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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
 Posted - 10/12/2009 : 18:43:32
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The Case For Withdrawing Nickels
By: Trace Mayer, J.D.
United States legal tender nickels present an almost completely risk-free investment. Getting a large 5 gallon bucket and tossing in the nickels from your daily change is an excellent way to preserve your purchasing power, protect your wealth and reduce both counter-party and payment risk. But due to increasingly despotic threats and actions by the United States government this avenue for wealth preservation is being threatened.
PURCHASING POWER
The current melt value of 1946-2009 nickels is about $0.0465604 or 93.12% of the face value. A great resource to track the current melt rates of United States legal tender money relative to Federal Reserve Note legal tender currency is You must be logged in to see this link.
Each nickel is 5.00 grams and consists of 75% copper and 25% nickel. Thus, a $10 box of nickels, or 200 nickels, weighs 1,000 grams or about 2.2 pounds. This would be about the size of two bricks. With some gold spray paint and the unverified shortage of LBMA quality bullion you may even be able to get the problematic GLD ETF to buy a few bars.
COUNTER-PARTY RISK
Nickels are usually available for withdrawal from your local bank. Since so many banks are failing and so many others are in worsening financial shape it makes since to keep minimal cash balances in your account(s) unless you know of their financial soundness. The FDIC’s reserve fund is in horrible shape but the $500B line of credit with the Treasury should keep formal bank runs with lines, like Disney Land used to have, at a minimum.
But a physical nickel in your hand has intrinsic value and can never become worthless which makes it immune to payment risk. By taking possession instead of keeping the electronic digits in your bank account you completely eliminate that degree of counter-party risk. Additionally, you pay no fabrication fees unlike purchasing gold, silver or platinum.
MISH’S MISSTATEMENTS OF FACT
Mike Shedlock of Global Economic Analysis in an article titled Analysis: Ridiculous Hype Over Secret Oil Meetings wrote:
Ten Simple Facts
5) It takes less than a second for Forex trades to take place. 24 hours a day, 7 days a week, one can sell any currency they want and buy any other currency.
6) The above logic applies to any currency and any commodity.
7) Nothing is stopping anyone at any time anywhere from selling dollars for whatever currency they want to hold. Nor is anything stopping anyone anywhere at any time from selling any major currency for U.S. Dollars.
Because currency conversion is instantaneous no one has to hold U.S. dollars to buy oil, copper, gold, iron, lead, wheat, soybeans, or anything else.
While I will not address the substantive analysis of his article I would like to address several misstatements of fact and offer analysis on potential likely changes to the landscape.
CURRENCY CONTROLS
First, as stated in #5 the ability to ’sell any currency they want and buy any other currency’. Foreign exchange controls are various overt forms of controls imposed by a government on the purchase or sale of foreign currencies. These controls can take many forms including, (1) banning the use of foreign currency within a country, (2) banning locals from possessing foreign currency, (3) restricting currency exchange to government-approved exchangers, (4) fixed exchange rates or (5) restrictions on the amount of currency that may be imported or exported. Section 14 of the International Monetary Fund agreement provides for currency controls for transitional economies.
While Mish may attempt to narrow the discussion from ‘any currency and any commodity’ to any major currency or the currencies of major economies I think doing so fails on both counts as China imposes overt foreign exchange controls, had a 2007 GDP of $3.5T, began to sell sovereign bonds to foreigners in September 2009 and is a formidable force in the global economy. Therefore, to categorically state that anyone can sell or buy any currency or commodity through the extremely liquid FOREX markets is a blatant misstatement of fact. But this surface analysis is even more potent if one keeps digging.
Second, I am unsure what Mish means by ‘Nor is anything stopping anyone anywhere at any time from selling any major currency for U.S. Dollars.’ Drawing upon Dr. Vieira’s previous work I address the issue of what is a dollar as applied to the recent Kahre case. An excellent book on the subject is Murray Rothbard’s What Has Government Done To Our Money. The actionable conclusion for IRS purposes is to distinguish between FRN dollars and U.S. Dollars as found under 31 U.S.C. 5112. This difference leads to a capital gains tax on gold or silver, which are both commodities and currencies.
