We’ve already dumped the penny, so why not eliminate the nickel while we’re at it?
According to a Canadian credit union, it’s not such a terrible idea.
A new study released by Desjardins explored the concept of eliminating the nickel and adopting alternative denominations over the next five years.
“Due to the gradual increase in the cost of living and decreased buying power of small coins, the time will come when the nickel will have to be taken out of circulation,” wrote Desjardins economist Hendrix Vachon. He estimates that this could take place by 2021 and the nickel would be replaced with 10, 20, and 50-cent coins.
The study, “Is cash going the way of the dodo?,” found it’s “not likely” Canada will go cashless over the course of the next 10 or 20 years and that Canadians are actually holding more cash than they’re spending. And despite other countries steering towards cashless economies, Canada is unlikely to follow suit anytime soon.
In fact, the study found that cash in circulation today amounts to 3.8 per cent of Canada’s annual economic output, which is up from an average of 3.3 per cent between 2005 and 2008. How Canadians spend their cash is also changing as it’s used in fewer and fewer transactions, which could be due to the increased use of ‘tap’ payments.
At the same time, larger bills are becoming more popular, while smaller denominations are becoming less so.
The study also found that there’s little need to switch the $5 bill to a coin because of the new, longer-lasting polymer bills – not to mention that an iconic Canadian woman could end up on one of those banknotes by 2018.
“We might also assume that they [smaller bills] are used more for illicit activities, or in the underground economy,” Vachon wrote. “This is one of the reasons the $1,000 bill has not been issued in Canada since 2000.”
The study concluded that an increase in electronic payment means it’s time to re-evaluate the denominations in our currency because, as Vachon suggests, if the power ever goes out, electronic currency disappears.
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