President Donald Trump says he has directed the Treasury Department to stop minting new pennies, citing the rising cost of producing the one-cent coin.
It does not, because each use does not generate $0.01 in revenue for the government. Let’s say it costs $0.05 to make a penny. Every 20 pennies produced collectively costs everybody $1. It doesn’t matter how many times that penny is used, because it still costs 5x more to produce than it will provide back to the government, as a result of its existence. Even if it’s used 5 times, will the government get $0.05 as a result of that? Of course not.
Let’s say each penny costs $1,000 to make. Making 1,000,000 pennies would cost a billion dollars. That means to produce $10,000 in pennies, you’d devalue everybody’s money, collectively, by $1B. Obviously, pennies don’t cost this much, but at scale, I hope you can see that even the estimated $0.037/penny it costs adds up to significantly larger amounts, and those amounts do have a meaningful effect on the economy.
It’s a matter of inflation. If it costs more to produce the money, but you retain the same demand to use money, then you will cause inflation, because you will have to create more currency, to fund the creation of currency.
It’s not a matter of cost-per-use, it’s a matter of cost-vs-revenue.
The question is why does everyone think of this as a single use item? If a penny gets used 4 times it covers its cost.
It does not, because each use does not generate $0.01 in revenue for the government. Let’s say it costs $0.05 to make a penny. Every 20 pennies produced collectively costs everybody $1. It doesn’t matter how many times that penny is used, because it still costs 5x more to produce than it will provide back to the government, as a result of its existence. Even if it’s used 5 times, will the government get $0.05 as a result of that? Of course not.
Let’s say each penny costs $1,000 to make. Making 1,000,000 pennies would cost a billion dollars. That means to produce $10,000 in pennies, you’d devalue everybody’s money, collectively, by $1B. Obviously, pennies don’t cost this much, but at scale, I hope you can see that even the estimated $0.037/penny it costs adds up to significantly larger amounts, and those amounts do have a meaningful effect on the economy.
It’s a matter of inflation. If it costs more to produce the money, but you retain the same demand to use money, then you will cause inflation, because you will have to create more currency, to fund the creation of currency.
It’s not a matter of cost-per-use, it’s a matter of cost-vs-revenue.