Interestingly, Section 408(m), applicable to retirement accounts, provides exceptions for legal tender gold and silver coins along with ‘a coin issued under the laws of any State’. The IRS also issued a private letter ruling that ‘The acquisition by an IRA of shares in trusts which hold gold and silver bullion as their only asset will not constitute the acquisition of a collectible under Code Sec. 408(m).’
If a capital gain tax rate greater than 25% is not a draconian currency control in practice then I am not sure what is. Because both FRN$, gold, silver, copper and nickel are legal tender thus in practice this capital gains tax is perhaps the single largest protection of the FRN$’s fiat currency monopoly which leads to its market dominance and world reserve status. Yes, all Dollars are dollars but some Dollars are more equal than others.
Third, as I analyzed in June 2009 the United States Treasury issued additional overt currency controls on United States legal tender in 2006. The announcement provided:
The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation. … Prevailing prices of copper, nickel and zinc have caused the production costs of pennies and nickels to significantly exceed their respective face values.
“We are taking this action because the Nation needs its coinage for commerce,” said Director Ed Moy. “We don’t want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers.”
Specifically, the new regulations prohibit, with certain exceptions, the melting or treatment of all one-cent and 5-cent coins. The regulations also prohibit the unlicensed exportation of these coins, except that travelers may take up to $5 in these coins out of the country, and individuals may ship up to $100 in these coins out of the country in any one shipment for legitimate coinage and numismatic purposes. In all essential respects, these regulations are patterned after the Department of the Treasury’s regulations prohibiting the exportation, melting, or treatment of silver coins between 1967 and 1969, and the regulations prohibiting the exportation, melting, or treatment of one-cent coins between 1974 and 1978.
The new regulations authorize a fine of not more than $10,000, or imprisonment of not more than five years, or both, against a person who knowingly violates the regulations. In addition, by law, any coins exported, melted, or treated in violation of the regulation shall be forfeited to the United States Government.
In conclusion, the assertions in Mish’s “Ten Simple Facts” of substantive statements of fact are actually complete misstatements.
For example, if an individual wants to withdraw a mere $10 of legal tender nickels, or 2.2 pounds, from their bank account and melt the coins down to create a doorstop then they face a fine of $10,000 and imprisonment of not more than five years. If they sufficiently resist then the costumed criminal gang will escalate the unjustified aggressive violence and inflict death. It would be nice to live in the fantasy world Mish describes where ‘Because currency conversion is instantaneous no one has to hold U.S. dollars to buy oil, copper, gold, iron, lead, wheat, soybeans, or anything else.’ but that is simply not the case.
Additionally, I have not addressed other enacted or pending legislation in both the America and the Eurozone that lays a strong foundation for additional currency controls to be implemented.
CONCLUSION
Nickels are made (of) copper and nickel which are tangible assets that have intrinsic value. They are an excellent vehicle for protecting and preserving one’s purchasing power. Nickels are approaching the point where, like gold, silver and copper coins, their face value will be less than their melt value. But in anticipation of and to impede the free flow of capital the United States has imposed overt foreign exchange controls on nickels and pennies with draconian penalties.
Disclosures: Long physical gold, silver, platinum and some nickels with no position in the problematic GLD or SLV ETFs.
Trace Mayer, J.D.
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 10/12/2009 : 18:48:28
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This article is old news for most of us, but it is useful information when you re-read the article.
..."Department of the Treasury’s regulations prohibiting the exportation, melting, or treatment of silver coins between 1967 and 1969, and the regulations prohibiting the exportation, melting, or treatment of one-cent coins between 1974 and 1978."
The Treasury's regulations were not permanent they were lifted in a few years. Those who were patient enough to wait out the prior melt/export ban were rewarded for their patience.
