by Brad Moon | February 4, 2013 12:10 pm
Today is the end of an era in Canada.
It has nothing to do with maple syrup, hockey or even the switch from “Research In Motion” to BlackBerry (NASDAQ:BBRY). No, today marks the day the Royal Canadian Mint stops releasing the penny.
If you’re doubting that this is big news, well, the occasion was marked in Canada with a Google (NASDAQ:GOOG) Doodle … so there.
The copper-colored one-cent coin was first introduced in Canada in 1876. You can buy one from that year in good condition on eBay (NASDAQ:EBAY) for $6.99 right now, although if you were to make that purchase in Canada, the final tally (once sales tax was added) would either be rounded up or down to the nearest five cents. Unless you’re paying with plastic, in which case the penny lives on … at least virtually.
Psychologically, it’s traumatic to eliminate an entire currency denomination. Although the penny hasn’t been relevant for years (I’m well into my 40s and even I don’t remember penny candy), taking the step of physically eliminating the coin drives home a point that we all know — stuff is way more expensive now than it used to be. From the Canadian government’s perspective, the penny has long been a pain in the butt as well. It costs 1.6 cents to manufacture each of the coins — which haven’t been made of copper in this country since 1996, when they were switched first to zinc, then steel (with copper plating). And most of them seem to end up in big jars that terrify bank tellers when they’re finally wheeled into the branch to cash in. Now, the Mint will just melt them down as they’re turned in.
At face value, 20 pounds of Canadian pennies will net you somewhere around $50 to $60, depending on the year each penny was made. That would have bought a Canuck around 100 or so McDonald’s (NYSE:MCD) Big Macs (drawing on the infamous “Big Mac Index” for inspiration) in 1975. Today that huge jar of pennies will net 11 or so Big Macs. When we’ve reached a point hoarding, then lugging 20 pounds of coins to the bank, dealing with the teller who will be less than thrilled by your transaction (or paying a percentage to dump them in a machine) nets you only 11 Big Macs, it’s just not worth the effort anymore. Clearly, it was time for the penny to go.
The Royal Canadian Mint has been on a roll when it comes to shaking up Canadian currency. In 1987, Canada lost its one-dollar bill to a gold-colored coin known here as the “Loonie.” That was so successful that in 1996, the two-dollar bill met a similar fate, being replaced by the “Toonie.” Trust me, it is much more satisfying to cash in a big jar of loonies and toonies than pennies. And before you get too smug about Canadians walking around with half a pound of change in their pockets, the U.S. government has been watching the success closely, with Congress reportedly mulling doing the same thing with the American dollar bill and possibly saving $4 billion over the next 30 years in the process. If that happens, watch out for your penny, it could be next!
Of course, not everything the Royal Canadian Mint does has turned out exactly as planned. For example, we’re currently dealing with the embarrassment of the new 20-dollar bill. Made of plastic, it was supposed to be virtually indestructible, while thwarting counterfeiters. Unfortunately, it has a habit of shriveling up into a hard ball when heated; good luck getting a store to accept it in that condition. And to add national insult to injury, the Mint accidentally printed the bills with a Norway maple leaf — an invasive species not native to Canada — instead of the traditional Canadian Maple Leaf.
Rumor has it the five-cent coin (the nickel) may be next on the chopping block. Apparently the Royal Canadian Mint hasn’t quite finished the job of illustrating the effects of inflation for Canadian consumers.
If all the players could just sit down and figure out this whole mobile payment thing, the day could come when all those coins go away for good and we could stop chopping denominations altogether, but in the meantime, if your dollar bill disappears or you see an end of the $0.99 price tags in stores, blame Canada.
Source URL: http://investorplace.com/2013/02/are-canadian-pennies-now-an-investment-opportunity/
Short URL: http://investorplace.com/?p=301618
Copyright ©2013 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.