I just had an idea. Why not redefine the 'cent' to equal one-tenth of a dollar? It won't really match up to its original meaning, such as when used in the word 'percent', which is taken to be hundredths, but at least we can start using those useless pennies again.
Trivia: In Australia, one and two cent coins were removed from circulation some time ago. All cash purchases are now rounded to the nearest $0.05.
How would you value a 'dime'? The penny will probably go the way of the 'mill'. Remember those? They were valued at 1/1000 of a dollar (a mille). Some states issued them for paying taxes, but the mill was never minted by the Federal Mint. Property taxes were based on mills in the past, and may still be in some cases, I'm not sure. One remnant of the mill you still see in the U S is at the gas pump. A gallon of gas is priced using mills, such as $2.99.9 per gallon.
pete, same here in new zealand, this year the 5c is scheduled to be removed aswell(no longer distributed in july, no longer legal tender in october). makes you wonder just who the government isy trying to please though, they seem to up interest rates every month to try and stop inflation, yet they go and eliminate small currency is bound to lead to inflation.
If every penny became worth x10 as much as it is now, inflation would skyrocket. http://www.kokogiak.com/megapenny/twelve.asp which is 1.4 billion dollars. They all become dimes, which is an injection of 12.6 billion dollars into the economy.
The correctness of that would depend upon how you define "inflation." - If it is the number of pennies required to buy an item, say a hamberger, one could argue just the oppposite. If a Big Mac now costs 300 pennies after 1 to 10 the revision it should only cost only 30. Serious deflation. Please give your argument for inflation.
Since I have long advocated doing away with all paper money, I think that redefining the value of coins upward may not be a bad idea, if it were used to keep the price of a "basket of essential domestic items" with constant price. (See my prior post to understand that could be the effect. - I.e. deflation is the more likely result of a 1 to 10 re definition of the value of the cent. - In my example the now 300 penny hamburger would cost 30 pennies.) I.e. very small weekly re definitions of the value of the dollar coin would be made by the FED*, but that would only effect foreigners as the price of the hamburger, etc. would remain essentially constant (or annually increasing at whatever rate the FED thought best, without using high interest rates to control inflation.) Note, this "price freeze" does not inhibit innovation, investment etc. If you think you can persuade the public to buy "rat-meat" hamburgers at half the price, just do it and then, if you succeed, the price of hamburgers will drop. This because the value of the coins is defined in terms of a "basket of essentials", not any one item like gold. I.e. the normal "signals" needed to kept a free market functioning still exist with this type of "price freeze." The FED also re-defines the "basket" when it thinks desirable, just as the NYSE & Dow co. Re-define the DJIA. For example, "buggy whips" in the basket can be replaced by "cell phones" etc. I am not sure there would not be some serious problems, but when Brazil had inflation of several percent PER WEEK!, a new unit of value, called the URE, was introduced, but it did not really exist for circulation. - The cost of every thing was, by law, stated in UREs and basically did not change. (What did change still was the relationship between the circulating currency and the URE.) Then, after a year or so for people to get use to the idea that prices could be stable, and that when the new currency was introduced, it would not be necessary to spend your entire paycheck the day you got it etc. the new currency, the Real, was introduced with the value of the URE at that time. Almost all economist are amazed at how well this worked to kill inflation in Brazil. It is running now, in a year, at about the same rate it was running in a week before. In fact, the Real is about 50% more valuable against the dollar than when it was first introduced! Reason I want to do away with all paper money is the fact that to pay for the importation of even a small shipment of drugs, the wholesale dealer would require about a dozen trucks to move the payment coins (or leave a paper trail if done via credit cards, bank wires, etc.) for even a small wholesale deal. That "dozen truck payment" now easily fits inside a suitcase, if hundred dollar bills are available. This solution to the drug problem is so obvious that I suspect the government must also be on the take to not apply it. This termination of paper money also makes a lot of liquor store etc. robbers think twice. - not easy to run away fast if carrying a 1000 silver dollars, which weigh about 55 pounds. Few would consider killing you for the value of the coins you might carry in your pocket. Why put up with all the drug related crime? ------------------ *Got to give Bernanke and crew something they can do with tape over Bernanke's mouth. Please Register or Log in to view the hidden image! Please Register or Log in to view the hidden image! PS - I forget exactly what URE stood for and it was Portuguese of course, but it was something like Unit of Reference Estable. I speak poorly Portuguese but do not spell well in any language. I think the Portuguese word for stable starts with "E", if not the perhaps RE was from Unit of REference. (I have mild dyslexia.)