Expect the same thing to happen with the current melt/export ban. |
Edited by - pencilvanian on 10/12/2009 18:51:12 |
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jonflyfish
Penny Hoarding Member
USA
693 Posts |
Posted - 10/12/2009 : 20:57:48
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| Withdraw them! |
The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring a temporary (and false) prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunities. |
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misteroman
Administrator
USA
2565 Posts |
Posted - 10/12/2009 : 23:30:17
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ever since my son was born in January I havn't spent 1 nickel. Zero.
I figure when he turns 18 that should help pay for his college or he can just keep the tradition going. |
Buying CU cents!!!! Paying 1.2 unlimited amounts wanted. Can pick up if near Ohio area. |
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AGCoinHunter
Penny Hoarding Member
USA
685 Posts |
Posted - 10/13/2009 : 08:18:34
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| Unless the laws are changed I dont ever see a nickel more than what its worth...5 cents. Legally you can not melt them to get their intrinsic out of them. Until laws are changed, hording nickels is useless. At this point, silver coins are the coin to hord since it is worth more than face and can be melted. Once the alloy on a nickel is changed to something less valuable modern nickels will be worth holding onto. |
"All tyranny needs to gain a foothold is for people of good conscience to remain silent."
-Thomas Jefferson
"There is no difference between communism and socialism, except in the means of achieving the same ultimate end: communism proposes to enslave men by force, socialism—by vote. It is merely the difference between murder and suicide." - Ayn Rand
________________________________________________
Lenin: Class-based International Socialism
Hitler: Race-based National Socialism
Obama: Class- and Race-based Post-National Socialism
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jonflyfish
Penny Hoarding Member
USA
693 Posts |
Posted - 10/13/2009 : 09:02:46
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quote:
Originally posted by AGCoinHunter
Unless the laws are changed I dont ever see a nickel more than what its worth...5 cents. Legally you can not melt them to get their intrinsic out of them. Until laws are changed, hording nickels is useless. At this point, silver coins are the coin to hord since it is worth more than face and can be melted. Once the alloy on a nickel is changed to something less valuable modern nickels will be worth holding onto.
The laws will be changed. Why wait until you have to pay a premium when you can hold them now for a risk free opportunity to sell them to someone with your rationale for tremendous gains? Besides, why melt any coin with a known purity and source? What good does a metal blob do that coins cannot? If holding something of value is the goal why think in terms of destroying it?
It reminds me of these guys who buy perfectly good Honda Civics then sandblast the paint off, bolt cheap zoom zoom plastic body panels on, paint it in primer, slap a trash can sized echo chamber on the exhaust and feel like the ride is 2 fast 2 furious, when all they have really done is spend a lot of money to ruin an asset. |
The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring a temporary (and false) prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunities. |
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AGCoinHunter
Penny Hoarding Member
USA
685 Posts |
Posted - 10/13/2009 : 10:30:42
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| Your rationale is that the law will be changed. I am looking at it from the point that it will not. I do not believe that the goverment will change it because of the undue cost of replacing pennies/nickels that get pulled from circulation. Unless the alloy is changed and they want to purge the current market of CuNi then it will not change. At this point, a nickel is 5 cents, you cant go sell it for its intrinsic value legally. If you fill up 50 gallon drums with them they are still only worth 5 cents each, that doesnt change unless the law is changed. I would rather hold something that gives me the flexabilty to sell for melting purpose. |
"All tyranny needs to gain a foothold is for people of good conscience to remain silent."
-Thomas Jefferson
"There is no difference between communism and socialism, except in the means of achieving the same ultimate end: communism proposes to enslave men by force, socialism—by vote. It is merely the difference between murder and suicide." - Ayn Rand
________________________________________________
Lenin: Class-based International Socialism
Hitler: Race-based National Socialism
Obama: Class- and Race-based Post-National Socialism
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El Dee
Penny Hoarding Member
USA
547 Posts |
Posted - 10/13/2009 : 10:54:14
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quote:
Originally posted by AGCoinHunter
I do not believe that the goverment will change it because of the undue cost of replacing pennies/nickels that get pulled from circulation. Unless the alloy is changed and they want to purge the current market of CuNi then it will not change...
