Slashdot Log In
US Pennies To Be Worth Five Cents?
Posted by
kdawson
on Fri Jan 26, 2007 08:19 AM
from the new-nickel dept.
from the new-nickel dept.
Z-MaxX writes to point out Reuters coverage following up on last month's news that the US Mint has made it illegal to melt or export US coins in bulk, since the value of their constituent metals — in the case of pennies and nickels — now exceeds their face value. The new story quotes Francois Velde, senior economist at the Federal Reserve Bank of Chicago, who thinks the new rules will not be enough — he believes that determined speculators are already piling up pennies. Velde suggests "rebasing" the penny to be worth five cents. Quoting Velde: "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."
Related Stories
[+]
News: Melting Coins Now Illegal In the U.S. 778 comments
A number of readers have noted the action by the U.S. Mint to outlaw the melting down or bulk export of coins. This has come about because the value of the precious metals contained in coins now exceeds their face value.
The Mint would rather not have to replace pennies (at a cost of 1.73 cents per) or nickels (at 8.74 cents). The expectation is that Congress will mandate new compositions for some U.S. coins in 2007.
This discussion has been archived.
No new comments can be posted.
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
Full
Abbreviated
Hidden
Loading... please wait.
Yogi-esque (Score:5, Funny)
Re:Yogi-esque (Score:5, Funny)
Parent
Re:rebase my login name.. (Score:4, Funny)
Parent
Re:rebase my login name.. (Score:4, Funny)
Parent
Re:Nickels I know, but you have farthings?!!! (Score:5, Interesting)
We do not have anything smaller than a penny actually minted any more, specifically because each of the smaller coins experienced this same situation of costing more than its own value. Many things are still priced in half-penny or tenth of a penny denominations, especially things sold in bulk. The final price is just rounded to the nearest penny. (Or sometimes bumped up to the next penny in favor of the vendor for any fraction).
If the penny goes away, the same thing will probably still be done, only we'll be rounding to nickels or dimes.
Parent
Re:Nickels I know, but you have farthings?!!! (Score:5, Informative)
Parent
Re:Nickels I know, but you have farthings?!!! (Score:5, Interesting)
Then, that does give some weight to what I've read recently that the Federal Reserve bank is constitutionally illegal?!?! They are privately owned, not a branch of the Federal Govt. This is a new argument to me, and I'd not known it in the past, but, it bears some looking into...?
Reference 1 [wikipedia.org] and Reference 2 [worldnewsstand.net] ....are among many links I found Google pertaining to this.
Any opinions out there? I've read on some sites, that if we did away with the Fed tomorrow...we could wipe out our debt almost overnight...due to the bonds and such they give out...and the Fed. Govt. would then own the money it has 'borrowed' from the Fed....
I don't know much about finances, but, it sounded interesting.
Parent
Re:Nickels I know, but you have farthings?!!! (Score:5, Informative)
I said that it's completely legal for a group to decide amongst themselves to exchange two things for each other (I could wash your car if you fix my computer, if one of them happens to involve little IOU notes of some type so be it). What I said, is "If a city or state government attempted to force a business to accept something as legal tender, the Federal Gov't would shut them down". Flooz was completely legal. If the State of Arizona attempted to force business to accept flooz, or would only accept tax debts paid in flooz the Federal Gov't would take them to Federal Court and crush them with a fairly straightforward argument.
As far as what is or isn't legal tender, the $20 bill in my wallet says right on it, "This note is legal tender for all debts, public and private". So I'm reasonable confident that printed bills are in fact legal tender. I'm also sure that any state that attempted to print such a thing on a piece of paper they printed would find themselves in a whole lot of trouble. It is one of the few rights the Federal gov't retained for itself.
What'd I screw up about the barter system? I'm fairly sure bartering is when folks agree to exchange things of value. Weather they be legal tender, things or services, it's bartering. I specifically mentioned that these local currencies are legal, but it's completely voluntary that anyone participate in it. If you have a debt to me, if you hand me "LETS Money.", I can laugh at you. If you hand me US Dollars, I have to accept them (assuming I'm in the US).
Kirby
Parent
Re:181 Pennies to the Pound (Score:5, Informative)
Parent
Re:181 Pennies to the Pound (Score:5, Funny)
Parent
Steel (Score:5, Interesting)
Re:Steel (Score:4, Funny)
Parent
Re:Steel (Score:5, Informative)
Parent
no more pricing in penny increments? (Score:5, Insightful)
Re:no more pricing in penny increments? (Score:5, Informative)
Parent
Re:no more pricing in penny increments? (Score:4, Insightful)
Oh the humanity! There was a time, as the summary implies, when one could pay with half-pennies and quarter-pennies (in Britain at least). A loaf of bread cost a dime at some point in the past. Below twenty cents (dime + 100%), there are only twenty possible prices, thus the price of some loaves was probably a little higher than it should have been. Today a loaf is around $2. There are 200 different prices between $3 and $1 ($2 +/- 100%). Do we really need this fine grained pricing? Why didn't we need it in the past? Axeing the penny gives you about 40 different prices in that range. If the penny is more trouble than it's worth, let's ditch it. Keep in mind that prices are already rounded to the nearest cent, so you're already paying tenths of a penny more or a less. Also keep in mind that price is determined by what people are willing to pay. I understand Austrailia has done away with the penny, final price is rounded up or down at checkout, and the economy has not collapsed.
