In an effort to cut costs, the Canadian government released its 2012 budget Thursday without any money designated to fund the Canadian penny. The penny’s costs have finally grown so high that the government has realized it just doesn’t make sense to keep the 1-cent coin going. Does any of this sound familiar?
“The penny is a currency without any currency,” said Finance Minister Jim Flaherty, who is also quoted saying that pennies “take up too much space on our dressers at home” and “far too much time for small businesses trying to grow and create jobs.”
The Canadian penny now costs Canada 1.6 cents to produce. And if this seems similar to the U.S. penny, that’s because it is, except that American pennies are still being funded by the federal government and manufactured by the U.S. Mint. Oh, and the financial situation’s much worse.
The U.S. penny costs an incredible 2.4 cents to make (and the nickel, by the way, costs 11.2 cents). That’s why a couple months back the Obama White House included a proposal in their latest budget to make pennies and nickels cheaper to produce in order to pare down the federal deficit.
There are numerous private citizens (including this guy) and legislators who have proposed getting rid of the U.S. penny altogether. (There are some who even think we should retire the U.S. dollar.) A couple bills have been introduced but of course neither has passed. How Canada actually goes about doing away with its own penny may prove to be a model for the U.S.
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In April, Canada will mint its final penny, and a few months later, it will halt all distribution of pennies to the country’s financial institutions as it attempts to withdraw them from circulation.
As for how Canadian businesses and consumers deal with a world without pennies, that’s largely up to them. The government is suggesting that they either round up or down to the nearest five cents. For those who use debit or credit cards, prices will still be charged to the cent. Still, many businesses will have to deal with logistical issues like reprogramming cash registers and changing their pricing.
The Canadian government says it loses $11 million each year making and distributing pennies, and the cuts are part of a larger package of reductions estimated at $5.2 billion.
If the U.S. moves forward with seriously considering letting the penny go, the government could take notes from a number of countries that have done so. The U.K. dumped the half-penny in 1984, Australia got rid of its 1- and 2-cent coins in 1992, and Israel stopped producing the five-agorot coin in 2008.