6 ms·

In Canada, find a penny, recycle it

rahimnathwani 12y ago
"estimated 31 billion pennies that are still in circulation" "The Finance Department of Canada estimates that melting down the metal from the pennies and reselling it in the industrial sector will bring in $42.5 million in revenue." So, they're going to buy $310m worth of pennies, melt them down, and sell them for $42.5m? That doesn't seem like a worthwhile exercise.
- paulgb 12y ago
  Well, if they take $310 million in currency out of circulation, they can mint (say) 310 million loonies without devaluing the currency. So if the metal in 100 pennies is worth more than the metal in a loonie they make a profit.
- NortySpock 12y ago
  They'll save money in the long run in not printing the pennies at a loss. Also, by buying them back from the banks it's the government that takes the hit for the cost of de-circulating the penny, rather than the banks or the consumer. If private industry were taking the hit, people would fight tooth and nail against retiring the penny.
  - rahimnathwani 12y ago
    I understand that it might make sense to stop printing new pennies, but how does the central bank benefit by taking the _existing_ pennies out of circulation, assuming the scrap value of the metal is less than the pennies' face value? (If the scrap value were higher than the face value, presumably the private sector would take the pennies out of circulation, and no government action would be required.)
    - mcpherrinm 12y ago
      If you didn't take them out of circulation, what would you do with them? Stores, banks, and people would be stuck with their piles of pennies. You'd end up with a situation like US dollar coins: Half-hearted attempts means nobody really bothers to switch. If every cash register in the country, and every person's pocket still has pennies in it, would people really start doing the five cent rounding? It would be a pretty poor currency user experience.
    - zAy0LfpBZLC8mAC 12y ago
      For the central bank, it doesn't matter what the face value is relative to the scrap value. If they take back a coin, they get both the face currency value _and_ the scrap value - in contrast to all other participants in the system who can only get one of those out of the coin (assuming melting it down was legal). When you return a cent coin to the central bank, you are simply depositing money in your account with the central bank - you give them one cent of cash, they give you one cent of account balance - and taking deposits does not somehow cost the bank the money that they take as a deposit. Now, the central bank is in the special position that it can create coins and bank notes, which is why they don't necessarily lose any money when they melt down the coin you gave them, as they can just mint a new one, presumably a cheaper one, and the amount of money they have won't change, except by the difference between the scrap value of the old coin and the cost of producing the new coin.
- JacobAldridge 12y ago
  I don't think they're buying them back, just re-circulating the currency in larger denominations.
  - rahimnathwani 12y ago
    Re-circulating the currency in larger denominations is the same as buying them back. In order for them to take 100 pennies out of circulation, they must compensate the owner with a dollar bill/coin (i.e. a larger denomination) or a dollar of bank credit.
    - deleted 12y ago
      [deleted]
    - eli 12y ago
      It's a funny sort of "buying" when you can print money. Be careful not to confuse the value of a coin with value of the metal the physical token contains.
      - rahimnathwani 12y ago
        Ah... I think your point is similar to paulgb's: "So if the metal in 100 pennies is worth more than the metal in a loonie they make a profit." Is that what you mean?
        eli 12y ago
        I think so... but the profit is a lucky bonus that happens because the coins we decided we don't want any more happen to have some intrinsic value. They would need to take the pennies back even if it was at a "loss" in terms of manufacturing cost vs recycled value.
    - vacri 12y ago
      No net currency value has taken place. Party A gives $1 in the form of 100 1c coins, Party B gives $1 in the form of 1 $1 coin. It's the same as when you give change to a stranger on the street - exchange two fives for a ten, and you're no better or worse off financially. You haven't bought anything, just exchanged for a more convenient set of tokens.
- eli 12y ago
  Well, they already decided to kill the penny. Might as well resell the raw metal rather than putting it in a landfill.
- lstamour 12y ago
  You missed two key facts: 1. They can't recover all the pennies, so the recovery estimate takes that into account. 2. The Mint already made the pennies, there's no need to buy them, just collect during the usual distributions to banks, and process them after.
- aarkling 12y ago
  Maybe they meant $42.5 million in profit?
JacobAldridge 12y ago
Good luck finding the 31 billion pennies still out there! Here in Australia we farewelled the 1 and 2 cent coins in the mid 1990s - I've moved house several times since then, and still find the occasional coin somewhere. And that doesn't even account for the hoards that have been tossed away as worthless. My only regret is that future generations won't understand why we ask police officers "What's the colour of a 2 cent piece?"
