By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
On March 29, the Canadian government announced that it would permanently cease minting 1-cent coins by the end of April 2012. The final shipment of these coins to banks will occur in the fall. After that, the Canadian government will start calling in the coins for destruction.
Although transactions paid by check or credit card could still be paid to the exact penny, the Canadian government expects the public to quickly get used to rounding transactions to the nearest nickel.
The main reason for the end of production is that it costs the Royal Canadian Mint about 1-1/2 cents to produce each penny. This is the same problem that affects the US Mint, where it costs more than 2 cents for raw materials, labor, and overhead to produce each cent.
I believe that Canada is the first nation to discontinue production of coins equal to .01 of its monetary denomination. If the economy quickly accepts the disappearance of these coins, that will improve the likelihood that the US could follow suit sooner rather than later.
The US Mint continued to strike Half Cents through 1857, several years after that denomination was made obsolete from the effects of inflation. The US Cent has been economically obsolete for at least a decade, so it just might be time to end production in America. It would not be necessary for the US government to recall the coins, as there are several hundred cents per capita already in private hands.
Even if the US mint abolished production of the cent, it would still be burdened by continuing losses in the production of nickels. With a metal value close to face value, and the Mint figuring that labor and overhead costs about four cents to produce each nickel, the US Treasury could increase profits simply by discontinuing fabrication of nickels.
Just because the Royal Canadian Mint will curtail striking cents does not necessarily mean that these coins will become instant rarities. There are comparatively few collectors of these coins relative to available mintages. If the US stopped striking cents, I similarly suspect that many people would hoard them thinking that they would become valued collectibles. Don’t hold your breath waiting for that to happen. There were a lot of people who did not turn in their silver certificates in the mid-1960s, thinking that they would be valuable in the future. Most Series 1935 and 1957 $1.00 Silver Certificates today are worth little more than face value. I suspect that will be the same long-term story for US and Canadian cents.
Patrick A. Heller owns Liberty Coin Service and Premier Coins & Collectibles in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (http://www.numismaster.com under “News & Articles). His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.
“I believe that Canada is the first nation to discontinue production of coins equal to .01 of its monetary denomination.”
Many other countries did this long ago – see the sidebar here: http://www.cbc.ca/news/business/story/2012/03/30/f-penny-faq.html
Australia and New Zealand haven’t used a 1 cent coin since 1990.
“I believe that Canada is the first nation to discontinue production of coins equal to .01 of its monetary denomination.”
WOW! That is not even remotely close to being true. Switzerland also discontinued the 1 and 2 rappen (.01 & .02) YEARS ago. In fact, of the world’s currencies that presently trade near par with the U.S. dollar, we are now virtually the ONLY one usind a .01 coin. The another example of Heller inaccuracy.