Americans stuck with obsolete currency denominations . . .

Silly Coinage Burdens Everyday Commerce
Conrad Weisert, November, 2008

© 2008, Information Disciplines, Inc., Chicago. This article may be circulated freely as long as this copyright notice is included.


American currency denominations in 1938 and 2008

Small coins

Seventy years ago the penny and the nickel were the smallest money denominations in the United States. Here are some of the things they could buy:

A 1938 penny could buy A 1938 nickel could buy
a stick of chewing gum a package of chewing gum
one or two pieces of bulk candy a candy bar or a cup of coffee
15 minutes on a parking meter a local call from a public phone
a stamp to mail a postcard a ride on the New York subway

Two or three pennies would buy a daily newspaper or a first-class postage stamp.

So what can we buy today for a penny or a nickel? Nothing!

Yet our pockets are weighed down with nickels and pennies. We have to count them out at the grocery store and the cashier has to count some to give back. They have so little value that it's hardly worth the bother to pick one up if you drop it.

Furthermore the cost of manufacturing pennies and nickels far exceeds their value, and the cost of distributing and counting them is a continuing drain on the American economy.

Greenbacks

Seventy years ago the one-dollar bill was the smallest denomination in Americans' wallets. One of them would pay for a haircut, including a tip for the barber. When we bought a week's worth of groceries or dinner for two in a nice restaurant we might hand the cashier a five- or ten-dollar bill and expect change back. We rarely handled twenty or fifty dollar denominations.

But today one dollar bills, too, have become uneconomical, not because of their manufacturing cost relative to one-dollar coins, but because they wear out very quickly and because we need more of them than ever for routine transactions.

Overcoming resistance to change

Eliminating pennies

In response to inflation, nearly every country in the world has updated its currency by:

But in the world's most conservative developed society it's hardly surprising that proposals to modernize the currency are met with resistance from the public.

If pennies are eliminated, shoppers fear, the price of every item in the store will be increased to the next higher multiple of five cents. That's a particular problem, they point out, because so many American prices end in 9.

Not so! It's only the total that would be rounded. Shops would still be free to price an individual item at 59¢. When a shopper buys a bunch of such items and the store adds sales tax, the rounding of the total would be indeed random. On a major purchase like the $399.99 washing machine, the penny is insignificant anyway.

Update
May 16, 2009

The U.S. Mint has just proudly unveiled not one but four brand-new redesigns for the penny! They present it as part of the commemoration of Lincoln's 200th birthday.

Surely there were a hundred more sensible and less wasteful ways to pay tribute to our sixteenth president.

A retailer with a dozen check-out lanes could experiment today by labelling one as a "penny-free lane". The cash register would round the total to the nearest nickel (or dime). I would certainly choose that cashier, and I suspect many other impatient shoppers would, too. We're tired of being burdened with all that meaningless change in our pockets.

Eliminating singles

I find one-dollar coins much more convenient that one-dollar bills. I don't like having to take out my wallet1 to buy a newspaper. I don't like being weighed down with a dozen quarters for parking meters and laundromat machines.

The U.S. mint has just launched an expensive advertising campaign to urge public acceptance of $1 coins. I have a less expensive solution for them: Just stop printing one dollar bills. That, of course, assumes that enough $1 coins and $2 bills2 are put into circulation.


1—Every time you take out your wallet on a busy city sidewalk you risk having it snatched away by a speedy thief.
2—I routinely request $2 bills from the bank. They're convenient and sufficiently rare that I get remembered when I give them as a tip. But cashiers put them under the cash drawer and don't give them in change to the next customer.

Last modified November 21, 2008

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