What would it mean if we ended all money and just went digital? I think most of find pennies and nickels useless. Did you know that it now costs more to mint them than they are worth? According to David Wolman in “The End of Money,” (The Awl, February 2012) “a few years ago, the cost of making a penny peaked a 1.8 cents per cent, and nine cents per nickel.” While those costs have fallen a little, compare that to only 34 cents to make a new dollar coin. The U.S. Mint “has manufactured about half a trillion coins over the past generation, yet the mint itself estimates that 200 billion of them has fallen out of circulation. According to one estimate, Americans forfeit $1 billion a year due to the time spent dealing with pennies at cash registers and in wallets,” says Wolman. Even retail is moving away from trying to entire buyers by pricing items at a penny less, i.e., $5.99 v. $6.00.
Many countries have eliminated low value coins to save costs and bother. But a funny thing happens when you begin to eliminate currency because it is so invaluable. Says Wolman, “Eliminating the penny is an admission of inflation. What does a formal acknowledgement of the worthlessness of 1 cent say about the worth of a dollar? In other words, it doesn’t help the economy to remind people that prices are continually rising, while the purchasing power of their money is continually falling, even though both are true.”
Luckily for Americans, we haven’t experience high inflation since the 1970s. Wolman points out, “Younger Americans today have been so lulled by economic stability that the notion of all prices surging upward is alien.” He asks, “What’s riskier: producing and circulating annoying coins at a loss, or injuring morale about the economy so much as to undermine faith in more than just the value of those little metal discs?”
Wolman’s solution is to move to digital currency. He wishes that the Federal Reserve, Bank of England, European Central Bank and most other central banks would not mint more coins and just move into the “digital realm.” And with an interesting note, he says that when people tip when paying with plastic, they tip more than with cash. And with our cell phones becoming an easy way to pay for things, perhaps Wolman will get his wish to go cashless sooner than he thinks.