The Canadian Penny is Little More than a Rounding Error Today Thanks to Inflation

Posted by PITHOCRATES - March 31st, 2012

Week in Review

Do you know when a country has inflated their currency too much?  When they start eliminating the smallest denomination of their money (see In Canada, the Lowly Penny’s Time to Shine Nears an End by IAN AUSTEN posted 3/29/2012 on The New York Times).

Jim Flaherty, the finance minister of Canada, pronounced a death sentence on the country’s penny during his budget speech on Thursday…

As pennies disappear, cash transactions will be rounded to the nearest nickel after federal and provincial sales taxes have been added. All other transactions, including payments by check, credit and debit cards, will still be calculated to the cent.

Britain, Australia and Norway are among the countries that preceded Canada in abandoning their smallest-denomination coins. A study by the Bank of Canada concluded that the move has no significant impact on inflation.

Won’t have a significant impact on inflation?  Of course not.  That damage is already done.

Pennies once had value.  Before our government inflated them away.  If you can find an old catalog from a department store look at the prices in it.  Something from the Fifties.  Or earlier.  You’ll see a strange unit used on some of their prices.  A thing that looks like this ‘¢’.  It’s the symbol for ‘cents’.  And we used it a lot back in those days.  When a lot of prices were less than a dollar.  When we often used the penny when shopping.  Especially for making change when you bought something with the much larger nickel.

Penny candy.  Shopping at the five and dime.  Penny for your thoughts.  Once upon a time, before the Keynesians embarked on a policy of permanent inflation, we bought most things with the coins in our pocket.  Because they were worth something.  And the only reason why they aren’t anymore is because of the inflationary policies of our government.  As they printed more and more money they depreciated the value of each unit of currency.  Until the penny became nothing more than a rounding error today.


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