The final penny marks a moment for reflection. Inflation, even at “moderate” levels, chips away at purchasing power and quietly renders small denominations meaningless.
The United States minted its last penny this past month. The U.S. Mint was spending nearly four cents to produce one penny, a perfect metaphor for how inflation has eroded the value of money. The cent that once bought a piece of candy now buys nothing at all. Even charity jars ignore them. The penny has become a cost center, not a currency.
Its demise symbolizes a larger truth: for more than fifty years, the United States has lived with higher inflation than at any time before the 1970s, and many have come to excuse inflationary bursts as entirely caused by external supply shocks, completely unrelated to fiscal and monetary policy. The other central challenge is that nominal wages have struggled to keep pace with inflation.
Since 1971, when the U.S. left the Bretton Woods system and severed the dollar’s last link to gold, inflation has averaged three to four percent a year. On paper, that sounds modest. In practice, compounding is relentless: a dollar today buys only about 15 cents of what it purchased in 1971.
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