Good morning, Power Readers.
Powerkid, the Eldest (5 years old) had been carrying a penny in his coat for a few days. On a recent trip to HyVee with dad and Powerkid, the youngeset, Eldest exclaims (and, if you've met Eldest, you know that I mean EXCLAIM) that he is ready to spend his penny. I said "OK" but remarked "you probably won't find anything that costs a penny."
To which the wise Eldest responds "Then why do we have pennies anyways?"
Good question. Greg Mankiw agrees:
Today's New York Times reports:
The solution, in my view, is to get rid of the penny.it costs the mint well more than a cent to make a penny.
Indeed, I would advocate this even if the penny were free to manufacture, as I argued earlier this year in the Wall Street Journal. The purpose of the monetary system is to facilitate exchange. The penny no longer serves that purpose. When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful. It is just wasting peoples' time--the economy's most valuable resource. The fact that the penny is costly to make only adds force to the argument.
Update: King has some more info:
Over the last six months, the cost of producing a penny and the material costs of the metal contained therein (97.6% zinc, the rest is the copper coating) has risen to a total cost of $.014, including production and record-high metal costs but not transportation. It's worth remembering that in 1943 the U.S. Mint, facing a shortage of copper and zinc from munitions demand, switched to a zinc-covered steel penny. People hated them -- they corrode when exposed to enough moisture -- but you still find collectors of them. If prices on zinc and copper continue to climb, you can expect some change in the composition of the penny.