| Author |
 Topic  |
|
MichaelOnion
Penny Pincher Member
USA
105 Posts |
 Posted - 02/02/2010 : 20:13:53
|
Just got done reading this....
You must be logged in to see this link.
The U.S. Currency Problem and the Return of the Wooden Nickel
The U.S. has a currency problem. No, not just the dollar, or even the staggering debt and deficit, but another one: It loses money making pennies and nickels. Here is some musing on the problem from the new White House budget docs:
The Mint's primary cost driver is the price of metal, a factor over which it has no control. Daily spot prices of copper and zinc, the Mint's two main metallic materials, have fluctuated in excess of 100 percent, and the price of nickel by 500 percent in recent years. This contributes to volatile and negative margins on both the penny and nickel: in recent years the penny has cost approximately 1.8 cents and the nickel approximately 9 cents to produce. Costs have exceeded the value of these two coins by over $100 million in prior years.
Well, the White House and the Mint have a cost-saving solution:
The 2011 Budget would bring the costs of coins more in-line with their face values and create a more sustainable, cost-effective 21st Century use of materials in the minting process. The Budget enables the Department of the Treasury to explore, analyze, and approve new, less expensive materials for all circulating coins ...
Paper? Plastic? The return of the wooden nickel?
Here is their solution. Taken from
OMB HOME • PRESIDENT'S BUDGET • FY 2011 BUDGETTerminations, Reductions and Savings
You must be logged in to see this link.
Pg 100
OTHER SAVINGS: COINAGE MATERIAL
Department of the Treasury
The Budget proposes to provide the U.S. Mint with greater flexibility in the material composition of coins
to reduce its losses on some coins and the production costs associated with volatile metal prices.
Justification
The Mint’s primary cost driver is the price of metal, a factor over which it has no control. Daily spot prices
of copper and zinc, the Mint’s two main metallic materials, have fluctuated in excess of 100 percent, and
the price of nickel by 500 percent in recent years.1 This contributes to volatile and negative margins on both
the penny and nickel: in recent years the penny has cost approximately 1.8 cents and the nickel approximately
9 cents to produce.2 Costs have exceeded the value of these two coins by over $100 million in prior years.
Through its gains on other coins, the Mint annually returns hundreds of millions of dollars to the Treasury
General Fund (GF) and is funded by the Mint Public Enterprise Fund.
Greater flexibility in the composition of coinage materials could enable the Mint to utilize less expensive
metals in the minting process and substantially reduce its production costs. Using alternative coinage
materials could save $150 million annually after an initial period of development and capital adjustments.
These savings result from increased seigniorage, or the difference between the face value of the coin paid
by the Federal Reserve and the cost of production. Seigniorage increases the available means of financing,
but has no direct budgetary impact. Specifically, the Budget includes provisions that authorize the
Department of the Treasury to approve alternative coinage compositions and weights across five
denominations (half dollar, quarter, dime, nickel, and penny).
The 2011 Budget would bring the costs of coins more in-line with their face values and create a more
sustainable, cost-effective 21st Century use of materials in the minting process. The Budget enables the
Department of the Treasury to explore, analyze, and approve new, less expensive materials for all circulating
coins based on factors that will result in the highest quality of coin production at the most cost-effective
price. Such factors may include physical, chemical, metallurgical and technical characteristics; material,
fabrication, minting, and distribution costs; materials availability and sources of raw materials; durability;
effects on sorting, handling, packaging and vending machines; and resistance to counterfeiting. The added
flexibility the Budget proposes will improve the minting process and enable the Mint to mitigate the high,
volatile costs of commodity metals.
Citations
1 Global InfoMine, Metals Prices, You must be logged in to see this link. (January 2010).
2 USA TODAY, Coins Cost More to Make than Face
Value, You must be logged in to see this link. (May 2006).
TIME TO STEP IT UP.
|
___
-M
 |
|
|
highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
Posted - 02/02/2010 : 20:50:32
|
| Wow no one commented on this yet? This is 1 step closer to having the melt ban lifted! |
Copper Penny Investing
www.portlandmint.com |
 |
|
|
Nickelless
Administrator
USA
5580 Posts |
|
|
Computer Jones
1000+ Penny Miser Member
USA
1112 Posts |
Posted - 02/02/2010 : 22:01:49
|
| Git now while the gittin's good!!! |
There's profit if you melt things!!
8{> |
|
|
|
Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 02/02/2010 : 22:11:27
|
quote:
Originally posted by highroller4321
Wow no one commented on this yet? This is 1 step closer to having the melt ban lifted!
Possibly, but no guarantee. Our beloved government could keep the ban in place and follow Canada's lead and start an alloy recovery program... 
|
Edited by - Bluegill on 02/02/2010 22:11:52 |
|
|
|
highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
Posted - 02/02/2010 : 22:26:42
|
quote:
Originally posted by Bluegill
quote:
Originally posted by highroller4321
Wow no one commented on this yet? This is 1 step closer to having the melt ban lifted!
