What Happened to the Penny

Most people don't bother picking up a penny. You see one on the ground and you keep walking. It's not worth the bend. Maybe someone left it as an offering to the universe, or maybe it just fell out of a pocket. Either way, it stays there.

A hundred years ago, you would have stopped.

In 1913, a penny didn't just have symbolic value. It was money that worked. A penny bought a newspaper. A penny bought a stamp. A penny bought a piece of candy, a ride on the streetcar, or your share of a dozen eggs from the farmer. Five pennies bought a beer. Ten bought a meal. The penny was the coin of everyday life—the way a five-dollar bill might be today. It had to be worth picking up because it could buy something real.

The penny didn't change. It still has "one cent" stamped on it. It still has Lincoln on the front. But the penny didn't change, and that's exactly the problem. The dollar did.

What a penny used to buy

To understand what happened, let's start with specifics. In 1913, a penny was thick. Solid. Mostly copper—a metal that had value. That single cent could purchase things that seem almost fantastic now:

This wasn't a smooth decline. It was a visible, measurable erosion of purchasing power across your great-grandparents' lifetimes, your grandparents' lifetimes, and into yours. Each decade the penny bought less. Each decade people's behavior adjusted. First people picked up dropped pennies. Then they stopped. Then stores had to literally pay people not to use them, with "round down" promotions. Then the penny became invisible—a unit of account that didn't correspond to anything you could actually hold and spend.

The penny wasn't broken. The dollar was.

The coin that costs more than itself

Today the situation has reached an absurdity so complete it should be funny, except it's not funny because it reveals something true about the entire system.

In 2024, the US Mint released data on the cost to produce its coins. It costs approximately 3.69 cents to manufacture a single 1-cent penny. The Mint loses money on every one it makes. The material cost alone—copper plating, zinc, labor, equipment, distribution—exceeds the coin's face value by more than 200 percent.

In 2023, the US Mint produced roughly 4 billion pennies. At a loss of about 2 cents each, that's approximately $85 million per year in pure operating loss. Not opportunity cost. Not inflation adjustment. Just: the government cannot afford to manufacture its smallest unit of currency.

This wasn't always the case. Before 1982, the penny was 95 percent copper. An ounce of copper then was worth less than an ounce of copper today, but it was still valuable. The penny had intrinsic worth. You couldn't simply extract more value from the coin than its face value implied, at least not easily.

In 1982, the government switched. The modern penny is 97.5 percent zinc with a thin copper plating—a sandwich made of the cheapest metals the Mint could use while keeping the penny visually recognizable. Even the plating is now viewed as a waste. The copper layer serves almost no purpose except tradition and manufacturing habit.

Why zinc? Because copper became too expensive. And what happened next is predictable: people who understood the arbitrage—that pre-1982 pennies contained 2-3 cents of metal—started hoarding them, sorting them by date, pulling them out of circulation. Some people melted them down. The government's response was to make the penny cheaper, which made it worth even less, which made fewer people want it, which made the Mint need to produce even more of them to keep people from getting rid of them entirely.

This is the death spiral of a currency unit. First it loses purchasing power. Then it becomes inconvenient. Then the government tries to keep it alive by making it cheaper to produce, which accelerates the purchasing power loss, which accelerates the inconvenience. Each step generates a new problem that requires a new (worse) solution.

The half-cent precedent

This isn't new, and the US government has faced this exact problem before. They chose to solve it by simply eliminating the coin.

The United States minted a half-cent coin from 1793 to 1857. For 64 years, the half-penny was legal tender. It had its own denominations. Merchants used it. Commerce relied on it. And then one day, the government looked at the data, realized that inflation had made the half-cent so small it no longer served any practical purpose, and stopped minting it. No announcement. No debate. They just discontinued it.

The purchasing power of that half-cent in 1857? Using modern price indices, it was equivalent to roughly 16 cents today. That's nearly as much as a modern dime, and significantly more than a modern penny, nickel, or quarter in terms of what it could actually buy.

In other words: the half-cent was eliminated when it was more valuable than today's penny. The government decided the denomination had become too small to justify. By that same standard, we should have eliminated the penny decades ago. We should probably eliminate the nickel and dime while we're at it.

So why haven't we? Inertia is part of it. Lincoln nostalgia is part of it. The zinc lobby—yes, there are companies whose profit depends on the penny continuing to exist—accounts for some opposition. But there's a deeper reason: eliminating the penny would make something visible that we've all agreed to ignore. It would force an accounting.

