Sunday, February 17, 2008

Small denominations - should they be eliminated?

CBS 60 minutes last week talked about "Should we make cents". Here are some of the takeaways summarized

1. It takes approximately $134 million in cost to make $80 worth of pennies.
2. Pennies are made up of approximately 98% zinc the cost of which is spiraling over the last few years.
3. Its illegal to use these coins and resell them for the metal.
4. Kids used to collecting pennies or nickels will now have to search for something of greater value to start putting in their piggy bank.
5. Rounding off will cost Americans approximately $600 million a year.
6. Americans waste approximately 2.4 hrs a year counting pennies ! Is it a lot?

Some thoughts on the same:
Most of the things in US have a price tag of .99 , 9.99 or 99.99 are common examples. Will they get rounded off to the next digit ? If these are taxed items the taxes of these could be adjusted to rounded off to the next divisible by dime or 10 value !
This will be a one time inflationary hit that will be felt.
Some people have pointed out the 9/10 value thats commonly seen as gas stations. How do we account for that?

Most of the money is nowadays paid on credit or electronic media. So, that gives a lot of freedom on not producing pennies !

What do we do with our existing pennies or nickels if they are stopped ? Bring it to n exchange center where you get back the equivalent back and the change in electronic form?

OR last but not the least - make paper money for these small denominations?