You might want to check with our Canadian members about this.
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Trust the government? Ask an Indian. |
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Kurr
1000+ Penny Miser Member
2906 Posts |
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ZigMeister
Penny Pincher Member
USA
229 Posts |
Posted - 10/13/2009 : 11:56:30
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I also believe the melt ban will be lifted. I think it will happen in 1-4 years when enough newer cents are minted in order for the mint to feel confident that enough non-Cu cents are in circulation to facilitate commerce not counting the Cu cents. Over the next several years there will be a relatively orderly withdrawal of Cu cents from circulation...that is what I think the Mint is hoping for with the Ban. They know that the Government is debasing the Dollar and that bad money always chases out good money...they're just trying to slow it down so a cent shortage doesn't hit the economy forcing them to ramp up production of additional cents at considerable expense.
In any event, even if the Ban is not lifted, the Cu cents will always have their intrinsic value.
As the Dollar continues to weaken because of the politicians propensity to spend and the value of Cu rises, more will become painfully aware of their lost puchasing power. I suspect the value of Cu cents will have to reach 3x face before there will be more widespread awareness...then I think you will have more people willing to deal in Cu for the intrinsic value...just to have as a store-of-value.
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ZigMeister
Penny Pincher Member
USA
229 Posts |
Posted - 10/13/2009 : 12:03:16
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| I also am old enough to remember a cent shortage that occurred decades ago (can't remember the reason) but I remember merchants and banks asking people to bring in their pennies and they were paying 2x for each. That would sure be a nice way to get rid of Zincs at 2x. |
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El Dee
Penny Hoarding Member
USA
547 Posts |
Posted - 10/13/2009 : 12:08:10
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quote:
Originally posted by ZigMeister
I also believe the melt ban will be lifted. I think it will happen in 1-4 years when enough newer cents are minted in order for the mint to feel confident that enough non-Cu cents are in circulation to facilitate commerce not counting the Cu cents
They'll probably just demonetize the cent, and stop making it. The cent is already irrelevant for commerce.
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Trust the government? Ask an Indian. |
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AGCoinHunter
Penny Hoarding Member
USA
685 Posts |
Posted - 10/13/2009 : 12:45:32
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quote:
Originally posted by Kurr
quote:
Originally posted by AGCoinHunter
At this point, a nickel is 5 cents, you cant go sell it for its intrinsic value legally.
Why not? we do it with circulating pennies all the time. Isn't a bit illegal to sell for the intrinsic value. Or above.
Ok, I wont say its illegal to sell above value, its illegal to melt the coin. Selling CU above value is brilliant if you can find someone to take them. But why would I want to buy something that I can go out into the marketplace and with a little work, collect on my own. Cu is still out there, why pay a premium at this point? |
"All tyranny needs to gain a foothold is for people of good conscience to remain silent."
-Thomas Jefferson
"There is no difference between communism and socialism, except in the means of achieving the same ultimate end: communism proposes to enslave men by force, socialism—by vote. It is merely the difference between murder and suicide." - Ayn Rand
________________________________________________
Lenin: Class-based International Socialism
Hitler: Race-based National Socialism
Obama: Class- and Race-based Post-National Socialism
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2old
Penny Pincher Member
188 Posts |
Posted - 10/13/2009 : 13:05:45
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5/1975
Los Angeles, California) Grand scale penny hoarding underway. [Penny speculator Ernie WHEELDEN - admits penny hoarding is a gamble.] [Federal Reserve Bank Jack LUCY - thinks return flow of pennies to begin before long.]
