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MaDeuce
Penny Pincher Member
USA
124 Posts |
 Posted - 06/18/2008 : 09:06:14
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Hello old friends, it's been a while since I've checked in. I received an email today about HR5512, which has apparently already passed the House, approving a new steel "penny" for the US. It's not law yet, but I'm sure that in their zeal to show us how responsible they are with our money, our folks in DC will pass it soon enough.
There's nothing in the article that anyone who's been on this list for a while doesn't already know. In fact, a bunch of y'all could have written it. But I thought I'd pass it along anyway.
BTW, the article is hosted at the Ludwig von Mises Institute. For any of you with an interest in Economics, especially Austrian Economics, this is a wonderful site.
You must be logged in to see this link.
On an unrelated note, I have been working on a project that you will all get a kick out of and that would make Mr. Gresham proud. Hope to be able to share it with y'all by the end of the summer.
Text of the article follows:
Wooden Nickels and Steel Pennies
Daily Article by Dan McLaughlin | Posted on 6/18/2008
"Don't take any wooden nickels" was an admonition to be careful in your dealings because someone might try to pay you with worthless money. Wooden coins were actually used in trade in America in certain limited circumstances on a local level. A contemporary equivalent could be "don't take any steel pennies." The United States House Of Representatives has already passed a bill, HR 5512, authorizing the Treasury Department to substitute steel for the nickel and copper now used in American pennies and nickels.
The rationale is that, by substituting cheaper metals, the government can save many millions of dollars. This is, in fact, a very valid point. Another observation is equally obvious and valid. The dollar has been devalued to such an extent that a penny — as in one hundredth of a dollar — can only buy a fraction of the metal needed to make a physical penny. Each coin takes significantly more than one cent to produce.
This is not the first time in history that the currency of a country has been debased. In centuries past, kings would debase gold and silver coins by reducing metal content, making smaller coins and actually replacing the original metals with cheaper alloys, while holding the legal-tender value the same. This gave rise to Gresham's Law, a principle in economics that bad money drives out good money. Consumers will use the devalued currency in transactions and take the more valuable money out of circulation. Since the establishment of the Federal Reserve, American coins have been debased numerous times, replacing more valuable metals with less valuable ones. The dollar, which was backed by gold decades ago, is now backed by nothing but legal-tender laws.
Devaluation of the currency gives rise to a general increase in prices, inflation in the popular sense. General price inflation is, everywhere and always, a monetary phenomenon, as stated by various economists, including central bankers. That means that a general increase in prices cannot arise from an increase in the prices of gasoline, food or any other commodity, the mythical "cost-push inflation." The monetary phenomenon that the money specialists talk about is the increase in the money supply by the bankers.
Fuel prices are very high right now. Because of that, people adjust their lives to accommodate them. This adjustment results in a lower quantity demanded for many goods and services that rely on travel and energy consumption. The lower quantity demanded should also lead to lower prices of nonenergy items. With a constant supply of money, an increase in prices in one area necessarily has to result in a decrease in prices in other areas. The only way that prices of all things can increase at the same time is if the relative supply of money increases; more dollars chasing after the same amount of goods and services.
Congressional leaders give the appearance of being interested in saving taxpayers money, which would be a very good thing if only it were true. In theory, the less they spend making coins, the less they would have to tax the people. What they don't reveal is that inflation, which gives rise to the need for devaluing the coins, is in effect a tax. It takes wealth from your pocket and transfers it to the pockets of bankers and government agents who get the money first. The inflation tax is just as much a burden on the population as a direct tax. It is more insidious, however, because it is not seen as a tax. It has become such a normal occurrence that people just factor it into their daily business. People are told that rising prices cause inflation to divert the heat from our elected officials. In reality, it is just the opposite. The rising prices are the effect. The increasing money supply is the cause.
There was another time in the past when pennies were made of steel. I have a steel penny from the World War II era. At that time, copper was in short supply due to military consumption during the war. Copper was expensive because it was scarce. Today it is not scarce. Copper and nickel have a high dollar price because the dollar is rapidly losing its value. With the current inflationary scheme for financing government, there will come a time when even steel will cost too much to use in coins. We may be forced to accept wooden nickels because every metal will be priced out of the market for coinage.
[VIEW THIS ARTICLE ONLINE]
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Dan McLaughlin is a former financial executive and a current columnist for The Post Journal. Visit his website, AboutFreedom.org. Send him mail. Comment on the blog.
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Edited by - MaDeuce on 06/18/2008 09:07:50 |
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Centsearcher
Penny Pincher Member
USA
107 Posts |
Posted - 06/18/2008 : 15:32:54
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Great article, thanks for sharing!
If they start making steel cents we'll just have to start hoarding zinc |
--Misplaced Numismatist--
Democracy: The only system where any two idiots can out-vote a genius
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NotABigDeal
1000+ Penny Miser Member
USA
3890 Posts |
Posted - 06/18/2008 : 17:19:44
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MaDeuce, welcome back. Thought you were gone. I figured you were cooking up something. I can't wait to see what it is....
Deal |
Live free or die.
Plain and simple.
"If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your council or your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen."
- Samuel Adams |
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Gr33nday43
New Member
Uzbekistan
10 Posts |
Posted - 06/18/2008 : 23:12:12
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| I really hope they do not pass this! I hate steel cents, they rust and corrode. As a previous poster said, we will just have to hoard zinc! |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 06/18/2008 : 23:34:52
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*Already has a substantial hoard of zinc.. but not intentionally.*  |
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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MaDeuce
Penny Pincher Member
USA
124 Posts |
Posted - 06/19/2008 : 08:59:59
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You know where this is eventually going, don't you? It won't be all that long before it isn't possible to find a material that is cheap enough to make a penny from. One way or another, it will become too expensive to make pennies out of anything (except paper). First pennies, then nickels, then ... Unless the face value of coin denominations increase (e.g., $1 coins, $5 coins, ...), it will be too expensive to have any coins. The other alternative, of course, is to re-value the dollar so that a penny is actually worth something again.
There are a number of third world countries that have already done away with coins for this exact reason.
If the value of our money was actually tied to something (like gold!), this wouldn't be an issue. But then, the government couldn't expand the money supply to steal from us.
Sorry for the despondent tone. The past year and a half of penny and nickel sorting has really opened my eyes to the realities of how monetary systems and central banks work.
MaDeuce |
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The "new" US steel pennies
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