The discussion of discontinuing the penny (1 cent coin) in America was going on for several decades. Recently the government decided that now the production of new pennies will be stopped. The biggest reason behind this decision is that the cost of making a penny had reached 3 cents, which was making it economically disadvantageous.
Why was the production of pennies stopped?
According to the government, there are already 114 billion pennies in circulation in the country, worth a total of $1.14 billion. However, about $192 million is spent on the manufacture of these coins every year. Because of this, economists believe that continuing this coin is wasteful.
What will be the impact on prices?
After the penny is discontinued, the prices of small items may change. Since prices will now have to be rounded to the nearest 5 cents for cash transactions, the prices of some products may increase or decrease.
Will it increase inflation?
Some experts believe that shopkeepers may round prices higher, which may lead to a slight inflation increase. However, according to other studies, rounding prices to 5 cents will not have a major impact on inflation.
Impact on cash transactors
People who use cards, checks or digital wallets will not be affected much by this change. However, people who pay in cash, especially those who are away from banking services, may be more affected by this change.
The future of the penny and its value
Even though new pennies will not be made, the coins that are already in circulation will still be valid. Gradually these coins will return to the banking system and the government will melt them and reuse the metal for other coins.
Also, rare pennies such as the old “Wheat Penny” or other historical coins may become more valuable over time.
Environmental impact
Stopping the production of pennies will not only benefit the government financially, but it will also have a positive impact on the environment. Metals like zinc and copper are mined to make coins, which harms the environment.
Will nickel be the next coin?
Economists believe that the same debate may arise over the nickel (5 cent) coin in the future. Currently, it costs about 11 cents to make a nickel coin, which may make it economically impractical.
Conclusion
The end of the penny is a historic change, which will affect the economy, prices and people doing cash transactions. However, its impact will be limited and most people will move towards digital payments. Also, the value of rare coins may increase, making some coins collectible.
FAQs
Q. Why is the U.S. stopping penny production?
A. The cost of making a penny exceeds its value, making it economically inefficient.
Q. Will existing pennies still be usable?
A. Yes, pennies already in circulation will remain legal tender.
Q. How will prices change without pennies?
A. Cash transactions will be rounded to the nearest five cents, but digital payments remain unchanged.
Q. Will eliminating pennies increase inflation?
A. Some experts say minor rounding effects could occur, but overall inflation impact is expected to be minimal.
Q. What happens to rare or collectible pennies?
A. Rare pennies may become more valuable as they become scarcer over time.