Published March 1, 1992 | March 1992 issue
It fills pockets and purses...but doesn't buy a thing. Yet we can't seem to do without itthe penny.
The following thoughts on the penny, the coin we love to hate, are reprinted from Penny Points, a publication of the Federal Reserve Bank of Boston.
The penny is an American favorite. No other coin has figured as prominently in the popular idiom and imagination. Ben Franklin reminded his readers that, "A penny saved is a penny earned," and according to the songwriters of Tin Pan Alley, clouds contain "pennies from heaven." Back in the days when things were cheaper and the pace of life was slower, kids walked to the corner store to buy penny candy, people amused themselves on summer Sundays at the penny arcade, and friends offered "a penny for your thoughts."
Even today, a person who is reluctant to spend money is known as a "penny-pincher," and someone who practices false economy is said to be "penny wise and pound foolish." Millions of people still keep a "lucky penny" tucked away somewhere, and penny jars of all sizes sit on shelves and countertops in kitchens all across America.
Indeed, the penny was so popular during the 1970s that merchants and bankers throughout the country experienced periodic penny shortages. A variety of factors were responsible for the penny shortages. Speculators hoarded pennies in the hope that copper prices would eventually increase enough to make a pound of copper cents worth more than the coins' face value. Would-be coin collectors, having missed their chance on gold and silver coins, believed that copper pennies would someday have numismatic value. Aesthetes simply liked the look of copper-colored coins in clear glass penny jars.
Of all the people who hoarded pennies during the 1970s, the lovers of beauty suffered the least amount of disappointment. The general consensus among coin dealers is that copper pennies are too commonplace to appreciate very much in value. From 1959 through 1981, the Mint produced more than 130 billion copper pennies.
Copper speculators were also in for a letdown because in 1982 the Mint introduced a penny that is 97.6 percent zinc and only 2.4 percent copper. (By comparison, the old pre-1982 copper pennies were 95 percent copper and 5 percent zinc.) The copper-plated zinc penny is identical in size and appearance to its copper counterpart, but the current cent is 19 percent lighter. A 5000-piece bag of copper pennies weighs 34 pounds, whereas the same size bag of zinc-alloy pennies tips the scales at 28 pounds.
The "new" penny has been a tremendous success. Since its introduction in 1982, penny shortages have become a thing of the past. The copper-plated, zinc alloy pennies are also less expensive to mint. Based on 1988 figures, a zinc penny costs 6/10 cent to manufacture, compared to 8/10 cent for the old copper coin.
The word penny is probably derived from Penda, the name of an eighth-century English (Mercian) king who coined a piece of money called the penig or pennig.
The U.S. Mint in Philadelphia coined one-cent and half-cent pieces from six pounds of copper, the first metal purchased for coinage by the federal government. The one-cent pieces, called large cents, approximated the present-day quarter size. Between 1793 and 1857, they were minted in a variety of designs. All the designs, however, shared a common attribute because the Coinage Act of 1792 decreed that each coin feature "an impression emblematic of Liberty," a mythical female figure who appeared as a symbol of America in colonial cartoons and prints.
The smaller Eagle cent replaced the large cent. Production of half- cents was discontinued entirely.
The Indian Head cent (1859-1909) was one of the first American coins to capture the public's imagination. James B. Longacre, the Mint's chief engraver, offered mid-nineteenth century Americans a refreshing alternative to the classical Greco-Roman influences that characterized so many of the Mint's earlier efforts. According to legend, an Indian chief inspired the coin's portrait when he visited the Philadelphia Mint and placed his feathered bonnet upon the head of Longacre's young daughter, Sarah. Actually, the portrait bears a closer resemblance to Liberty wearing a headdress.
The Lincoln penny commemorated the centennial of Abraham Lincoln's birth. It was the first regular-issue U.S. coin to bear the portrait of an actual American.
A wartime copper shortage prompted the introduction of a zinc-coated steel penny. The coin, however, proved so unpopular that the Mint soon resumed production of the copper cent. Pennies minted in 1944 and 1945 were struck from the metal of salvaged cartridge cases.
The reverse of the Lincoln penny was redesigned to commemorate the 150th anniversary of Lincoln's birth. A view of the Lincoln Memorial replaced the 1909 design that featured simple lettering set off by plumes of grain.
The Mint introduced the copper-plated zinc penny. It was the first copper-plated coin ever produced by the U.S. Mint.
The U.S. Mint produced 12.6 billion pennies during 1989. The copper- plated, zinc alloy penny is currently the only one-cent piece being produced. The copper penny has been completely discontinued.
That's the number of pennies scheduled to be minted in 1992about 70 percent of the total volume of new coins. (By comparison, only 1 billion nickels and 1.4 billion dimes will be produced.) And most of those pennies will replace coins that end up on tops of bureaus, in coffee cans, stuck under chair cushions or just generally squirreled away in forgotten places.
In 1991, the Minneapolis Fed provided 420 million pennies to depository institutions in the Ninth District, while district institutions deposited only 240 million excess pennies in the Fed's vault, prompting the Cash Services Department to order nearly 137 million new pennies to meet customers' demands in 1992.
Due to inflation each penny is worth only about one-seventh of its original 1792 value in today's economy; nonetheless, it pays for the Treasury to continue minting the penny.
In fact, eliminating it would not save the Treasury money and would eventually cost the taxpayers. The Treasury actually produces pennies at a profit, which goes toward reducing the national debt. That profit comes from the difference between the face value of a coin and the value of its metal content, known as seigniorage.
This is how it works: The Federal Reserve banks credit the Treasury for the face value of the coins when they are put into circulation. The Reserve banks then collect from financial institutions as they order coins. Even after production and transportation costs are added up, the Treasury still earns money by producing pennies. For example, penny production in 1989 netted the Treasury about $42.4 million.
But it's not just the Treasury that wants to retain the penny. According to a 1990 study entitled National Coinage Proposals prepared by the U.S. General Accounting Office, the American public has a sentimental attachment to the penny.
The study, prepared in response to legislation introduced in Congress to eliminate the penny, surveyed members of the general public and representatives of public interest associations, vending machine operators, state sales tax authorities and others directly affected by proposed legislation.
Some respondents said the penny is part of America's heritage and should be retained for that reason alone. And public interest groups expressed concerns that if the penny were eliminated, the resultant rounding-up or price increases would unfairly burden the poor.
Others surveyed thought the penny could be eliminated because of its limited buying power and inconvenience and that without it cash register transactions would move faster.
But the negatives outweighed the positives in the long run and the study concluded that "there is no compelling reason to eliminate the penny."
With a Mint estimate of more than 136 billion pennies in circulation, it is clear that the penny will not disappear any time soon.