It's time for the penny to go

[DJ FC]

One of the first things I did in Chicago was visit an authentic American McDonald's. I bought some french fries, the bill came to $1.78 and I paid with 2 crisp $1 bills. My change came back to me in the form of 2 dimes... $.20. The mathematicians in the room will note that I was due $.22. I was robbed of $.02 and I didn't care about that at all.

When a store rounds up on your change and gives you say $.25 instead of $.24, that is one sign that the $.01 is of marginal value and in most cases may be a trivial, notional amount. But when a store rounds down on the change with no expectation whatsoever that the customer will complain, then you really know that the currency is worthless. Some customers may still complain, but the vast majority of customers will agree that $.22 and $.20 are "close enough". Indeed if there wasn't some semi-religeous psychological factors involved I'd probably think that $0 and $.22 were "close enough".

The fact is the penny is worthless. Before commodity prices dropped and the dollar had it's recent strength, the US govt. was paying as much as 1.75 cents to print a single penny. (And 7 cents to print a Nickel!). Many argue that the penny is such a strong candidate for being eliminated by arguing that even the Nickel should go!

The Penny Should Go, But What About the Nickel? - Economics Blog - Zubin Jelveh - Odd Numbers - Portfolio.com

When the half cent coin was eliminated in 1857, it was worth $.02 in today's money. So we have a coin which is worth half as much as the one they decided to give the boot.

Play around with this:

The Inflation Calculator

First: A rebuttal of the stupid argument which I'm sure would have been asked or given without my pre-emptive answer:

Q: But now all the stores will round up their prices and we'll get screwed!

A: Not really. Prices can still be in $.01 incriments (Indeed, Gas is sold in $.001 incriments many times), and the rounding will only happen at the final sale. A good which costs $.06 will still cost $.06 and you'll round as the last step.

Professor's research supports eliminating penny