Parent
Our dimes go to eleven (Score:5, Funny)
Follow Australia (Score:5, Informative)
Re:Better yet... (Score:4, Informative)
Parent
Melt em! (Score:5, Insightful)
Re:Melt em! (Score:5, Funny)
Parent
Re:Melt em! (Score:4, Funny)
To whomever is modding this "informative" instead of "funny", please frequently check the batteries in all of your smoke detectors and make sure your home insurance up to date....
Parent
Copper (Score:4, Interesting)
Inflation! (Score:5, Insightful)
The U.S. is suffering inflation. It's not that the cost of metal is increasing, it's that the value of your currency is falling. Fast.
This week it very, very, nearly reached £1 = $2 for the first time in my lifetime.
You REALLY NEED TO WORRY ABOUT THIS INFLATION, not the value of the metal in your coins.
Re:Inflation! (Score:4, Insightful)
Actually, it's both.
There's a higher demand for copper nowadays and supply is remaining constant.
All the metals are in higher demand because of little things like oh, I donno, China?
I agree, inflation's a huge problem (and getting worse), but it's not solely responsible for this.
Parent
Re:Inflation! (Score:5, Informative)
You must be about 13 years old then. I seem to recall that back in the early 90s the USD:GBP exchange rate was about 2:1.
Also, the U.S. inflation rate is currently about 2.5%, which, while not spectacularly good, is not that terrible either. By contrast, the U.K. inflation rate is at 2.7%. Maybe try waiting until you need to shave before doling out your stunning economic advice.
Parent
Re:Inflation! (Score:5, Interesting)
Quote from this interview [capitalspectator.com]:
That's deceptive. The rate of inflation is actually horrendous, especially for low-to-middle-income people, who spend their money on food and fuel, and clothing and medical care. Even if inflation was as low as stated, it's the same type of deception that occurred in the 1920s. They kept saying there's no inflation. Inflation is measured by the increase in the money and credit. The distortions sometimes lead to higher prices, but many times you can't predict where those higher prices will emerge. Sometimes it's in a stock market bubble, sometimes it's in commodities, sometimes it goes into the consumer price index. So inflation emerges in different ways. Meanwhile, the biggest problem is the deception that interest rates are low, which causes people who save, people who invest, people who spend to do things they otherwise wouldn't do.
Interestingly, the Federal Reserve does no longer publish M3 [wikipedia.org] - the interview with Ron Paul might explain why.
Parent
Inflation!!!!!!!!1!!!!1! (Score:5, Insightful)
OK, OK, Jeez. I'm worried, OK? If I promise to worry, will you quit yelling at me?
Actually, you're referring to the dollar/pound exchange rate, not necessarily inflation in the US. Since most goods and services purchased in the US are denominated in dollars, not pounds, the relative strength of the pound has little to do with prices in the US. In fact, consumer and manufacturer price inflation is pretty low.
British products may be more expensive in America, but this only really affects the price of my cheesy comestibles. That's not trivial, but I can make do with less. In the meantime, you should take advantage of the situation and purchase cheaper US goods. I wish I could recommend a visit here to you, but ever since the "Department of Homeland Security" was created this country has had all the charm of a prison camp.
Exchange rates are rather volatile. When I was visiting Canada on vacation in Fall 2000, the USD:CAD exchange was 0.65 USD per CAD. Canadians I talked to were concerned about two things: that their currency was going to become worthless and that it looked like a bloodthirsty Texas redneck might get elected US president. At least their currency rebounded.
Parent
not the only idiocy of us coinage (Score:5, Interesting)
1. the nickel itself is worth more than a nickel for the same reason the penny is worth more than a penny. the penny should just be gotten rid of
2. bills are the same color (the salmon pink $10 bill is a recent relief from that) and size so they are hard to tell apart easily, and impossible to tell apart for the blind... who in fact recently sued and won the us govt over this fact [cnn.com]
3. a dollar coin you can't tell apart from quarters easily (still, i am talking about the sacagawea: same approximate size/ weight)
the usa is the largest important economy in the world, but its currency is designed worse than the coinage/ bills of some third world countries. i wrote a story about it recently on kuro5hin [kuro5hin.org]. i think australia has some of the best designed currency in the world (different colors/ sizes for the blind, made of plastic, not linen, etc.)
the us should do a dramatic rethink of the design of their bills and coins, what we have now is depressingly outdated, archaic, and not very user friendly
Re:not the only idiocy of us coinage (Score:4, Interesting)
Do you realize that all of Europe did this, largley without incident?
