Options
Coin shortage could turn pennies to nickels... TRUE!
TXGold
Posts: 21
By Kevin Plumberg
NEW YORK (Reuters) - Talk about pennies from heaven.
A potential shortage of coins in the United States could mean all those pennies in your piggy bank could be worth five times their current value soon, says an economist at the Federal Reserve Bank of Chicago.
Sharply rising prices of metals such as copper and nickel have meant the face value of pennies and nickels are worth less than the material that they are made of, increasing the risk that speculators could melt the coins and sell them for a profit.
Such a risk spurred the U.S. Mint last month to issue regulations limiting melting and exporting of the coins.
But Francois Velde, senior economist at the Chicago Fed, argued in a recent research note that prohibitions by the Mint would unlikely deter serious speculators who already have piled up the coinage.
The best solution, Velde said, would be to "rebase" the penny by making it worth five cents rather than one cent. Doing so would increase the amount of five-cent coins in circulation and do away with the almost worthless one cent coin.
"History shows that when coins are worth melting, they disappear," Velde wrote.
"Rebasing the penny would ... debase the five-cent piece and put it safely away from its melting point," he added.
Raw material prices in general have skyrocketed in the last five years, sending copper prices to record highs of $4.16 a pound in May. Copper pennies number 154 to a pound. Prices have since come down from that peak but could still trek higher, Velde said.
Since 1982, the Mint began making copper-coated zinc pennies to prevent metals speculators from taking advantage of lofty base metal prices. Though the penny is losing its importance -- it is worth only four seconds of the average American's work time, assuming a 40-hour workweek -- the Mint is making more and more pennies.
Velde said that since 1982 the Mint has produced 910 pennies for every American. Last year there were 8.23 billion pennies in circulation, according to the Mint.
"These factors suggest that, sooner or later, the penny will join the farthing (one-quarter of a penny) and the hapenny (one-half of a penny) in coin museums," he said.
News found on Reuters.
NEW YORK (Reuters) - Talk about pennies from heaven.
A potential shortage of coins in the United States could mean all those pennies in your piggy bank could be worth five times their current value soon, says an economist at the Federal Reserve Bank of Chicago.
Sharply rising prices of metals such as copper and nickel have meant the face value of pennies and nickels are worth less than the material that they are made of, increasing the risk that speculators could melt the coins and sell them for a profit.
Such a risk spurred the U.S. Mint last month to issue regulations limiting melting and exporting of the coins.
But Francois Velde, senior economist at the Chicago Fed, argued in a recent research note that prohibitions by the Mint would unlikely deter serious speculators who already have piled up the coinage.
The best solution, Velde said, would be to "rebase" the penny by making it worth five cents rather than one cent. Doing so would increase the amount of five-cent coins in circulation and do away with the almost worthless one cent coin.
"History shows that when coins are worth melting, they disappear," Velde wrote.
"Rebasing the penny would ... debase the five-cent piece and put it safely away from its melting point," he added.
Raw material prices in general have skyrocketed in the last five years, sending copper prices to record highs of $4.16 a pound in May. Copper pennies number 154 to a pound. Prices have since come down from that peak but could still trek higher, Velde said.
Since 1982, the Mint began making copper-coated zinc pennies to prevent metals speculators from taking advantage of lofty base metal prices. Though the penny is losing its importance -- it is worth only four seconds of the average American's work time, assuming a 40-hour workweek -- the Mint is making more and more pennies.
Velde said that since 1982 the Mint has produced 910 pennies for every American. Last year there were 8.23 billion pennies in circulation, according to the Mint.
"These factors suggest that, sooner or later, the penny will join the farthing (one-quarter of a penny) and the hapenny (one-half of a penny) in coin museums," he said.
News found on Reuters.
-----------------------------------
Gold. And lot's of it.
-----------------------------------
Gold. And lot's of it.
-----------------------------------
0
Comments
contingency plan for what to do when the nickels disappear. It seems
improbable since the government rarely "gives away money".
The 8 billion number is in error. There are probably more on the order of
80 billion cents in circulation or quasi-circulation. Increasing their value
by 4c is a $3,000,000,000 infusion into the economy which is nearly in-
consequential now days. This would be a windfall to those who have
been hoarding cents.