- maaku 12y ago
  Why do you ask police officers "What's the colour of a 2 cent piece?"
  - mig39 12y ago
    Copper?
    - maaku 12y ago
      Ah
  - lstamour 12y ago
    It's a song/chant marginally popular in Australia apparently? http://theroarforum.com/index.php?topic=2868.0 http://theroarforum.com/index.php?topic=2868.0 People sing it to Camptown Races. It's stuck in my head now. A variant answer is "dirty copper".
RossM 12y ago
Forgive my ignorance, but doesn't there need to be a minimum-value coin in circulation to facilitate transactions? For example, I go to a shop and buy something for £4.99 and pay with a £5.00 note - do I get any change in return?
- YokoZar 12y ago
  This is handled by rounding. In the US many businesses already opt out of pennies and just round things down to the nearest 5 cents. It's just an extension of the rounding they already do (for instance when an 8.5% sales tax is added to a 1 dollar purchase, the half cent will be rounded even when the business uses the penny). Interesting historical note is that when the US half penny was removed from circulation due to it being nearly useless, it was worth approximately 8 cents in today's money.
- kps 12y ago
  It depends. In Canada, legally, cash transactions may be rounded to the nearest 5 cents, so you wouldn't get change. In practice, many merchants round down, so you'd get 5 cents change.
- nandhp 12y ago
  Most places that have abolished low-denomination coins use Swedish rounding (or at least that's what Wikipedia calls it): when paying with cash, round to the nearest (sometimes this will be up, sometimes down) payable price. https://en.wikipedia.org/wiki/Swedish_rounding https://en.wikipedia.org/wiki/Swedish_rounding
- dobbsbob 12y ago
  Well there's GST+PST added in Canada depending on province so that $4.99 item would probably cost $5.58 then they round the price since the penny is gone, so $5.58 would be $5.60 Retailers are supposed to round up/down depending on amount but you will quickly find that everybody is rounding up unless you say something.
- dhughes 12y ago
  If you pay in cash it gets rounded up or down e.g. $1.03 becomes $1.05 if it's $1.02 it's $1.00 but if you pay via debit card or credit card it doesn't change. Here is the government's explanation http://www.cra-arc.gc.ca/gncy/lmntnpnny/menu-eng.html http://www.cra-arc.gc.ca/gncy/lmntnpnny/menu-eng.html
Ellipsis753 12y ago
Interesting. I wonder if anyone will fill empty warehouses with them and just sit tight and wait until they're no longer considered currency and so can be melted down (legally)?
cjfont 12y ago
> steel pennies will be drawn to magnets whereas the zinc and copper pennies will float. Float on water?
- adrianN 12y ago
  It works with aluminium, if you're careful https://www.youtube.com/watch?v=kJlRnCed0bY https://www.youtube.com/watch?v=kJlRnCed0bY
- city41 12y ago
  It said "and water tables composed of different chemicals" -- they will create a density that causes zinc and copper to float but not steel.
  - zAy0LfpBZLC8mAC 12y ago
    Which is somewhat nonsensical, of course - they can already separate out the steel pennies magnetically, and it would be pretty pointless to have all of the remaining pennies after that separation step float. If anything, they'll have the less dense non-steel float and the denser non-steel sink.
hippich 12y ago
I am not getting why they are doing it at all? Why not let existing pennies to exist? They mentioned it costs 1.6c to create 1p coin, but it costs 0.0c to keep existing 1p coins...
- sdrothrock 12y ago
  It's right in the title: recycling. They get the materials out of pennies that nobody can use anymore.
  - Naga 12y ago
    They are still legal tender actually, and stores still accept them. They are just uncommon now.
- lstamour 12y ago
  Because they can make money off the pennies by recycling them, it costs them the metal worth of the pennies they choose not to recycle. There are also productivity benefits if people don't have to count pennies during transactions. And it's a highly visible action the federal government can take to show it still exists to people who don't read newspapers (like me). I'm sure there are other reasons, but pinning the penny as a "drag on the economy," probably tops the list after the obvious, "I pay taxes to keep the penny in circulation? Why didn't they recycle it?"
- vacri 12y ago
  Small denominations also cost more to handle, for vendors, banks, any one that handles cash, really.
- peeters 12y ago
  Besides the opportunity cost of not reclaiming pennies for recycling, another issue is that pennies, more so than any other denomination, fall out of circulation quickly. That's because people don't tend to keep them in their pocket like most loose change; they end up in a jar somewhere. So by deciding not to mint new coins, you're still signing the penny's death warrant. But you condemn it to a slow, messy death. Stores gradually aren't able to acquire the pennies they need to make change on purchases, as the existing coins fall out of circulation. Eventually the day comes where you need to change the way cash transactions work, because it makes no practical sense to consider the penny a currency. So why delay? Instead, the government flipped the off switch and gave the penny a quick death. Of course, Canadians can still take their pennies to the bank and trade up for a valid denomination.