Possibly, but no guarantee. Our beloved government could keep the ban in place and follow Canada's lead and start an alloy recovery program...
That would require the U.S gov to do something intelligent.....look at their track record |
Copper Penny Investing
www.portlandmint.com |
|
|
|
HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 02/03/2010 : 00:20:14
|
| Can't wait to get my new plastic half dollars. If they do get around to changing the composition I don't think they will lift the ban for a couple of years.. but the coins will disappear from circulation quite quickly. Don't they make enough seignorage already on all those golden dollars and quarters to offset some of the cost for the base metals that make the minor coins? Do they really need more seignorage? Once the material is down to almost free they will realize that their labor and the way they allocate costs are much more significant than they are letting on now. Pretty sad that this country's once proud coinage will be reduced to something a third world nation would be embarassed to call "money." Maybe they can replace the eagle on the back of the coin with a rat. |
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. |
|
|
|
beauanderos
1000+ Penny Miser Member
USA
2408 Posts |
|
|
wolvesdad
1000+ Penny Miser Member
USA
2164 Posts |
Posted - 02/03/2010 : 02:36:35
|
| NO, just simply a symbolic fat dirty rat should suffice. Nothing too specific, keep it general so that it can fill the profile of the next batch of electees as well. |
"May your percentages ever increase!" |
|
|
|
smalltimeopn
Penny Sorter Member
USA
54 Posts |
Posted - 02/03/2010 : 05:19:57
|
Interesting times we be livin' in...
The way the dollar is/has been loosing its buying power, why not do away with the metal value of the coins as well? |
|
|
|
JobIII
1000+ Penny Miser Member
USA
1507 Posts |
Posted - 02/03/2010 : 07:20:43
|
I'm not sure what's more prudent. Increasing penny hoarding or starting into nickels. I wouldn't mind sorting the nickels out once the change happens. For the time being since i'm not sporting multiple 10's of $1k's, i'll just continue penny sorting.
Also, KEEP IN MIND: This is just one addendum to an incredibly hopeful budget proposal. It still needs to pass through congress. A congress that can't seem to agree on anything lately. With all the speculator's and lobbyist's in Washington we may see changes made to only some or even none of these coins. If it does get watered down, i'd assume the Penny and Nickel to be the first to get modified however... <--  |
Selling Copper cents. $0 FV available at 1.4xFV. Also interested in trading for wheat pennies and other coins Please pm me for requests or inquiries.
|
|
|
|
Mikep2020
Penny Collector Member
USA
402 Posts |
Posted - 02/03/2010 : 07:37:43
|
| The vending machine and coin counting lobbyists will be all up in arms over this. Millions of machines would need to modified to accept any new compositions which would most likely be steel. Never mind the zinc and copper lobbyists who will fight against it to. |
|
|
|
HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 02/03/2010 : 09:55:41
|
| How's that new health plan working out for him? |
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. |
|
|
|
Dalmatian929
New Member
15 Posts |
Posted - 02/03/2010 : 10:01:30
|
I wouldn't start to panic just yet. It will take years to settle on what the new compositions will be (due to the political reasons noted above), and there will be plenty of years of good hoarding after the change - just not the 25% we get now.
Gresham's law takes a while - especially when it comes to copper. Remember, most Americans don't even understand what we are doing. Not to mention that even when they will undertsand they will be too lazy to hoard.
The biggest threat would be the government reclaiming the copper pennies and melting them down into their new $100 coin after the inflation we are about to see. |
|
|
|
Common Cents
Penny Sorter Member
82 Posts |
Posted - 02/03/2010 : 10:40:53
|
| We all knew it would be a matter of time before the composition changed on pennies and nickels. I don't anticipate it would have any immediate effect on the melt ban being lifted. They would need to keep it in place until enough of the new composition coins were in circulation. This is just a signal to step things up for us. The changes are coming sooner rather than later, and percentages in circulation are bound to decrease. Get now, while the getting's still good! As for nickels, there will be plenty of time to get them before the percentages decline. Pennies have already been debased for 28 yrs. ('82-2010) and there's still about 25% in circulation. If they debased the nickel now, it would still take years for the percentages to decline significantly. There will be a time to shift the focus from pennies to nickels, but that's a long way off, IMVHO. |
|
|
|
highroller4321
1000+ Penny Miser Member
USA
2648 Posts |
Posted - 02/03/2010 : 11:01:02
|
quote:
Originally posted by Mikep2020
The vending machine and coin counting lobbyists will be all up in arms over this. Millions of machines would need to modified to accept any new compositions which would most likely be steel. Never mind the zinc and copper lobbyists who will fight against it to.
The majority of vending machines and coin counter count by size of the coin. Very few do anything with the composition.
