Friday, March 30, 2012

Price inflation for metals leads Canada to toss the penny

On March 30th, the nation of Canada made a decision to eliminate the penny from its monetary system and use a rounding up method for purchases and transactions.  The decision was based on the rising cost of metals which are used to mint the 1 cent denomination, and no longer will it cost 1.5 cents just to create 1 cent.



Canada will withdraw the penny from circulation this year, saving taxpayers about C$11 million ($11 million) annually and forcing retailers to round prices to the nearest nickel, the government announced in its budget today.

The Royal Canadian Mint, which has produced 35 billion pennies since it began production in 1908, will cease distribution this fall due to the coin’s low purchasing power. Production and handling cost for the one-cent coin are a C$150- million drag on the economy, according to a 2006 study by Desjardins, a Levis, Quebec-based financial institution. - Bloomberg

When I was a military brat overseas in Spain in the early 1980's, the USAF was doing this form of monetary policy, and rounding up transactions to the nearest nickel.  With inflation devaluing the dollar denominations fast and furious, it may be time to make that policy complete and join Canada in tossing the penny from the economy.

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