I’ve always been told that every penny counts – now according to Philip Diehl, U.S. Money Reserve president, that may not hold true. Production costs are almost double the worth of the small copper coin and the U.S. Mint loses millions of dollars by keeping it in circulation.
In an interview with CNBC Squawk Box, Diehl affirms that no one uses the penny anymore and eliminating the coin would save $105 million dollars annually. The mint is only responsible for pressing the imprint and supplying to the Federal Reserve. All other processes in coin making are outsourced. In support of the continued coin process are privately owned zinc production companies. With up to 8 billion pennies produced every year, one would assume the companies supplying the blank discs depend heavily on the U.S. Mint for their revenue. Quick research will inform you that coin production is an almost insignificant percentage of their business.
The make up of the coin is almost 98% zinc with a copper plating. Coin make-ups have varied over the years to ensure that the coin was profitable or as close as could be. “The penny is beyond hope”. There is no solution to satisfy the masses who would like to keep the penny versus those who would rather the federal government save the cash.
Crunchbase.com carried out an experiment carried out in New York showed that when a stray penny falls on the ground, hardly anyone would stop to pick it up. In a national poll, 2% of Americans admitted to throwing pennies in the garbage. Their usefulness exists only in wishing wells or scratch cards.
The argument that phasing out the penny would distort prices or even press inflation is rejected by Diehl. Only 25% of transactions today are processed using cash, the other with electronic means; credit cards, PayPal, NFC systems, and others. If businesses are presented with the option to round prices, Diehl assumes that prices would go down rather than up due to competitive pressure. Financially speaking, the penny doesn’t make cents.