Monday, February 29, 2016
Two weeks back, the prominent economist Larry Summers recommended that the U.S. Mint stop issuing $100 bills and even consider taking existing $100 bills out of circulation.
The reasoning was simple; Much of the underground economy and many criminal enterprises operate on a cash basis. Summers noted that 500-euro notes had come to be known as "bin Ladens" and added that the weight of $1 million would be 2.2 pounds in 500-euro notes, but much more -- 50 pounds -- in $20 bills. This would make cash transactions less convenient for bad guys.
It makes sense to me. I don't carry $100 bills generally.
But I have a better idea that would benefit all of us, including those who of us are not involved in illegal activities.
Here is my thought: Let's get rid of the penny.
The other day I needed some vegetables. (The younger person was coming for a visit, and he consumes approximately three pounds of same each and every day.) I stopped at the farmers' market, filled one bag with broccoli and another with asparagus; I estimated the total cost would be just under $7.
I was wrong. When I went to pay, the bill came to $7.24. I had a $5 bill, two singles and a couple dimes in my pocketbook. (This was unusual; generally there are many, many pennies in the coin section of my wallet.)
"Oh, I'm sorry, I'm four cents short," I told the woman running the stand.
"Don't worry about it," she said, and then waved me off so she deal with the next customer.
When I visit stores, I frequently encounter little bowls like the one in the picture at the top of this page. If you think about it, people leaving pieces of money for strangers is quite odd. It suggests that those currency units are more trouble than they are worth.
Here's another thing: People will not pick up pennies they see lying on the street. If a normal person sees a $20 bill on the sidewalk, he will pick it up. A dollar bill -- yes; a quarter -- yes; a nickel -- maybe; a penny or two pennies -- never. Even hungry beggars won't make an effort to pick up a penny.
That tells you something.
According to recent reports, the U.S. Mint has been fiddling with the metal composition of U.S. coins in the interest of reducing production costs, and good for that. Between 2011 and 2014, for instance, the cost of minting a penny was reduced by about 30 percent.
This sounds great, except that making a penny still costs substantially more than a penny is worth. Said another way, it costs 1.7 cents to manufacture a single penny.
My thought is this: Why bother?
Canada and Australia also have dollar-based currencies. Each has stopped issuing pennies. Neither country seems to have suffered ill effects. Maybe we can learn something from our friends, the Canucks and Aussies.