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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 11/10/2007 : 08:26:18
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Nickel, penny no longer are worth minting
Friday, November 9, 2007 3:47 AM
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Nickel, penny no longer are worth minting
Friday, November 9, 2007 3:47 AM
By WILLIAM G. DEWALD
Inflation over the past half-century has played havoc with U.S. coinage. The system needs to be updated to avoid the pointless waste of minting pennies and nickels that cost more to produce than they are worth as money.
Silver coins were the first to require a major makeover. Market silver prices increased in the 1960s and 1970s so much that silver dimes, quarters, half dollars and dollars became more valuable as silver than as money. People made a profit from sorting small change for silver coins, which were collected in bulk, melted down and sold as metal.
Congress authorized the U.S. Mint to eliminate silver from dimes and quarters in 1964 and it also authorized the Kennedy silver half dollar, after President Kennedy's assassination in 1963. The metallic value of this coin exceeded its monetary value. Only Congress could have been surprised that Kennedy halves did not end up in circulation but in coin collections and the international metal market. Congress in 1965 authorized cutting the silver in the Kennedy halves from 90 percent to 40 percent, but to no avail, because it also authorized big spending to finance the Vietnam War, and inflation took off. Silver prices rose to a level that made even the debased silver Kennedy halves worth more in collections and ingots than in circulation.
Disappearance of silver half dollars from circulation prompted Congress in 1971 to authorize that not only dimes and quarters but also halves and dollar coins be minted with no silver but an alloy of 92 percent copper and 8 percent nickel. That solved the problem. Today, the metal in those coins is worth far less than their monetary value so that, unless metal prices increase a lot more, these coins can be expected to function effectively into the indefinite future.
That is not true for the penny and especially the nickel. As the price of copper rose in the inflationary 1970s, the penny became worth more as metal than money. The U.S. Mint in 1982 circumvented that threat by reducing the content of the penny from 95 percent copper to 2.5 percent by plating copper over a zinc core, which is one-third the cost of copper. That is the currently circulating penny. But the high price of copper and zinc has the new debased penny at risk again. The metal in it is now worth 72 percent of its monetary value. At the current 2.5 percent annual inflation rate, if matched by metal prices, the metallic value of the penny will be worth more than its monetary value in 14 years, which is far from a long-term fix.
The nickel is already beyond saving. The metallic value of this 75 percent copper and 25 percent nickel coin is now 6.7 cents. It doesn't take a degree in economics to predict that history will repeat, and the nickel will disappear from circulation unless the U.S. Mint invests time and trouble in jiggering its metallic content, as it did with the penny in the 1980s. As for the future, unless inflation is not just kept low but eliminated, that plan also eventually will fail.
Because design and production costs for coins need to be added to the cost of metals in minting them, it costs far more to produce 1- and 5-cent coins than they are worth as money. The U.S. Mint now prohibits the bulk export of pennies and nickels, a stopgap defense against market forces that are working as they did in the case of silver coins earlier. The demise of the nickel is a likely outcome -- and soon.
So what should Congress do? It should authorize totally eliminating the penny and nickel. That will cause some consternation as the public adapts to prices set in units no smaller than one-tenth of a dollar. But it really won't be such a big deal, because we have had equivalent-coinage values before. The nation's coinage worked fine in 1945, when the price level was one-tenth of what it is now. A 1945 penny bought as much as a dime does now. It is time to recognize what a half-century of inflation has done to U.S. prices and adapt the coinage to match. Today's dime should be the nation's smallest-denomination coin.
I just returned from New Zealand, where I gave seminars at its Reserve Bank and Otago University. The New Zealand dollar is worth about 75 cents in terms of the U.S. dollar. Yet, faced with the same problems that we have with our 1-cent and 5-cent coins, New Zealand eliminated its smallest coins. The smallest now is its 10-cent coin, which is copper and looks a lot like our penny.
William G. Dewald retired from Ohio State University as an economics professor, served as an economist in the U.S. State Department, was director of research at the Federal Reserve Bank of St. Louis and was a U.S. adviser to the Central Bank of Iraq in 2003-05.
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Fanaticism is doubling one's efforts, yet forgetting one's purpose.
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All posts either by the members, moderators, and the administration of You must be logged in to see this link. are for entertainment purpose only. It is not the intent of realcent.forumco.com to provide investment, medical, legal or tax advice and nothing posted here should be considered to be so.
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c140cessna
Penny Collector Member
USA
419 Posts |
 Posted - 11/11/2007 : 14:10:10
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I could not agree more - kill off the penny and nickle...we do not need that level of resolution in our coinage.
M41/1USMI:US1Cu397000,CA1Cu328000,CA5Ni35000....total Cu = 724,000. |
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fiatboy
Administrator
912 Posts |
Posted - 11/11/2007 : 21:13:19
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Another great find! Thanks for keeping us all up-to-date on penny news, Ardent Listener. 
