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Why getting rid of the penny piece is a good move

In for a penny, out for a pound.

It is a welcome relief when the narrative in the current economics debate throws up a sufficiently serious matter that we can take a break from thinking about Brexit and the gravity model.

Nick Macpherson, former permanent secretary at the Treasury, is exorcised about Treasury plans to abolish the one and two penny coins. 

He exclaimed, on Twitter:  “Only banana republics don’t have a coin representing the lowest denomination of their currency.”

Nick's tweet is an indirect remark about the fact that countries that experience hyperinflations out of necessity abandon the use of the smaller denominations of their currency, on the journey to discarding the currency altogether.  When you get to the point of needing holdalls full of notes to buy your groceries, you have no need for small coins.

But hyperinflations have typically been caused by profound breakdowns in political order.  Extreme pressures on public finance caused by war, or a collapse in public order and the willingness to consent to normal tax collection.  Although hyperinflationary economies abandon small coins, we can be sure that the reverse causality does not operate:  republics don’t slip into banana status because they abandoning small currency units.

The modern consensus on the best rate of inflation is that it is low and positive.  Before we thought the zero bound was relevant, central banks were assigned two p er cent.  Now some - me included - support a higher number, like four per ent, to make more room for interest rate cuts fighting a recession [in the long run, achieving a four per cent target will lead to a correspondingly higher resting point for central bank rates].  So eventually, even at ideal, low and positive inflation, all Republics, even Banana ones, will abandon their smallest denominations. 

In fact over grand sweeps of time the currency unit will be continually recalibrated.  In a thousand years, if the pound is not already replaced by the Euro or Canzuk dollar, it will have been supplanted by the New or Super-Pound.

Macpherson followed up with:  ‘to abolish penny would be to give in to inflation and trash 1000 years of history’.

In fact, we have, as many have pointed out on Twitter, already been travelling down this journey, abolishing the farthing in 1960, the old penny in 1971's decimalization, and the half-penny coin in 1984.

This is as it should be.  Currency needs to be divisible.  If the smallest physical denomination were £50, trade would be inconvenient.  Anything worth less than that would have to be bought in larger bulk than needed, perhaps on credit.  Or, if the good were not storable, vendors would have to set up accounts for customers, taking advance payment of £50, or offering credit, the account only run down once enough of the small item [say a 1970s penny chew] were eaten.

But it only needs to be divisible up to a certain point.  Beyond that, the extra convenience of finer units is outweighed by the inconvenience of managing small coins. 

Also, ultimately, cutting out some of the smaller denominations helps what economists call the 'unit of account' function of money.  In hyperinflationary economies like Zimbabwe, 100 trillion dollar notes were in circulation.  You really have to be on top of your large units to check your change when a lot of zeros are involved.  But similarly, it's much easier to do mental arithmetic in units of 5p or 10p.  If my Sainsbury’s receipts had items priced down to the last 0.00001 of a penny, checking them would give me a headache.

Remember too that our economies are moving rapidly towards widespread use of electronic payments using debt and credit cards, and smartphone-app equivalents.  So the actual suite of physical currency units is becoming less and less relevant.  People are slowly turning away from not just 1p coins, but all our notes and coins.

Macpherson pointed out rightly that 'symbols [of an economy with sound monetary policy] matter'.  But we have plenty others.  A large carbuncle of an imitation-classical building for the Bank of England, with impregnable-looking walls.  Ornately decorated polymer notes with historical figures and old fashioned writing.  All of it [ok, perhaps not the polymer] communicating that 'this has been here for a long time and so will be around for a lot longer!' 

The symbol of the 1p can safely be guarded in the Bank of England museum, alongside the farthing, old penny, and the half-penny piece.

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Michael Carrick is the “Geordie Pirlo” that England misunderstood

The Manchester United legend’s retirement announcement should leave Three Lions fans wondering what if?

