Saturday, January 23, 2016

Our Economic Protector: The Penny

January 24, 2016
Yahshua Matheny
The penny has a critical role as an economic vanguard against inflation.

We've all been through it: fumbling around with pennies when your cart costs one last cent or slightly more. Most of us have resigned to simply telling the cashier to "keep the change" whenever the price point doesn't end in a neat zero or five. Escalating the matter even further, some have been calling for the U.S. to drop the penny from mint, just as Canada did in 2013. However, despite the initial benefits retiring the penny would seemingly give, there is substantial evidence against this change of economic policy. For everyone interested in a strong economy, the answer is simple: the United States should not get rid of the penny.

The penny has a critical role as an economic vanguard against inflation. According to the Scholastic article,"Should the U.S. get rid of the penny?" the price of minting a penny now costs "almost two cents to make one." This means that inflating the penny via increased minting of the coin would be much more difficult financially than, say, minting a coin with a lower cost to ratio, like the dime or quarter. The cost prevents mass minting and therefore resulting inflation that also brings economic havoc, as seen in the inflation of the German Reichsmark after World War I. In order to pay war reparations from the Treaty of Versailles, the Mark was printed in massive quantities, devaluing it greatly. Wheel barrels of Marks would only afford a single loaf of bread. In order to avoid such an economic crisis in the United States, a stable currency without a potential ro be inflated is needed. Therefore, the penny should be kept.

Another benefit of keeping the penny would be the avoidance of rising prices caused by losing the coin. Without pennies, stores would have to round up to the nearest 5 or 0 cent mark in order to support customers paying in cash and coins. This could have an impact on consumers. According to Forbes, research suggests that consumers could spend an additional $600 million a year if the penny was dropped out of mint. This could severely hurt families, as the collective ride of prices would begin to take a toll on budgets. The penny, along with the nickel, is the last line of defense against a devestating price increases such as the one described.In today's economy, losing such a valuable advantage would, and could, be disastrous nationwide.

One of the most potent aftereffects from dropping the penny would be a rise in government spending, something that is already a catastrophic problem today. According to Forbes, an economic study, found that the resulting inflation from dropping the penny could result in an extra $1 Billion in federal spending. With government spending already at ** $3.5 Trillion and a deficit at $486 Billion, another billion to the pile might not sound like much, but it is still impactful. Getting another billion deeper into the deficit is not a productive economic outlook, especially if it is easily avoidable. Thusly, keeping the penny is what anyone seeking to reduce federal spending would desire.

The common, popular, and main talking point in favor of ridding the penny is the aforementioned production to value ratio described earlier. Since pennies cost more to mint than they are worth, cutting them out of production would save the government money, reducing federal spending, as the anti-penny argument goes. However, as illustrated above, retiring the penny would simply encourage inflation, raise prices, and as a result, increase government spending. Introducing such a slew of economic problems based upon a flimsy preposition would be a recipe for financial misconduct. Any economic gain that would result from getting rid of the penny would be near - immediately countermanded by the effects.

Aside from cutting down on the annoying penny hassling, getting rid of the coin would just cause more problems than it is worth, quite literally. Seeing even more inflation added to our current economic status, along with higher prices from rounding up, and lastly, government spending increasing by another billion, is just unwise to needlessly cause. If we just decide to keep the penny, not only will we prevent such financial troubles, but we'll also save ourselves the extra costs on both a local and nationwide level.

Who doesn't want to keep more change in their pocket?


**Federal Spending by the Numbers, 2014

Yahshua Matheny is 14 years old, and likes studying economics, history and politics. He is a contributor to SIC SEMPER TYRANNIS!!! News.

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