As long as the penny exists, we can pretend the dollar's fundamental unit still means something. We can pretend our smallest coin still represents a tiny quantum of real value, even though it doesn't. Remove the penny and you've made the collapse of purchasing power impossible to deny. You've drawn a line and admitted that everything below it is worthless. That's politically difficult. It's much easier to keep printing pennies at a loss and pretend the problem will go away.

What gold tells you

Let's apply the gold framework from the housing essay to the penny, because the numbers are illuminating.

In 1913, when gold was officially $20.67 per ounce, a single penny represented approximately 1/2000th of an ounce of gold. That fraction might seem absurdly small, but let's see what it's worth today.

One-two-thousandth of an ounce of gold, at today's price near $4,560 per ounce, is worth approximately $2.28. That's the gold-equivalent penny. If we had maintained the penny at its 1913 relationship to gold, the smallest coin in your pocket today would be worth roughly two dollars.

Think about what that means. The "real" purchasing power of a penny, if we measured it in gold, never changed. It's still one-two-thousandth of an ounce. But the dollar measurement? That tells a completely different story. The one-cent denomination now represents less than 1% of what it represented in gold-standard terms. This isn't because the penny changed. It's because the unit it's denominated in—the dollar—changed by a factor of 221.

Or flip it another way: what's the 2026 equivalent of a 1913 penny? Using the Consumer Price Index, CPI inflation puts that penny at roughly 32 cents in modern dollars. Using gold, that same penny is worth $2.28. The truth is somewhere in that range—the penny has lost 97% of its purchasing power by the conservative estimate, or close to 99% by the gold measure. Either way, the story is the same. The penny is a ghost.

What's happening internationally

The penny problem isn't unique to the United States, and other countries have already made the choice America keeps avoiding.

Canada eliminated the penny in 2013. Australia dropped theirs in 1992. New Zealand followed in 1990. Across the European Union, countries have either rounded to the nearest 5 cents or eliminated their lowest denominations entirely. Even countries that once had vibrant small-coin cultures have concluded the same thing: at a certain level of inflation, you can't afford to mint coins that don't represent anything.

These countries didn't collapse. Commerce didn't grind to a halt. Prices were rounded fairly—usually in the consumer's favor—and life went on. The transition took months. Within a year, nobody remembered what the old coin looked like.

The US has done the same thing before. We got rid of the half-cent. We got rid of the two-cent piece. We got rid of the three-cent coin. We got rid of the twenty-cent coin. Every time, the world spun on. Every time, people adjusted. And every time, the existence of those coins had masked an underlying erosion of the dollar's value.

The penny is next. It's mathematically inevitable. The only question is whether we'll eliminate it voluntarily, like Canada did, or whether we'll let it die slowly through pure economic irrelevance, continuing to produce 4 billion of them a year at an $85 million loss.

What it all means

The penny is a tiny object — 2.5 grams, 19 millimeters across. But it's a window into something much larger. It's a physical, tangible record of what happened to the dollar.

Nobody planned the penny's obsolescence. No government official sat down in 1913 and said "in 113 years we'll make these things worthless." It happened through thousands of small decisions: print more dollars to fund a war, then another war, then a social program, then another. Each increment seemed reasonable in isolation. Each seemed temporary. But compounded over a century, through the Korean War and Vietnam and the Great Society and the financial crisis and the pandemic, the result was inevitable: the smallest coin would become worthless.

This is how inflation works in practice. It doesn't arrive as a sudden catastrophe. It arrives as slow irrelevance. The penny was just the first to become irrelevant. The nickel will be next. Then the dime. At some point, the dollar itself becomes the penny—a unit of account that technically exists but that nobody bothers picking up off the ground.

That's not alarmism. That's just division. If the penny lost 99% of its purchasing power in 113 years, and the dollar is now becoming the penny, then the dollar will lose 99% of its purchasing power over the same time horizon. It's a math problem, not a prediction.

The penny is the canary in the coal mine. When your smallest coin can't buy anything, your currency has a problem that no amount of minting can fix.

You can't hold a penny for a hundred years and expect it to be worth anything. The penny tells you that explicitly. But most of your wealth is held in dollars, which are just larger denominations of the same system that made the penny worthless. The penny's message applies equally to the rest of your money—it's just that we don't want to see it.

This is the fourth essay in The Great Remember's series on prices, purchasing power, and the history of money. Next up: how a Ford's price in gold has barely moved across a century. See all essays →