"estimated 31 billion pennies that are still in circulation" "The Finance Department of Canada estimates that melting down the metal from the pennies and reselling it in the industrial sector will bring in $42.5 million in revenue." So, they're going to buy $310m worth of pennies, melt them down, and sell them for $42.5m? That doesn't seem like a worthwhile exercise.

paulgb 12y ago
Well, if they take $310 million in currency out of circulation, they can mint (say) 310 million loonies without devaluing the currency. So if the metal in 100 pennies is worth more than the metal in a loonie they make a profit.
NortySpock 12y ago
They'll save money in the long run in not printing the pennies at a loss. Also, by buying them back from the banks it's the government that takes the hit for the cost of de-circulating the penny, rather than the banks or the consumer. If private industry were taking the hit, people would fight tooth and nail against retiring the penny.
- rahimnathwani 12y ago
  I understand that it might make sense to stop printing new pennies, but how does the central bank benefit by taking the _existing_ pennies out of circulation, assuming the scrap value of the metal is less than the pennies' face value? (If the scrap value were higher than the face value, presumably the private sector would take the pennies out of circulation, and no government action would be required.)
  - mcpherrinm 12y ago
    If you didn't take them out of circulation, what would you do with them? Stores, banks, and people would be stuck with their piles of pennies. You'd end up with a situation like US dollar coins: Half-hearted attempts means nobody really bothers to switch. If every cash register in the country, and every person's pocket still has pennies in it, would people really start doing the five cent rounding? It would be a pretty poor currency user experience.
  - zAy0LfpBZLC8mAC 12y ago
    For the central bank, it doesn't matter what the face value is relative to the scrap value. If they take back a coin, they get both the face currency value _and_ the scrap value - in contrast to all other participants in the system who can only get one of those out of the coin (assuming melting it down was legal). When you return a cent coin to the central bank, you are simply depositing money in your account with the central bank - you give them one cent of cash, they give you one cent of account balance - and taking deposits does not somehow cost the bank the money that they take as a deposit. Now, the central bank is in the special position that it can create coins and bank notes, which is why they don't necessarily lose any money when they melt down the coin you gave them, as they can just mint a new one, presumably a cheaper one, and the amount of money they have won't change, except by the difference between the scrap value of the old coin and the cost of producing the new coin.
JacobAldridge 12y ago
I don't think they're buying them back, just re-circulating the currency in larger denominations.
- rahimnathwani 12y ago
  Re-circulating the currency in larger denominations is the same as buying them back. In order for them to take 100 pennies out of circulation, they must compensate the owner with a dollar bill/coin (i.e. a larger denomination) or a dollar of bank credit.
  - deleted 12y ago
    [deleted]
  - eli 12y ago
    It's a funny sort of "buying" when you can print money. Be careful not to confuse the value of a coin with value of the metal the physical token contains.
    - rahimnathwani 12y ago
      Ah... I think your point is similar to paulgb's: "So if the metal in 100 pennies is worth more than the metal in a loonie they make a profit." Is that what you mean?
      - eli 12y ago
        I think so... but the profit is a lucky bonus that happens because the coins we decided we don't want any more happen to have some intrinsic value. They would need to take the pennies back even if it was at a "loss" in terms of manufacturing cost vs recycled value.
  - vacri 12y ago
    No net currency value has taken place. Party A gives $1 in the form of 100 1c coins, Party B gives $1 in the form of 1 $1 coin. It's the same as when you give change to a stranger on the street - exchange two fives for a ten, and you're no better or worse off financially. You haven't bought anything, just exchanged for a more convenient set of tokens.
eli 12y ago
Well, they already decided to kill the penny. Might as well resell the raw metal rather than putting it in a landfill.
lstamour 12y ago
You missed two key facts: 1. They can't recover all the pennies, so the recovery estimate takes that into account. 2. The Mint already made the pennies, there's no need to buy them, just collect during the usual distributions to banks, and process them after.
aarkling 12y ago
Maybe they meant $42.5 million in profit?

JacobAldridge 12y ago

Good luck finding the 31 billion pennies still out there! Here in Australia we farewelled the 1 and 2 cent coins in the mid 1990s - I've moved house several times since then, and still find the occasional coin somewhere. And that doesn't even account for the hoards that have been tossed away as worthless. My only regret is that future generations won't understand why we ask police officers "What's the colour of a 2 cent piece?"

maaku 12y ago
Why do you ask police officers "What's the colour of a 2 cent piece?"
- mig39 12y ago
  Copper?
  - maaku 12y ago
    Ah
- lstamour 12y ago
  It's a song/chant marginally popular in Australia apparently? http://theroarforum.com/index.php?topic=2868.0 http://theroarforum.com/index.php?topic=2868.0 People sing it to Camptown Races. It's stuck in my head now. A variant answer is "dirty copper".

