Canada ditches the penny
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Canada will give up on the penny this year, a step that has been thwarted in the United States. The penny will still be accepted in Canadian shops, but it will gradually become extinct as production of new coins ends.
Foes of the penny argue that the coin costs more to make than it’s worth: 1.6 cents.
The gap adds up, experts say: Keeping the penny in circulation cost Canadians $130 million a year, a study by the Desjardins Group found five years ago. The Canadian government pegged the costs lower in its announcement, saying that making the penny costs the country $11 million annually.
‘The penny is a currency without currency in Canada,’ Finance Minister Jim Flaherty told the Globe and Mail newspaper Thursday as the plan was announced.
The Royal Canadian Mint, which will stop sending out pennies this fall, suggested that Canadians redeem their pennies at the bank or donate them to charity.
Prices for goods will be rounded up or down to the nearest five cents, a step expected to balance out the effect on consumers.
Several countries have dropped similar coins: New Zealand stopped issuing 1- and 2-cent pieces in 1989. Russia stopped minting 1- and 5-kopek coins, though they’re still used. And South Africa gave up making its 1- and 2-cent coins in 2002.
The step was cheered by economists who argue that the penny has long been useless. ‘Freakonomics’ co-author Stephen J. Dubner, who lives in New York, pleaded in a blog post, ‘Can We Please Be Next?’
But efforts to eliminate the penny in the U.S. have gotten little traction. Penny backers argue that inflation would rise if the coin were dropped.
Americans for Common Cents, a group that supports the penny, said it found in a recent poll that 66% of Americans want to keep the penny in circulation.
‘Americans don’t like rounding,’ said Mark Weller, the group’s executive director. ‘They believe merchants will use that as an opportunity to raise prices and they’ll come out on the short end of that.’
-- Emily Alpert in Los Angeles