The Zinc producers and possible copper producers will the ones "fighting" the bill. |
Copper Penny Investing
www.portlandmint.com |
|
|
|
mickeyman
Penny Pincher Member
Canada
243 Posts |
Posted - 02/03/2010 : 21:00:41
|
| If they want to increase seignorage, why not let the Mint print paper currency? |
Not all who wander are lost. |
|
|
|
cesario
Penny Pincher Member
129 Posts |
Posted - 02/03/2010 : 22:27:16
|
quote:
Originally posted by HoardCopperByTheTon
How's that new health plan working out for him?
I'm still inappropriate languageed at Cash for Clunkers. I have very few 24 Hours of LeMons and ChumpCar beaters to scrounge for. |
|
|
|
SANITARIUM_INMATE
Penny Pincher Member
211 Posts |
Posted - 02/03/2010 : 23:25:06
|
| If the mint were to just drop the weight of each cent from 2.5 grams to say a flat 2 grams it would boost their profit by a 20% margin. Take it even further and make them 1.7 grams and they might get out of trouble. I know the canadian cent is lighter than our US cents, maybe doing it like them we might not have to change the composition of metals to something like steel or plastic. I mean come on man it's just a stinkin Lincoln cent for crying out loud, it does not need to be indestructable. Just make them with less material and I'm sure nobody will be able to destroy them any easier than when they tried with the older heavier ones. |
|
|
|
twocents
Penny Collector Member
398 Posts |
Posted - 02/03/2010 : 23:47:56
|
| Help me out, fellas and ladies. I just don't see how money is truly lost on all of this. How does the government actually lose money on cents and nickels? I understand that it costs more than a cent to make a cent and more than a nickel to make a nickel, but each cent or nickel is not instantly consumed by use. Each can be used and reused. Each is taxed every time it legally changes hands. At a 10% tax rate, a penny would only need to change hands 20 times to earn Uncle Sam $0.02. Commentary above states it costs 1.8 cents to make a penny. Thus anything beyond that is profit. How many times does a penny change hands during its life cycle? 1,000 times? 10,000 times? That would be $10 in tax revenue for every penny made. Seems profitable to me. |
Just my two cents! |
|
|
|
simplicitycounts
Penny Hoarding Member
USA
535 Posts |
Posted - 02/04/2010 : 00:13:11
|
| What two cents just said. Seems profitable to me too. |
|
|
|
thatgeorge
New Member
15 Posts |
Posted - 02/04/2010 : 00:44:17
|
Unless people like us scoop them up and hide them away, but who is going to hoard zincolins when there are still lincolns out there?  |
|
|
|
Zyll
Penny Pincher Member
USA
214 Posts |
Posted - 02/04/2010 : 07:30:47
|
| With the gubment hemorraging money like it is, seems to me that the negative seignorage issue is separate from tax revenue. Paper money lasts 3-5 years vs. 40+ years for a coin, that's the argument they used for starting the golden dollar. Savings over the long haul. But tax revenues is probably not a factor in their equation. They know hyperinflation of base commodities will already be in effect by 2011. They know coins are going the way of the dodo bird. |
|
|
|
terminal99
Penny Sorter Member
53 Posts |
Posted - 02/04/2010 : 15:59:10
|
| Why not just get rid of the penny and nickle all together? They could round to the nearest tenth when paying cash. Debit or credit could remain at the exact amount. Think about the money buisness could save by not having to get deliveries of pennies and nickles for change. |
 |
|
|
|
Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 02/04/2010 : 16:21:46
|
| Once they get rid of the pennia and the nickel I will then be super rich........lol........who cares about PM. |
"If you don't hold it, you don't own it"...Ponce |
|
|
|
El Dee
Penny Hoarding Member
USA
547 Posts |
Posted - 02/04/2010 : 16:51:38
|
quote:
Originally posted by twocents
Help me out, fellas and ladies. I just don't see how money is truly lost on all of this. How does the government actually lose money on cents and nickels? I understand that it costs more than a cent to make a cent and more than a nickel to make a nickel, but each cent or nickel is not instantly consumed by use. Each can be used and reused. Each is taxed every time it legally changes hands. At a 10% tax rate, a penny would only need to change hands 20 times to earn Uncle Sam $0.02. Commentary above states it costs 1.8 cents to make a penny. Thus anything beyond that is profit. How many times does a penny change hands during its life cycle? 1,000 times? 10,000 times? That would be $10 in tax revenue for every penny made. Seems profitable to me.
Sure. Every time I switch a penny between my pockets, I make 10% off myself. I'll be rich in no time!
At issue is the cost to make a coin. Coins made by the billion every year, year after year after year...not what happens after the coin leaves the mint. In a rational universe, when a coin costs more to make than it is worth, it is a strong indication that the currency is being too finely divided.
Let's take a recent example. GM produces a car at a loss. The car is sold again, then again and again, each time sales tax is collected on it.
Therefore, it's no big deal for the taxpayers to bail out GM, because the products it makes make money for the government over their lifetime, right?
Let's start making pennies of silver! |
|
|
|
Topic |
|
now its public knowledge
Forum Locked
