Five-cent coin on borrowed time

OK, the penny has been gone for more than a year now.

I know that technically the coin should be called the one-cent piece and the penny is British, but the Royal Canadian Mint itself has endorsed the use of the word penny and that’s good enough for me.

Before the coin was eliminated, even before it was being discussed by government officials, the RCM released a study on the coin which shows it was a drain on the Canadian economy. Now while I don’t deny that the penny was inefficient and not cost effective, I always thought the study, prepared by Desjardins Group, was less than impartial. It was sort of trying a bit too hard to make a case that was pretty much self-evident.

One place where it did hit the nail on the head was that members of the public would be concerned about losing money if savvy businesses adjusted their pricing to make sure most rounded transactions were in their favour.

To me, that always seemed a little hard to imagine. It just seemed like a lot of work for a fairly small return, and rounding is applied after shopping baskets are totalled and taxes are added. The number of variables to manage is mind boggling.

But, I have to admit, the suspicion was always there in my mind. What’s more, several of my friends were determined that businesses were making a killing by pocketing the increased profit margin.

“They can figure this out, they have computers,” a friend of mine said.

Well, my knowledge of computer programming implies that computers are really good at doing stuff, once the programmer figures out how to manage all the variables.

But now, today, I think the matter is probably at rest.

Roger Guitar, of Montreal, has been saving his cash receipts for a year. Using that information, at least according to a recent CBC News report, he was able to figure out that after a year, he is 89 cents richer.

Now that number isn’t absolute, since it seems to go up and down quite a bit. At one point he was down 23-cents.

With that kind of variance, I doubt if Guitar proved if there is a profit or loss in the long run. What he did prove is that, after a year of spending, any possible gain or loss is relatively insignificant.

Of greater significance is the chance that the five-cent coin doesn’t have much time left in our pockets.

Today, a five-cent coin has the same purchasing power as a penny did in 1954, that’s not just because it is now the lowest value coin; I determined that using a United States government inflation calculator.

The Desjardins Group figured the one-cent coin lost its usefulness sometime in the early 1980’s, so that gives the five-cent maybe 30 years.

Back when the Canadian Senate National Finance Committee was looking at nuking the cent, a representative from the Canadian Automatic Merchandising Association, a fancy name for vending machine owners, recommended doing away with the nickel at the same time.

It has worked. New Zealand eliminated its five-cent piece in 2006, and the Royal Australian Mint recommended the same move in 2011. At this time, rounding to the nearest 10-cent increment is the norm in New Zealand, Hong Kong and China, Sweden has even gone further. While there 100 ore to the Swedish krona and the ore remains a unit of accounting and is used in pricing. But since 2012 the smallest coin is the one-krona and all cash transactions are rounded off to the nearest unit. I presume that nothing is priced at less than 50 ore.

All of this reinforces the fact that, like the penny, the nickel is doomed to be eliminated.

Of course, I reckon that change is at least a decade away, but I have been wrong before.

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