REPORTER: Foster Davis
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highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
Posted - 10/13/2009 : 13:12:33
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quote:
Originally posted by AGCoinHunter
Unless the laws are changed I dont ever see a nickel more than what its worth...5 cents. Legally you can not melt them to get their intrinsic out of them. Until laws are changed, hording nickels is useless. At this point, silver coins are the coin to hord since it is worth more than face and can be melted. Once the alloy on a nickel is changed to something less valuable modern nickels will be worth holding onto.
And at that point in time you either wont be able to find very many nickels or you wont be able to get a nickel for 5 cents anymore. This is why NOW is the time to hoard copper pennies and nickels. You will make the most money/ preserve your "wealth" being ahead of the curve rather than playing catch up after the heat is on. I am a lot more bullish on copper pennies than I am nickels, but either one should be a good investment for long term. |
Copper Penny Investing
www.portlandmint.com |
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2old
Penny Pincher Member
188 Posts |
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2old
Penny Pincher Member
188 Posts |
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highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
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L1011
Penny Collector Member
310 Posts |
Posted - 10/13/2009 : 17:05:04
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| Half Dime, smaller than a Roosevelt? ...that would be a small coin |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 10/13/2009 : 20:52:23
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"The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins"
The term 'treatment' can mean different things to different people. I have not heard of anyone prosecuting modern hobo nickel engravers, have you? I suspect the Feds have much bigger fish to fry than worrying about nickel melters.
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Even if we can't melt our nickels, that doesn't mean we can't someday sell them as numismatic coins, or sell them as a way to protect one's assets in a financial sense.
For example, Howard Ruff, the publisher of The Ruff Times, made the arguement that if things get bad and certian items get rationed for fixed prices, a person with junk silver can legally buy the fixed priced items by using junk silver instead of clad coinage or FRNs.
Example, suppose steak is fixed at $4.00 per pound. A person who has $4.00 in junk silver can go to a butcher, one who knows what junk silver is and what it looks like, and exchange their $4.00 in face value junk silver and buy steak, while those with FRNs or clad coinage face signs that read 'sold out' when they try to buy. No law was broken, $4.00 was paid for the steak, the fact that silver coins were used in the transaction is a matter between the customer and the butcher, the silver coins are still worth $4.00 face and are still worth at minimum $4.00.
I don't know if this would be the case with nickels, but to deny their value is to deny junk silver's value.
If you had a time machine and you travelled back to 1964, and told everyone you met that someday their common dimes, quarters and half dollars would be sold as a commodity at least three times over face value, they would have thought you were nuts. The same thing is going on with our cents and nickels, I wouldn't be suprised if in the future the 1¢ and 5¢ sell like junk silver sell today.
Pulling nickels out of circulation now isn't a bad idea, the longer you wait the longer you procrastinate thinking the bandwagon will never get going, but remember this quote-
"If you see a bandwagon, it’s too late. — James Goldsmith"
Banks are paying next to nothing as far as interest goes, the stock market is facing a dead cat bounce with a weak economy, good dividends are hard to come by, you might as well put your money into something, and if the copper cent supply ever dries up nickels will be the next best thing. |
Edited by - pencilvanian on 10/13/2009 20:57:02 |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 10/13/2009 : 21:16:07
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Did anyone see this? It passed the House back in May 2008
You must be logged in to see this link.
If it passes the Senate then it will be time to kick our sorting up a notch or two. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 10/13/2009 : 22:27:21
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That one was by Space in Ohio. He is the Congresscritter that is in the pocket of Jackson Metals. He keeps trying different things on behalf of his Client.. um, I mean contituant. Never went much further.. apparently he just doesn't have the juice.  |
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
Now selling Copper pennies. 1.6x plus shipping. Limited amounts available. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 10/13/2009 : 22:35:40
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| I would love to see a return to the half dime.. I collect them. The only reason we started the 5 cent nickel in 1866 was to appease the lobbiests for the nickel mining interests. They did the same thing the year before in 1865 when they introduced the 3 cent nickel to replace the silver trime. |
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
Now selling Copper pennies. 1.6x plus shipping. Limited amounts available. |
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The Case For Withdrawing Nickels
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