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Scrap the penny, nickel and 5 dollar bill
by Roma Luciw

More than a year after it called for the penny to be scrapped, Desjardins Group says the government should also banish the nickel, replace the $5 bill with a coin, and think about creating a $200 bill.

If the Desjardins economists had their way, the typical Canadian loose change drawer – and wallet – would soon look pretty different.

“As prices rise in an economy, one of the normal adjustments the government must make is to change the denominations of both coins and bank notes,” Jean-Pierre Aubry, an economic consultant who co-authored the Desjardins study, said in an interview.

The study, issued by the Quebec financial institution on Wednesday, calls on Ottawa to re-examine the usefulness of the coins and notes circulating now and to come up with a long-term plan for replacing them with cheaper, more practical alternatives.

The Desjardins study suggests Canada start off by “promptly” removing the one-cent coin from circulation. The group first issued a report last February saying that one-cent coins are costing Canadian society at least $130-million a year.

The penny, which is increasingly obsolete, has so little purchasing power today that people either routinely refuse to take it as change or have taken to hoarding it, Mr. Aubry said. “These coins do not return to the system. That is a sign that they must be removed,” he said.

After ditching the penny, Ottawa should retire the five-cent coin and replace the $5 bill with a coin of the same value, Desjardins said. The next logical step would be to introduce a new series of smaller and lighter low-denomination coins, such as 10 cents, 20 cents and 50 cents, as was done in New Zealand. Given the small size of the current dime, the Canadian government could opt to keep it.

Not only should the $5 bill be replaced with a coin, but a new series of $1, $2 and $5 coins could be introduced, ones that are lighter and smaller than their predecessors.

“Imagine removing the one-cent coin or the five-cent coin and introducing the $5 coin. Then you can think about having smaller coins that are worth more but that have less weight,” Mr. Aubry said. “So we want Canadians to think about where we want to end up 10 or 25 years down the road.”

The Desjardins study also suggests that every five years the government “evaluate the merits” of introducing a $200 bill, taking into account the other means of payment — such as debit and credit cards, cheques, bank transfers — while also weighing potential repercussions related to illegal activities like money laundering and counterfeiting.

The great Canadian penny debate was reignited two weeks ago, when NDP member of Parliament Pat Martin introduced a private member's bill that calls for the elimination of the lowly coin from Canada's monetary system by the start of 2009. Scrapping the penny, which was at one time made mostly of copper but is now composed largely of steel, would save millions each year, Mr. Martin said.

Dalton McGuinty, the Premier of Ontario, supported Mr. Martin's bill, saying it makes sense for Canadians who want change by getting less change in their pockets.

Any decision on whether to change bills or coins – including scrapping or keeping the penny – rests with Finance Minister Jim Flaherty, who said earlier this month that he is not interested in eliminating the one-cent coin right now.

A call to the Ministry of Finance was not immediately returned on Wednesday.

The Royal Canadian Mint says it costs 0.8 of a cent to make a penny. A 2007 study by the mint found that most small retailers are slightly in favour of removing the penny while consumers are divided on the issue. For many Canadians, the penny is an integral part of this country's past.

That, according to Mr. Aubry, is no reason to hang on to a currency that buys almost nothing. “A currency is something important for a nation, but it should be beautiful and meaningful [and] it should also be useful. If we let people throw away coins or not use them, it generates disrespect.”
 



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