President Trump has ordered the U.S. Treasury to stop minting the penny, which costs more to produce than its value. The penny persists due to political reasons and reliance on exact pricing. In contrast, St. Kitts and Nevis discontinued smaller denomination coins due to their low purchasing power and high production costs.
President Donald Trump has directed the U.S. Treasury to halt the production of the penny, as its manufacturing cost exceeds its face value of one cent. Despite numerous attempts to eliminate it since the 1990s, the penny remains in circulation due to political and practical challenges. Removing the penny could be unpopular and disrupt pricing for consumers and businesses reliant on precise costs.
The existence of the penny is supported by various groups that produce and supply it, contributing to its continual circulation. Concerns about rounding prices without pennies could result in customers perceiving higher costs, complicating the decision to abolish the coin. The tradition, convenience, and economic factors surrounding exact pricing further entrench the penny’s role in the economy.
If the penny were discontinued, cash transactions would likely be rounded to the nearest five cents, potentially fostering an increase in digital payments. However, research indicates that such rounding would minimally affect overall prices and inflation in the economy.
In St. Kitts and Nevis, the smallest denomination is the 5-cent coin, measuring 23.11 mm in diameter and weighing 1.74 grams, constructed from aluminum. The Eastern Caribbean Central Bank (ECCB) phased out the one-cent and two-cent coins starting July 1, 2015, due to their negligible purchasing power and the burdensome cost of production and handling. This decision reflects a broader concern regarding production costs compared to denominations’ value, which may also apply to the five-cent coin.
The penny continues to exist in the U.S. despite its economic inefficiency, largely due to political resistance and tradition. In contrast, St. Kitts and Nevis has moved to eliminate lower denomination coins due to production costs versus purchasing power. The implications of such changes could encourage a move toward digital payment systems, although studies show minimal impacts on overall pricing and inflation.
Original Source: www.thestkittsnevisobserver.com
