CNBC Squawk Box recently published an interview with US Money Reserve President Philip Diehl on the slow death of the penny. The video may be found at the end of this article, and the article explains Diehl’s thoughts on the penny. Diehl was the 35th director of the US Mint, and he is still working to help the penny die a dignified death.
#1: The Penny Costs Too Much To Produce
Every penny that is created costs 1.8 cents to produce. Mr. Diehl notes that people who bend over to pick up a penny will make less than a minimum salary for picking up the penny, and the coin is draining the resources of the mint. There are many arguments to keep the penny, but Mr. Diehl disagrees on all fronts.
#2: The Loss Of The Penny Will Not Cause Inflation
Many proponents of the penny have argued the coin’s loss would cause a small amount of inflation to occur, but Philip notes that there is no substance to this argument at all. Philip notes that only 25% of sales are made in cash, and that is a small number compared to 25 years ago when the penny was first on the chopping block. Inflation cannot occur when only a quarter of all purchases are made using pennies.
#3: Price Fluctuation
Price fluctuations have been used by the penny lobby as a reason to keep the penny, and Mr. Diehl believes that companies around the world would simply make small changes to their prices. Companies would not want to trouble their customers over a few pennies, and many transactions do not involve pennies at all. Every retailer in America could recalculate prices to help ensure pennies are no longer an issue.
Philip has noted that the companies who make penny blanks, zinc producers and companies who make penny stamps would lose out if the penny dies. Keeping the penny around is a money-losing endeavor, and Philip wants these competing interests to bow out for the sake of the US Mint. The penny war continues, but Philip Diehl makes strong points concerning the penny’s demise.