DICK JOHNSON: CANADA ABOLISHES CENT

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V15 2012 INDEX E-SYLUM ARCHIVE

The E-Sylum: Volume 15, Number 14, April 1, 2012, Article 22

Dick Johnson submitted these thoughts and a roundup of other stories and editorials on the demise of the Canadian cent. -Editor

Subhead: Production of Money Losing Coin To Cease This April; Tally Prices To Be Rounded Off To Nearest 5 Cents

The press -- both print and broadcast -- has responded vociferously, on both sides of the border. Most report Canadian officials in their bold decision for the monetary move. It culminates four years of study in Canada. It is estimated to save $11 million in minting costs alone. Not having to stock, store and distribute cents in making change will save Canadian retail and banking establishments untold millions more.

The last cent coin will be struck this month, April 2012. The Royal Mint will continue to distribute its stock of the coins on hand. It should run out by Fall. There are between 30 and 35 billion Canadian cents in circulation. They will not be demonetized -- they will continue to "circulate" until no longer viable, whenever that may be

Business Week: Repeated a Canadian government statement which said "New Zealand, Australia, the Netherlands, Norway, Finland, Sweden and others 'have made smooth transitions to a penny-free economy.' It said penny production cost $11 million a year, and that the coins, which feature two maple leaves and Queen Elizabeth II in profile, would remain legal tender until they eventually disappeared from circulation."

CNET News: "Desjardins Group has estimated that the coin costs businesses $150 million a year in counting and transport costs. Meanwhile, it costs a penny and a half to mint every penny, and cutting it will save $11 million annually, according to the Department of Finance. At least Canada is only losing on its pennies -- the Mint says other Canadian coins cost 'well under face value' to produce. It thumbed its nose at the U.S.: "Not so south of the border. It costs the United States Mint 2.41 cents to produce every cent and 11.18 cents for every nickel. In the year to September 30, 2011, that resulted in a loss of $116.7 million, according to Coin Update, a site devoted to coin news."

Forbes quoted Stephen J. Dubner of Freakonomics asks, "Canada Kills Its Penny; Can We Please Be Next?" Not so fast, said an advocacy group, Americans for Common Cents (www.pennies.org), which worries about the alternative to pennies in cash transactions - merchants rounding up, not down. In a survey released this week, the group found that two-thirds of adults polled favored keeping the penny in circulation. [That's obsolete data, public opinion has now swung in favor of abolishment.]

Canada Daily News quotes a coin collector and dealer, Chris Linfitt, president of the Mid-Island Coin Club and owner of Nanaimo's West Coast Stamp & Coin, said a penny just doesn't buy anything anymore so "it's about time" that the coin will be discontinued. Further he said he expects it will be a long time before Canadian pennies will be worth anything as collectable coins.

CoinWeek in contrast stated: I suspect that Canadians will start hoarding their cents soon in the hope that they will be worth a premium after they are no longer available in circulation. This is what European Union citizens did during the transition to the euro currency. According to Canadian officials, 17 other countries have already done away with their lowest denomination coin.

Calgary Herald: One of Calgary's most astute business minds, W. Brett Wilson, has also been saying that it's time to punt the penny. After all, the government's move to take the penny out of circulation this fall will save the Canadian economy about $11 million a year.

Duluth News Tribune believes the coins will become collectible. It editorialized: So the next time some sly Northland cashier slips Queen Elizabeth and her maple leaves in with your Abe Lincolns, don't fret. You'll have a future collector's item in the palm of your hand.

Reuters reports: "Some Canadians consider the penny more of a nuisance than a useful coin. We often store them in jars, throw them away in water fountains or refuse them as change," the government said in a budget document. Financial institutions face increasing costs for handling, storing and transporting pennies. Over time, the penny's burden to the economy has grown relative to its value as a means of payment," it said.

San Francisco Chronicle: "Saving pennies in a piggy bank may be fun for children, but for banks, the transportation, handling and storage of coins costs about C$20 million each year according to Canadian officials, a cost that has to be passed on to customers in the form of fees. Eliminating the penny saves a portion of the costs associated with processing coins. Some argue that cash registers will have to be reprogrammed to accommodate the switch, but since the penny will remain in circulation until most pennies are out of circulation and taxes will continue to be calculated to the penny, cash registers and other business machines will operate as they always have."

Time Moneyland: "In April, Canada will mint its final penny, and a few months later, it will halt all distribution of pennies to the country's financial institutions as it attempts to withdraw them from circulation. As for how Canadian businesses and consumers deal with a world without pennies, that's largely up to them. The government is suggesting that they either round up or down to the nearest five cents. For those who use debit or credit cards, prices will still be charged to the cent. Still, many businesses will have to deal with logistical issues like reprogramming cash registers and changing their pricing." The Canadian government says it loses $11 million each year making and distributing pennies, and the cuts are part of a larger package of reductions estimated at $5.2 billion.