Goodbye, spare change? Elon Musk’s DOGE suggests the US penny is too costly to produce

Elon Musk’s DOGE, an agency humorously named after Dogecoin and formed under the Trump administration, is focusing on trimming federal spending by addressing the cost of U.S. coin production, particularly pennies. Musk’s argument stems from the fact that it costs the U.S. Mint about 3 cents to produce each penny, despite its nominal value being only 1 cent. In fiscal year 2023, taxpayers were burdened with an estimated $179 million to mint about 4.5 billion pennies.

But the penny isn’t the only coin in question. Minting a nickel costs even more—around 14 cents per coin. With rising zinc prices, the cost to produce a penny continues to climb, now exceeding 3.7 cents per coin according to 2024 U.S. Mint data.

This isn’t the first time a country has stopped minting small-denomination coins. Canada, for example, ceased production of its one-cent coin in 2012. The decision was based on the high production costs, which at the time were around 1.6 cents per penny. After halting production, Canada implemented a policy of rounding cash transactions to the nearest five cents, leaving electronic payments unaffected.

Musk’s cost-cutting agenda doesn’t stop at pennies. He reportedly plans to integrate Dogecoin into government operations as a way to streamline expenses. However, the idea has its own challenges. Mining Dogecoin, like other cryptocurrencies, can be more expensive than the coin’s market value, especially in regions where electricity costs are high. Mining operations can be inefficient if the technology used is outdated, making the cost of mining exceed the coin’s worth.

Similar to Bitcoin, Dogecoin mining is an energy-intensive process. However, unlike pennies and nickels, Dogecoin offers limited real-world utility, and its price volatility can cause mining profitability to fluctuate. During price surges, mining becomes more profitable, but in periods of low prices, it might not be financially viable, leading some miners to halt operations.

Ultimately, while the U.S. may be considering halting penny production to save costs, the concept of using Dogecoin in government operations brings its own set of economic challenges. Both the cost of minting traditional coins and mining cryptocurrencies like Dogecoin reflect broader issues of efficiency, resource allocation, and market volatility.