RossM 12y ago

Forgive my ignorance, but doesn't there need to be a minimum-value coin in circulation to facilitate transactions? For example, I go to a shop and buy something for £4.99 and pay with a £5.00 note - do I get any change in return?

YokoZar 12y ago
This is handled by rounding. In the US many businesses already opt out of pennies and just round things down to the nearest 5 cents. It's just an extension of the rounding they already do (for instance when an 8.5% sales tax is added to a 1 dollar purchase, the half cent will be rounded even when the business uses the penny). Interesting historical note is that when the US half penny was removed from circulation due to it being nearly useless, it was worth approximately 8 cents in today's money.
kps 12y ago
It depends. In Canada, legally, cash transactions may be rounded to the nearest 5 cents, so you wouldn't get change. In practice, many merchants round down, so you'd get 5 cents change.
nandhp 12y ago
Most places that have abolished low-denomination coins use Swedish rounding (or at least that's what Wikipedia calls it): when paying with cash, round to the nearest (sometimes this will be up, sometimes down) payable price. https://en.wikipedia.org/wiki/Swedish_rounding https://en.wikipedia.org/wiki/Swedish_rounding
dobbsbob 12y ago
Well there's GST+PST added in Canada depending on province so that $4.99 item would probably cost $5.58 then they round the price since the penny is gone, so $5.58 would be $5.60 Retailers are supposed to round up/down depending on amount but you will quickly find that everybody is rounding up unless you say something.
dhughes 12y ago
If you pay in cash it gets rounded up or down e.g. $1.03 becomes $1.05 if it's $1.02 it's $1.00 but if you pay via debit card or credit card it doesn't change. Here is the government's explanation http://www.cra-arc.gc.ca/gncy/lmntnpnny/menu-eng.html http://www.cra-arc.gc.ca/gncy/lmntnpnny/menu-eng.html

Ellipsis753 12y ago

Interesting. I wonder if anyone will fill empty warehouses with them and just sit tight and wait until they're no longer considered currency and so can be melted down (legally)?

cjfont 12y ago

> steel pennies will be drawn to magnets whereas the zinc and copper pennies will float. Float on water?

adrianN 12y ago
It works with aluminium, if you're careful https://www.youtube.com/watch?v=kJlRnCed0bY https://www.youtube.com/watch?v=kJlRnCed0bY
city41 12y ago
It said "and water tables composed of different chemicals" -- they will create a density that causes zinc and copper to float but not steel.
- zAy0LfpBZLC8mAC 12y ago
  Which is somewhat nonsensical, of course - they can already separate out the steel pennies magnetically, and it would be pretty pointless to have all of the remaining pennies after that separation step float. If anything, they'll have the less dense non-steel float and the denser non-steel sink.

hippich 12y ago

I am not getting why they are doing it at all? Why not let existing pennies to exist? They mentioned it costs 1.6c to create 1p coin, but it costs 0.0c to keep existing 1p coins...

sdrothrock 12y ago
It's right in the title: recycling. They get the materials out of pennies that nobody can use anymore.
- Naga 12y ago
  They are still legal tender actually, and stores still accept them. They are just uncommon now.
lstamour 12y ago
Because they can make money off the pennies by recycling them, it costs them the metal worth of the pennies they choose not to recycle. There are also productivity benefits if people don't have to count pennies during transactions. And it's a highly visible action the federal government can take to show it still exists to people who don't read newspapers (like me). I'm sure there are other reasons, but pinning the penny as a "drag on the economy," probably tops the list after the obvious, "I pay taxes to keep the penny in circulation? Why didn't they recycle it?"
vacri 12y ago
Small denominations also cost more to handle, for vendors, banks, any one that handles cash, really.
peeters 12y ago
Besides the opportunity cost of not reclaiming pennies for recycling, another issue is that pennies, more so than any other denomination, fall out of circulation quickly. That's because people don't tend to keep them in their pocket like most loose change; they end up in a jar somewhere. So by deciding not to mint new coins, you're still signing the penny's death warrant. But you condemn it to a slow, messy death. Stores gradually aren't able to acquire the pennies they need to make change on purchases, as the existing coins fall out of circulation. Eventually the day comes where you need to change the way cash transactions work, because it makes no practical sense to consider the penny a currency. So why delay? Instead, the government flipped the off switch and gave the penny a quick death. Of course, Canadians can still take their pennies to the bank and trade up for a valid denomination.