The Death of the Penny
Money is changing. It always has. It always will. Get ready for more change.
This old penny, a one cent coin, was sitting, quite visible, near the gear lever of my truck for some weeks. During those weeks, I filled the gas tank many times. I regularly visited grocery stores, restaurants, and omnifarious business establishments.
In the course of completing numerous transactions of various value, from smaller to larger, from tens of dollars to hundreds or thousands of dollars during that same period, not once did my attention turn to this coin to help settle a transaction. Why? Because, of course, it has almost no value in any transaction. Its value is approximately the reverse of the motto it bears: e pluribus unum — out of many, one.1
On its own this one coin cannot do anything of practical value. The task of collecting, storing, counting and delivering enough of these coins to purchase even something of low value, say a hamburger or milkshake, is extremely onerous for most people, and therefore, quite unlikely.
Even though it costs more to produce a penny than its actual value — almost three cents — and even though it has no practical value in physical transactions, and even though there is no legislation mandating the ending of this coin which continues to be produced by the U.S. Mint, the future lifespan of this unit of currency must surely be limited. In the digital world, every penny can be easily counted, and its value posted, but the continuing existence of the zinc-copper alloy penny is something of a modern day anomaly.
For some reason there is a debate in the USA about whether or not the penny should be continued in its physical form. This article and its subsequent reports won’t pay much attention to the various arguments for the elimination or retention of the penny, or the nickel, or the dime. Far more important is to understand that money, its forms, values, and delivery systems are constantly changing.
At the age of 11 in the mid-1960’s, I experienced the transition of our entire Australian monetary system, from pounds, shillings, and pence, to dollars and cents. The penny pictured is about the size of a US dollar coin, and thus, coins of that ponderous size for such a limited value, were even more impractical to handle than the US penny.
Just a few years later, Australia transitioned its measurement system from imperial — miles, yards, feet, inches, to metric — kilometers, meters, millimeters. I grew up with and experienced both money systems, and both measurement systems, imperial and metric, and therefore I can easily compute and adjust in my mind for both kinds of monies and measures, depending where in the world I might be needing to work or spend. Whereas, my grandchildren have no recognition whatsoever when I speak of pounds, shillings, and pence, or miles, yards, and inches.
Going back further in my Australian roots, to the late 18th century and early 19th century, the main currency in the fledgling new nation built on penal settlements by the British, was rum. Yes, alcohol was the predominant trading and payment system. Most Australians are glad we’ve moved on from that monetary system.
Money is simply a store of value. Units of money allow us to have a convenient exchange mechanism to avoid having to carry around bushels of wheat, motor vehicles, cows and pigs, eggs and fruit, cheese and milk, factories and warehouses, to each transaction. For most of us, money, our medium of exchange, has morphed into 1’s and 0’s — computer language — digital recording and transfer.
Though in Micronesia, even now, well into the 21st century, there is still a culture that values its old monetary system and uses it in parallel with the US dollar. In 2018, the BBC2 ran a story about the Yap people and their stone money. Their stone money units still have transaction value. The stones range in size from a few inches to more than 12 feet in diameter. “Today, shell [and stone] money has been replaced by the almighty US dollar for day-to-day transactions like grocery shopping. But for more conceptual exchanges, like rights or customs, stones remain a vital currency for Yap’s 11,000 residents,” says BBC correspondent Robert Michael Poole.
In the modern world we can be glad that we don’t have to use rum, or massive stones too large to move, in order to store value and facilitate exchange. In our era, there is much talk of fiat currencies — both digital and physical, issued by governments and central banks, and other terms such as blockchain, digital currencies, crypto currencies, stable coins, crypto exchanges, some of which are private, and some of which are government issue. Many modern people, whether seniors, or young adults, or younger, have much confusion about these terms, and what to expect in the future.
Comparative values are of equal concern. People hear about Bitcoin’s startling price, the failure of groups such as FTX, the expected issuance of a number of central bank digital currencies, and many other issuers and issues. The decline of the buying power and global strength of the US dollar is a matching concern. In the past twenty years the buying power of the dollar has declined to the equivalent of about fifty cents. The shrinking of the US dollar as the world’s principal reserve currency is also declining (still about 60%). What does the future hold?
See related story, “Decentralization and Tokenization,” linked below.
Veritas Chronicles will not serve as a pundit trying to predict the future, but we will clarify terminologies, report on trends, and create links to effective financial literacy portals. We will also introduce experts who can effectively comment on these matters.3
One of the experts who will join us from time to time is Dr. Gregory H. Jackson. Greg is a seasoned former C-level international banking executive, educator, social entrepreneur, and project management professional with decades of results-oriented experience in higher education fundraising and major non-profit sector initiatives deployed globally. Greg was chief operations officer for Bank of America for 16 Asian countries. He is a strategic integrator and creative finance expert who has helped found, develop, and manage numerous businesses, NGO organizations, and projects on four continents with a variety of stakeholders including international organizations, governments, and private sector enterprises. He currently serves as a board member/trustee and officer for several NGOs in the U.S. and the Pacific Rim. Greg holds a Ph.D. in International Education, an MBA in Finance and Accounting, a BA in History and Chinese Language, and a Diploma in Chinese Law. Multilingual, he is fluent in Mandarin Chinese and highly conversant in Japanese, Cantonese, Spanish … and … so important for our purposes, he understands and can communicate the language of digital currencies, along with their terminologies, technical systems, and delivery systems.
E pluribus unum was adopted as a national motto in 1776 and is now found on the Great Seal of the United States and on United States currency.
https://www.bbc.com/travel/article/20180502-the-tiny-island-with-human-sized-money
In fact, this note is a harbinger of that same proactive attention to matters of interest to many people, with new sections being developed on money, health and medicine, and energy.