"Bart, it's not about how many stocks you have, it's about how much copper wire you can get out of the building." --- Homer Simpson |
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n/a
deleted
84 Posts |
Posted - 11/12/2007 : 02:36:58
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You should realize, though, that as soon as Congress announces it is doing away with the penny, the hoarding will begin en masse. According to my latest calculation, there is well over $1 billion in net bullion premium (i.e. gross hoarding profit) to be had. It seems that about 25% of pennies in circulation are coppers. If and when the government does away with the penny (which I'm not anticipating anytime soon, due to both the psychological aspect of not wanting to admit to rampant inflation, and the interest-group poliitcs involved), the copper penny hoarding will proceed apace- good news if you've already got your hoard built up, bad news if you want to keep building your hoard.
Tyler
"Inflation is always and everywhere a monetary phenomenon." -Milton Friedman |
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c140cessna
Penny Collector Member
USA
419 Posts |
Posted - 11/12/2007 : 13:56:58
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quote:
Originally posted by Economist
You should realize, though, that as soon as Congress announces it is doing away with the penny, the hoarding will begin en masse. According to my latest calculation, there is well over $1 billion in net bullion premium (i.e. gross hoarding profit) to be had. It seems that about 25% of pennies in circulation are coppers. If and when the government does away with the penny (which I'm not anticipating anytime soon, due to both the psychological aspect of not wanting to admit to rampant inflation, and the interest-group poliitcs involved), the copper penny hoarding will proceed apace- good news if you've already got your hoard built up, bad news if you want to keep building your hoard.
Tyler
"Inflation is always and everywhere a monetary phenomenon." -Milton Friedman
I agree - hoarding will become very active if they make an official move to kill off the penny.....I think it may happen sooner than you think.....that is why I'm hitting it hot and heavy. I've went so far as to back my 401K contribution down to a minimum to divert additional funds into copper hoarding. If you can afford to do this, I suggest getting a Ryedale machine and start plowing the copper away. They could stop the penn in 2009 on the 100th birthday of the Lincoln Cent.......
I still want about 10 tons .....and I plan on getting there by 2009.
M41/1USMI:US1Cu397000,CA1Cu328000,CA5Ni35000....total Cu = 724,000. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 11/12/2007 : 20:13:11
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I agree with c140cessna. I think the time horizon is shorter than we realize. I suggest getting a Ryedale machine and socking away as much as you can also. Don't let me and c140cessna have all the fun. There are plenty of copper pennies out there for everyone to share right now. This could change virtually overnight if they either kill off the penny or end the melting ban. Hoarding will never be as good as it is right now, so the sooner you get serious the better off you will be. If you just want to sort a few coins, use a popsicle stick, but if you want to get serious about sorting, get a RYEDALE!
Welcome to the board Economist. You make a very verisimilitudenous argument. Question for you or others on the board.. How do you know when you have your hoard built up?
If your percentages are low.. just sort more.
"Preserving REAL coinage.. 2 tons at a time... and FAKE coinage.. a quarter ton at a time.. just for speculation"
HoardCode0.1:M49/15USCA:US1Cu692500(60000 Reserved):US1Zi150000:US5Ni9500:CA5Ni1150 |
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Ponce
Penny Hoarding Member
Cuba
630 Posts |
Posted - 11/13/2007 : 13:36:26
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I already posted this elsewhere but is worth reading again and then take action..... the future is now if you know how to read it.
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The history of the past century has shown that when doing so, most governments re-issue only new paper currency, but leave the old coinage in circulation, at the same face value. (Because the sheer logistics of a coinage swap would be daunting.) Typically, this leaves the holders of coinage as the unexpected beneficiaries of a 10X, 100X.or even 1,000 gain of the value of their coins. Governments just assume that most citizens just have a couple of pocketfuls of coins at any given time.So if th is were to happen while you are sitting on a pile of nickels, you will make a handsome profit. You could merely spend your saved nickels in the new currency regime.
"If you don't hold it, you don't own it"...Ponce |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 11/13/2007 : 13:45:55
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That's very true Ponce. We should not become discouraged over lower copper and nickel prices. The industrial demand may fall for the base metals due to a slow-down, but inflation alone will soon make the value of the coin's melt value worth even more than it's face value.
****************
Fanaticism is doubling one's efforts, yet forgetting one's purpose.
*********************
Realcent.forumco.com disclosure please read
All posts either by the members, moderators, and the administration of You must be logged in to see this link. are for entertainment purpose only. It is not the intent of realcent.forumco.com to provide investment, medical, legal or tax advice and nothing posted here should be considered to be so. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 11/13/2007 : 14:23:34
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I am not sure that I am ready to bank on the US adding an extra zero or two onto all their bills just yet, but that is an excellent point on what could happen to coins during a currency collapse.
Also, there is no guarantee that new coins will not be made. For example, when Mexico went from the Old Peso to the New Peso and 10 to 1 conversion rate, they made new coins as well as bills. So there was no advantage gained there on the old coins from the actual conversion. There was of course a metal content value advantage to the coins, but that was from the general devaluation of the currency and not specifically from the conversion event... |
Edited by - horgad on 11/13/2007 14:46:16 |
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Nickel, penny no longer are worth minting
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