President Trump has ordered the cessation of penny minting due to high production costs. The penny remains due to political and practical challenges, consumer preferences for exact pricing, and the influence of certain interest groups. Meanwhile, St. Kitts has eliminated lower denomination coins, highlighting different approaches to currency management.
President Donald Trump has instructed the U.S. Treasury to cease the minting of the penny, as its production costs exceed its face value of one cent. Despite ongoing efforts to abolish the penny since the 1990s, it continues to persist in circulation primarily due to political and practical challenges associated with its removal.
The penny remains relevant because numerous individuals and businesses depend on precise pricing. The elimination of the penny would necessitate rounding prices, potentially leading to customer apprehension about increased costs. Additionally, certain groups gain from the production and distribution of pennies, which contributes to their continual presence in the economy.
If the penny were eliminated, cash transactions might be rounded to the nearest five cents, potentially accelerating the transition towards digital transactions, which can accommodate exact amounts without rounding discrepancies. Nonetheless, research indicates that rounding practices in cash transactions would likely have a minor effect on pricing and inflation overall.
In contrast, St. Kitts and Nevis features a five-cent coin as its smallest legal currency. This coin measures 23.11 mm in diameter, weighs 1.74 grams, and is composed of aluminum. Since July 1, 2015, the Eastern Caribbean Central Bank (ECCB) has withdrawn one-cent and two-cent coins from circulation due to their low purchasing efficacy and high production and handling costs, signaling issues with economies of scale regarding lower denomination coins.
The effort to abolish the penny in the United States reflects broader economic realities that question the viability of low-denomination coins. The political and practical difficulties of eliminating the penny persist, driven by concerns over pricing impacts and customer reaction. In contrast, St. Kitts and Nevis has already streamlined its coinage by eliminating less valuable denominations, illustrating a possible precedent for the U.S. as it considers similar changes.
Original Source: www.thestkittsnevisobserver.com