I've long thought we should get rid of pennies. They're so worthless most people won't even bother to pick one up they see laying on the ground. Stores leave containers of them on the counter so you can help yourself to any you may need. They're practically litter. GET RID OF THEM.
WUH WUH WUH WHU! HUHUH? I am making loud sputtering noises. You don't even know the definition of inflation and you're making economic recommendations? Thank God we're not a true democracy.
Your post below was so silly that I thought I would be kind and give you the opportunity to explain it and/or tell what none-standard definition of inflation could give some validity to your statement below. In my post I gave the standard definition of inflation, in very simplified terms for just one item as: and continued on to illustrate with one item the stupidity of your claim that increasing the value of the cent by factor of 10 would lead to inflation by: Still wanting to be kind, I gave you the opportunity to correct or explain your claim that a ten to one increase in the value of the cent would result in inflation by: but as your claim is so silly that you have no way to defend it, you decided to attack me personally. - That is the typical response of stubborn person who is ignorant and has made an obvious mistake. Are you an ignorant person or just naturally mean?
Inflationary, not deflationary. If the Big Mac is worth 300 cents now, it will still be worth 300 cents in the old system but priced at more than 300 cents in the new system once the cent has been intrinsically devalued by an arbitrary increase in how much is in circulation via the denominational reassignment. If after the conversion, the Big Mac was still priced at 300 cents, it would in effect be discounted.
I think that is, at best, circular reasoning. I fail to see how making the new cent worth 10 of the old makes it "intrinsically devalued." It seems to me it is made more valuable. That is, it is worth ten of the old, not less than it was. If you are assuming that the government will issue ten times more coins, either new or old, yes each will be less valuable. - That is what is happening now in US as the government spends more than it takes in. The printing of money, increasing the supply does cause inflation, extreme at times as in Germany, but that is a separate question from the value of each coin or dollar. If every one's salary and savings account were changed by factor of X and so long as the price of everything is changed by X also, nothing has happened with respect to real economy. Yet if, for example, X is large number (say 1000) and hair cut cost 10.000 dollars, one can argue that inflation has occurred. That is, why I asked for his definition of inflation. Is it the number of dollars required to buy an object or the number of hours of work required to buy and object? If the later, then even with X=1000 there is no inflation. The number of coins/ dollars in stable circulation is not important, but it is nice not to have the ones in use with lots of zeros. - I.e. no nation likes (with Italy and a few other exceptions) to use 5000 of it basics currency units (dollars, pounds, marks, yen, etc) to buy an newspaper, but it really does not make much difference if it is a stable relationship between units in circulation and goods produced. Thus: (1)Reducing the value of the cent by a factor of ten is no big deal in the real economy, but is "inflation" as inflation is often defined. (dollars /per hamburger etc.) (2)Increasing the value of the cent by a factor of ten is no big deal in the real economy, but is "deflation" as deflation is often defined. (dollars /per hamburger etc.) PS- We were discussing case (2).
Because inflation is linked to the amount of currency in circulation. You raise the value of the pennies in circulation, then you're basically just pumping 12.6 billion dollars into the system. Thus, the money needs to be revalued and ends up being worth less.
I have been assuming that 100 penies equal a dollar in both new and old systms, so change of penny value is change in dollar value also. thus the 12.6 billion new dollars (or any other number) also change value. If we were to all agree to it we all could be billionaires, by adding some zeros to the currency and do not worry the merchants would add them to the prices also. However, this would not be inflation if inflation were the number of hours worked to buy a hamburger (just we now have 10,000-dollar hamburgers).* If however we define inflation by the number of dollars required to buy a hamburger, then yes $10,000 hamburgers are inflation. Does no one, but me, here understand that you cannot talk intelligently about this until the definition of inflation is clear? That is partially why, in my first post, I asked what his definition of inflations was. ---------------------------------------- *If US does not get it "twin deficits" under control soon, you may see the $10,000 hamburger. Germany saw the 100,000 Mark hamburger result from printing paper IOUs to cover its deficits.
Yes, lets redefine the cent so the Federal Reserve can continually rape the American people, as well as the world, good idea.
there are too many cents in the world currently... if something as this happens...the government economy might go amock. Lets redefine the tears from our eyes to count as cents. Each tear that drops shall count as a cent. And world shall cry so that tears will flow and form rivers of money...for money are made on tears.
Why not slowly adjust it while the fed. reserve accumulates the surplus, like a sort of miniature 'gold standard' ? That way, pennies could be cleaned from the streets.
