What's the Correct Denomination for Coins?

Some argue that coins are obsolete and should be abandoned altogether in lieu of paper or digital currency. Under normal circumstances, I see their point. However, not everyone lives a digital life...and what happens electronic communications are disrupted?

If we agree there's still a requirement for coins, what are reasonable denominations? Are the current denominations sufficient?

This is a sticky subject. There have been many threads on Coin Talk dedicated to this subject. I think everyone agrees that we can no longer buy anything with a Cent, Nickel, or Dime. However, when anyone suggests that these denominations should be phased out, folks become very emotional.

Frankly, I don't understand the reaction. As near as I can tell, the fear is that consumers will somehow get screwed if "non-commercially viable" denominations are phased out. They somehow believe that this would be a boondoggle for Big Business or the Government...that they would benefit at the expense of the average Joe.

Let me try to address that point.

Let's examine the extreme....what would be the effect if the smallest denomination of coin was $100? It would mean that the smallest unit of any good sold would be in $100 increments.

Let's say you want some mulch for your flower garden. Instead of vendors competing on price, they would compete on quantity. You might get 275lbs of mulch from one vendor for $100 while another vendor might offer 320lbs. You would consider many factors (quality, accessibility, etc) and choose the mulch that offers you the best value...and vendors would adjust their product accordingly.

However, another problem arises...what if you don't need 300lbs of mulch. What if you only need 50lbs of mulch? That's a problem. That's a problem that can only be solved with a lower denomination coin. If we were talking about chocolate bars instead of mulch, the smallest denomination would have to be smaller still.

So...the purpose of lower denominated coins is to provide sufficient granularity to purchase a reasonable amount of a good or service. Implicit in this definition is that the lowest denominated coin must be able to purchase something...anything.

Today, we encourage economic growth through inflation. To facilitate inflation (the taxation of wealth through the debasement of currency) we to moved away from the Gold/Silver standard and adopted a fiat currency (currency valued by the promise of repayment). Today's dollars are effectively zero-interest government bonds.

If coins were still minted in copper, silver, or gold...we wouldn't be having this discussion...there would be no need to re-denominate our coinage. However, money has been devaluing at a rapid pace for the past 50 years and it's time to increase our lowest denominated coin to some unit of value in commerce. People won't be screwed by "the Man"...they will simply make purchasing decisions based on quantity vs. price.

This is great news for Coin Collectors! Obsolete denominations become finite and desirable. Higher denominated coins are more difficult to collect, increasing rarities.

Let's let the Cent, Nickel, and Dime go with dignity and focus on newer, higher valued coins to come!

 

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I am slightly below the normal retirement age. I foresee the only change to our currency system in my lifetime being the elimination of the cent -- and I'm not betting on that happening. It's a subject that has been debated for years and any proposed changes, as far as I'm concerned, would be just for the hell of it with no practical reason for doing so.

 

I'm ready to say goodbye to everything smaller than a quarter, but I'd settle for getting rid of the cent and nickel. My grandparents as children did just fine with one-cent coins that were worth the equivalent of 20 cents today.

When was the last time you saw a gumball machine that took anything less than a quarter? (Although I do have to admit that I haven't yet seen one taking credit cards...)

 

Most countries have gone the common sense way and eliminated lower denomination coins. A few days ago I happened to be looking at some Spanish coins I have so let's take that as an example. Looking at the entire 20th century and considering only circulating coinage the lowest denominations minted (base and silver) and highest are:

1900s: 1 centimo bronze; 50 centimos silver: 20 pestas gold
1910s: 1 centimo bronze; 50 centimos silver: 50 centimos
1920s: 25 centimos copper-nickel; 50 centimos silver: 50 centimos
1930s: 5 centimos iron; 1 peseta silver: peseta
1940s: 5 centimos aluminum; no silver: 5 pesetas
1950s: 5 centimos aluminum; no silver: 50 pesetas
1960s: 50 centimos copper-nickel; 100 pesetas silver: 100 pesetas
1970s: 50 centimos copper-nickel; no silver: 100 pesetas
1980s: 50 centimos aluminum; no silver: 500 pesetas
1990s: peseta aluminum; no silver; 500 peseta

This is just one European country but is not atypical. After that, of course, they became part of the Euro. But notice how different that is from the USA. Our lowest coin has remained the same throughout but our highest has dropped from a dollar to a quarter!

 

Think of the trillions of ads - flyers, gas signs, web sites, etc. out there that will have to be rewritten. No more $1.97, or 2.35 5/8, etc........

 

Why on Earth would you think this?

Every gas station near me advertises prices to the tenth of a cent, and the last digit is always 9. There has never been a one-tenth-cent denomination in the US. Even if there were, prices would still be rounded, because you don't always buy an exact whole number of gallons.

You round on the whole purchase, not each individual item. You charge sales tax on the whole purchase, not each individual item. There can't be anyone who hasn't encountered this process. And yet, people keep trying to make this a supporting argument for keeping the cent.

 

We could just go to cardboard currency (disposable coins?), which you'd have to be sure to spend before they fell apart, but just think of the profit that would generate for the bankers and .GOV. It's been said that "The only thing we learn from history, is that men never learn from history".

 

I was making light of the situation.

 

I have covered this in the past. Revalue at the rate of 100:1 Got something that cost a quarter today, they are now four for a "cent'. A candy bar today is around $0.75. Revalue, reduce the size slightly and now they are "two for a penny". A quarter pounder currently costs about $3.99. Now it cost four cents. A roll of stamps is 50 cents etc.

You get to keep your old familiar denominations, but coins now have real purchasing power, even "pennys".

 

Sorry, Poe's Law. Stay tuned, the actual "rounding always goes against us"/"it'll cause inflation" posters will be by shortly...

 

Not true. It is still possible to charge $1.97. With no cent we would have one item rounded to $1.95, four to $7.90, etc. Gasoline typically is priced at xx.9 cents, but we don't have a tenth of a cent coin.

 

But think of all the people you meet at stores that can't count change now. They will have to learn to round up or down too......Well, guess the bigger stores will have the computerized cash registers to do the math for them...and probably squirt the coins out so they don't have to actually count.

 

(whine) Do I have to?

 

You are right. Best not to think of them. Especially the ones that stare at you when you give them a half dollar.

 

I think a 3.50 coin would be optimal. ..or I just want a 3.50 coin.. preferably with Cartman on it.

 

Let the record show that I was not the one who first dropped the O-bomb in this thread.

Coins for Making Change Efficiently

Get rid of the dime, and replace it with an 18-cent piece. Penny, nickel, legal, quarter?

 

I think it could well be argued that forcing an average checker to count by 18's would negate any utility optimized by using this denomination.

I think 3.50 is a good number for the reason South Park made it a joke: a ridiculous amount of items cost ~3.50. It's usefully between a $1 and $5. 2 coins would be $7- also useful. Besides, it is such a long-standing joke I would imagine this denomination could gain more traction simply on novelty.

 

If our largest denomination coin is a quarter,
why are they still minting half dollars and dollar coins?