While I'll believe it when I see it, it wpould be interesting to see cent
coins actually circulate for a while after years of just sitting in coffee cans
and sock drawers. It would really cause some interesting anomalies
for future collectors. It would also bring large numbers of BU rolls into
circulation for use as nickels since most rolls are worth less than $2.50.
Curiouser ans curiouser, but I believe this one's a red herring.
I would just slow down making them and let people dig them out.
If banks would stop charging to use their coin counters, more people may like cash them in (I use my credit union so there is no fee)
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
I wonder who would be clever enough to melt down pennies ? why bother ?
more data for you:
A nickel is worth about 7 cents in metal value or 40 % more than face
A penny is worth about 1.7 cents or 70 % more than face.
modern pennies (post 1982) are 98% zinc
modern nickels are 75% copper and 25 % nickel
Coinflation Web Site Link
Don't post-82 pennies make up a large -- if not dominant -- proportion of the total pennies in circulation? If so, shouldn't zinc prices be an essential part of this discussion?
BTW my preferred bank won't even bother depositing my accumulated loose change anymore. (Which is ridiculous, IMO.)
AL
<< <i>
Don't post-82 pennies make up a large -- if not dominant -- proportion of the total pennies in circulation? If so, shouldn't zinc prices be an essential part of this discussion?
>>
From my box searching experience, pre-1982 cents make up about 30% of each box, or roughly 750 per 2500 coins. Of course there are the oddballs. I had one box at nearly 50% pre-1982's.
But there are still a lot of them out there. *looks to my left* 25lbs of them right here.
Positive BST: WhiteThunder (x2), Ajaan, onefasttalon, mirabela, Wizard1, cucamongacoin, mccardguy1
Negative BST: NONE!
"Rebasing the penny would ... debase the five-cent piece and put it safely away from its melting point," he added.
Proud recipient of two "You Suck" awards
San Diego, CA
<< <i>As soon as the States stop collecting Sales Tax, than we would not need the Cent.
Why? What does one have to do with the other?
The cent coin needs to be discontinued immediately. It's a complete time and money waster, and serves no positive good in our nation's economy.
The nickel is more problematic, due to our quirky coinage situation. Without a nickel, you can't change a quarter. If we had been successful in replacing quarters with double dimes back in 1875, this would be a non-issue today -- just kill the nickel, and round all transactions to the dime.
I think there are two possible answers:
1) Make the nickel out of some other metal, like steel (Canada-style). This would mean reprogramming all the vending machines, which is a PITA.
2) Bring back the half-dime! OK, well maybe not...
I have lots of U.S. Cents that I would be happy to get a nickel for.
I have three banks, not one charges a fee, and only one asks you to roll the coins. All three require an account or safe deposit box to use their machine though.
What about all of the current cents now in slabs that will have to be reholdered as five cents pieces!!!!!!
;-)
TD
<< <i>Just curious where one would obtain U.S. pennies? I have never heard of these being produced here.
I have lots of U.S. Cents that I would be happy to get a nickel for.
And what is this "nickel" of which you speak? I know we have a coin that says "five cents" on it, but nowhere in the Coinage Act of 1792 can I find a reference to a coin called a "nickel".
<< <i>
<< <i>Just curious where one would obtain U.S. pennies? I have never heard of these being produced here.
I have lots of U.S. Cents that I would be happy to get a nickel for.
And what is this "nickel" of which you speak? I know we have a coin called that says "five cents" on it, but in nowhere in the Coinage Act of 1792 can I find a reference to a coin called a "nickel". >>
Alright you got me.
<< <i>As soon as the States stop collecting Sales Tax, than we would not need the Cent.
Cents are not needed.
Cents are not needed to collect sales tax either. Sales taxes would simply be collected in
five cent increments or rounded to the nearest five cents if there were no cents. There would
be absolutely no change whatsoever in average sales taxes if this were instituted.
what you do is leave all existing coins at their current face value, and stop making lincolns and jeffersons and roosevelts
then simply start making a 2 cent piece the same specs as the current one cent piece, and a 10 cent piece with the same specs as the current 5 cent piece.
soon, existing nickels and pennies will trade at 10 cents and 2 cents side by side with the new coins
Liberty: Parent of Science & Industry
But because of the way vending machines work - and the ridiculousness of pennies as money - here's the solution:In 10 years - eliminate the cent - make nickels out of something less expensive (steel, with nickel plate)..
-- naaaaah! we'll just keep on subsidizing the penny, while millions of them go to china to be melted down.