Has the penny become obsolete? The US Money Reserve President, Philip Diehl, made an appearance on CNBC to discuss taken the coin out of circulation. This topic has been a subject of debate for some time. In his December 30th interview, he discusses how expensive it is to make the penny but it is not beneficial to the economy.
Host Andrew Ross Sorkin brings up the opposition’s argument. Some economists have said that if you take it out of circulation, then prices would be wrong and inflation would increase. Diehl points out that 75% of transactions are electronic and the elimination of the penny would not effect them. He also said businesses could round prices down. He thinks removing the penny could stall inflation because of competition.
Critics of the penny elimination argument state that the nickel is more expensive to make. One nickel costs 9.4 cents, so it would be more cost effective to change the metal composition of the nickel. Currently, the nickel is made of a copper-nickel mix, so it could be altered to lower cost. Elimination of the penny could save tax payers close to 105 million USD annually. Diehl said this would not happen because of private interest groups, especially those in the zinc business. The penny is 97.5 % zinc, so it would greatly hurt the zinc market. Again, the minting business is a private business, so there are interest groups which effect the decisions being made about money. Read more about US Money Reserve and their ecommerce coin catalogue: http://www.prnewswire.com/news-releases/us-money-reserve-encourages-visitors-to-explore-its-new-website-and-e-commerce-coin-catalogue-300225181.html
Diehl is the president of the US Money Reserve, which is the largest private distributor of gold, platinum, and silver. Clients across the country use the Money Reserve to help with their asset portfolio and precious metals. They have professional who research coins and markets to find the best price for the customer. This Austin, Texas based company works with buyers and sellers of precious metals to help customers build their portfolios. Diehl would be best positioned to understand how the penny affects the economy. There is no way to tell if it will ever come to fruition. The 2 dollar bill has been taken out of circulation, so it could happen in the future.