Maybe instead of getting rid of the penny, we should simply redenominate the currency. You simply issue new versions of every denomination of currency and declare that their legal value is 100x the value of the old counterpart. So the new penny is legally worth an old dollar. Think of it as “US dollar v. 2.0.”
People get antsy when you suggest this sort of thing, as often it’s seen in countries experiencing hyperinflation. But it need not be. Countries with perfectly healthy economies could benefit to redenominate their currency every century or so. Even modest rates of inflation add up over time. If you want your currency’s value to remain reasonable, (ex: to avoid having to pay a million dollars for a cheeseburger some day.), eventually you do have to redonominate your currency.
Rationally, there’s really no reason not to do it. I wonder if it’s pride more than anything else that prevents us from doing it more often. It would be quite a mental adjustment to go from having a salary of $100k per year in the old system to $1,000 a year in the new one. Maybe that can’t help but make people feel smaller in some way? Even if rationally you can know that you haven’t lost anything, would you still feel poorer if you used to make $100k, but now only make 1k?
Nah. Your government is doing the right thing here.
Two reasons to not redenominate currency:
It’s messy. The old and new coins need to coexist for some time, and people get confused. Specially bad in the presence of disingenuous = dumb = malicious actors; picture your typical Karen saying “it doesn’t specify in which currency it should be, so I’m entitled to pay it in the old currency! I DEMAND TO TALK WITH YOUR MANAGER!!!”.
It’s costly. Reprinting all money would cost more than just stop minting the lowest value coins, and slowly remove them from circulation (as they hit the banks).
Because of both things, you’ll only see redenomination without hyperinflation once in a blue moon; it’s simply not worth the trouble, unless you’re cutting off three zeroes or more at once. Also, note trying to solve one of the issues makes the other worse.
Source: I’ve seen my country’s currency being redenominated twice. (Technically four times, but I was too young to remember two of them.)
Maybe instead of getting rid of the penny, we should simply redenominate the currency. You simply issue new versions of every denomination of currency and declare that their legal value is 100x the value of the old counterpart. So the new penny is legally worth an old dollar. Think of it as “US dollar v. 2.0.”
People get antsy when you suggest this sort of thing, as often it’s seen in countries experiencing hyperinflation. But it need not be. Countries with perfectly healthy economies could benefit to redenominate their currency every century or so. Even modest rates of inflation add up over time. If you want your currency’s value to remain reasonable, (ex: to avoid having to pay a million dollars for a cheeseburger some day.), eventually you do have to redonominate your currency.
Rationally, there’s really no reason not to do it. I wonder if it’s pride more than anything else that prevents us from doing it more often. It would be quite a mental adjustment to go from having a salary of $100k per year in the old system to $1,000 a year in the new one. Maybe that can’t help but make people feel smaller in some way? Even if rationally you can know that you haven’t lost anything, would you still feel poorer if you used to make $100k, but now only make 1k?
Nah. Your government is doing the right thing here.
Two reasons to not redenominate currency:
Because of both things, you’ll only see redenomination without hyperinflation once in a blue moon; it’s simply not worth the trouble, unless you’re cutting off three zeroes or more at once. Also, note trying to solve one of the issues makes the other worse.
Source: I’ve seen my country’s currency being redenominated twice. (Technically four times, but I was too young to remember two of them.)
Sounds logical, but emotionally I’m repelled. Anyone know economics can speak to this?