbooks.org. To submit items for publication in The E-Sylum, write to the Editor at this address: whomren@coinlibrary.com To subscribe go to: https://my.binhost.com/lists/listinfo/esylum | |
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