That it came in the months leading up to a World Cup arguably added an exclamation point to the announcement of Michael Carrick’s impending retirement. The Manchester United midfielder, who is expected to take up a coaching role with the club afterwards, will hang up his boots at the end of the season. And United boss Jose Mourinho’s keenness to keep Carrick at Old Trafford in some capacity only serves to emphasise how highly he rates the 36-year-old.

But Carrick’s curtain call in May will be caveated by one striking anomaly on an otherwise imperious CV: his international career. Although at club level Carrick has excelled – winning every top tier honour a player based in England possibly can – he looks set to retire with just 34 caps for his country, and just one of those was earned at a major tournament.

This, in part, is down to the quality of competition he has faced. Indeed, much of the conversation around England’s midfield in the early to mid-noughties centred on finding a system that could accommodate both box-to-box dynamos Steven Gerrard and Frank Lampard.

As time went on, however, focus shifted towards trequartistas, advanced playmakers and those with more mobile, harrying playing styles. And the likes of Jack Wilshere, Ross Barkley, Jordan Henderson and Dele Alli were brought into the frame more frequently than Carrick, whose deep-lying capabilities were not utilised to their full potential. That nearly 65 per cent of Carrick’s England caps have come in friendlies shows how undervalued he was. 

In fairness, Carrick does not embody similar characteristics to many of his England midfield contemporaries, including a laudable lack of ego. He is not blessed with lung-busting pace, nor is he enough of a ball-winner to shield a back four solo. Yet his passing and distribution satisfy world-class criteria, with a range only matched, as far as England internationals go, by his former United team-mate Paul Scholes, who was also misused when playing for his country.

Rather, the player Carrick resembles most isn’t English at all; it’s Andrea Pirlo, minus the free-kicks. When comparisons between the mild-mannered Geordie and Italian football’s coolest customer first emerged, they were dismissed in some quarters as hyperbole. Yet watching Carrick confirm his retirement plans this week, perfectly bearded and reflecting on a trophy-laden 12-year spell at one of world football’s grandest institutions, the parallels have become harder to deny.

Michael Carrick at a press event ahead of Manchester United's Champions League game this week. Photo: Getty.

Where other players would have been shown the door much sooner, both Pirlo and Carrick’s efficient style of play – built on patience, possession and precision – gifted them twilights as impressive as many others’ peaks. That at 36, Carrick is still playing for a team in the top two of the top division in English football, rather than in lower-league or moneyed foreign obscurity, speaks volumes. At the same age, Pirlo started for Juventus in the Champions League final of 2015.

It is ill health, not a decline in ability, which is finally bringing Carrick’s career to a close. After saying he “felt strange” during the second-half of United’s 4-1 win over Burton Albion earlier this season, he had a cardiac ablation procedure to treat an irregular heart rhythm. He has since been limited to just three more appearances this term, of which United won two. 

And just how key to United’s success Carrick has been since his £18m signing from Tottenham in 2006 cannot be overstated. He was United’s sole signing that summer, yielding only modest excitement, and there were some Red Devils fans displeased with then manager Sir Alex Ferguson’s decision to assign Carrick the number 16 jersey previously worn by departed captain Roy Keane. Less than a year later, though, United won their first league title in four years. The following season, United won the league and Champions League double, with Carrick playing 49 times across all competitions.

Failing to regularly deploy Carrick in his favoured role – one that is nominally defensive in its position at the base of midfield, but also creative in providing through-balls to the players ahead – must be considered one of the most criminal oversights of successive England managers’ tenures. Unfortunately, Carrick’s heart condition means that current boss Gareth Southgate is unlikely to be able to make amends this summer.

By pressing space, rather than players, Carrick compensates for his lack of speed by marking passing channels and intercepting. He is forever watching the game around him and his unwillingness to commit passes prematurely and lose possession is as valuable an asset as when he does spot an opening.

Ultimately, while Carrick can have few regrets about his illustrious career, England fans and management alike can have plenty. Via West Ham, Spurs and United, the Wallsend-born émigré has earned his billing as one of the most gifted midfielders of his generation, but he’d never let on.

Rohan Banerjee is a Special Projects Writer at the New Statesman. He co-hosts the No Country For Brown Men podcast.