Friday, March 30, 2012
Canadians to be penniless soon
The Conservative government's budget has provisions that would see production of the one penny coin ends this fall. However, they will continue to be accepted at banks and for cash transactions. So as expected the Conservative budget will leave Canadians penniless. It will just take a little time.
The penny now has about 5 per cent of its original purchasing power. It costs 1.6 cents to produce one penny. This is one case when minting new money costs the government! A government statement said the penny was a burden on the economy.
A 2008 study by the Desjardins bank claims that the lowly penny costs the Canadian economy about 150 million dollars just in the one year 2006. The cost of processing 9 billion pennies a year to the big banks is 20 million dollars.
Prices will be rounded to the nearest nickel. Probably most businesses will round out to the nearest nickel upwards. However, studies in such countries as Norway, Australia, and New Zealand indicate that eliminating the penny did not lead to systemic price increases. The liquidation of the penny may set the stage for the demise of the nickel if not the dime. The nickel has already gone in New Zealand. For more see this article.