Parent
two points (Score:5, Insightful)
and if you say any cost is unacceptable, then you really aren't in mental acceptance of the obvious shortcomings of current us currency. any minimal cost involved in a changeover will be greatly overshadowed by the cost gains due to currency with a superior design: efficiency, ease of use, etc. but that you don't seem to give much weight to these factors brings me to point
#2. this argument baffles me. that the us currency must always look the way it does is a sort of mindset i can't comprehend. why is this so important to you? doesn't functionality and intelligent design trump sentimentality and nostalgia? it doesn't even make sense from a point of view of a traditionalist: look at how different us currency is from the 1800s. what did you say?: "There is a certain elegance and history to the look of the bills, which was established centuries ago." excuse me, what are you smoking? centuries ago? you need to familiarize yourself with the history of american currency to a level that a casual elementary school coin collector already grasps
you could be saying that the us needs to be conservative about its currency since its so important to the world economy. well that's completely wrong. #1: the euro has only been around for a few years and is already supplanting the dollar as the de facto currency for reserves/ exchange on the international market. so much for the value of tradition. and #2: counterfeiting, especially the extremely good north korean kind is an argument for a radical redesign in the interest of preserving the hegemony of the american dollar in international exchange. in other words, you have it completely backwards: international confidence in the dollar is served by radically changing its design, and is undermined by allowing it to stay the same, in its easily counterfeited form (for the excellent north korean forgers). recent changes to the $50, $20, and $10 in fact is exactly because of this kind of counterfeiting. too bad the us mint only considered counterfeiting, and not ease of use, in their recent redesigns (and so much for your vending machines can never change argument too right?)
i really don't understand sentimentality and nostalgia as the prime motivating factor when it comes to currency. frankly, who the f*** cares what the currency looks like? usability, a concept a website populated with techies should easily grasp, trumps all. or at least this concept should trump all, but it obviously doesn't with you. the concept that seems to trump all in your mind is inertia. i frankly don't understand how your thinking on the subject has any value. sentimentality and nostalgia are completely useless subjects on the topic
Parent
that's just sentimentality and nostalgia talking (Score:5, Insightful)
you have no such equating going on in your mind about the roman coin. and that same germanic tribesman, upon seeing an american dollar, would not feel the "heft" you speak of either. he'd just think it was pretty paper, and probably wipe his ass with it. so the design of the dollar itself is not what gives you the feeling you get when you see it, it is your own mind. therefore, the design of the dollar can be changed, and 20-30 years from now, assuming the usa remains a strong country, a younger canadian tha yourself would feel the same "heft" you speak of, no matter what fruity colors a new radically different dollar would sport
i remember picking up a nazi coin in a friend's collection of coins when i was a teenager, and the thing had menace. i thought it was evil. it definitely had "heft" in my mind. but in actuality, it was quite worn and light weight and cheap looking, since the nazis needed all of their valuable metals for their war efforts. in essence, there was nothing intrinsic about the design of the nazi coin that gave it the "heft" i felt... in fact, it was quite cheap in design. my feeling about it was all psychological, and it all went on in my mind, and that feeling depended completely upon factors that had nothing whatsoever to do witht he actual look and feel of the coin itself. same with your feelings and the american dollar
in short, your canadian currency is superior to american currency. simply because its more usable than ours. and that concept completely trumps your weird psychological feeling of "heft" that you speak of
Parent
1 penny = 5 pennies (Score:4, Funny)
Similar stories (Score:5, Interesting)
About 15-odd years ago, South Africa replaced all their coinage (and paper currency too). One unexpected side effect was that the new 20 cent coin was a similar size to the old one cent coin. Some older badly calibrated vending machines, notably parking meters, were unable to tell them apart, so there was a sudden rush to aquire old one cent coins, and lots of people got away with very cheap parking for a while.
The problem was fairly short-lived, though -- all the old one-cent coins used this way went straight to the banks and were destroyed, so although it caused a short-term revenue issue for vending machines, it did a very effective job of removing all those old coins from circulation much quicker than they would otherwise have been.
Further back, the British decimalised their currency in the 1970s, but kept the same sizes of coin, so they were interchangable. The older silver coins (shilling, two shilling, etc) had previously been made with a pretty high content of actual silver metal, the older the coin, the more it contained. And since the coins were still in circulation, it was possible occasionally to get in your change a hundred year old coin worth a lot more than the ten pence (two shilling) face value. My grandparents kept a collection of the really old ones they got for years. I don't know what happened to it in the end, but it would probably be quite valuable. (The UK coin sizes were changed relatively recently, so you won't get the really old coins any more)
More recently, again in Britain, the news media carried excitable stories about the two pence coin being worth three pence for it's scrap copper value. It has been illegal to deface British currency for a long time, and you'd have to collect a vast number of two pence coins to make it worth the effort, so as far as I know, no-one has bothered actually trying to make any money from it, but in theory it is possible.
Look to the past for the answers (Score:5, Interesting)
Printing presses in high gear (Score:4, Informative)
The US dollar is losing it's value so rapidly, base metal slugs used as coinage are worth more than face value.
See, we stopped making pennies of copper in 1982. Pennies made after 82 are copper plated zinc alloy. Now even that is worth more than a penny (1.73 cents). A pre 83 copper penny is worth about 3 cents.
Pre 65 dimes, quarters and halves, also referred to as "junk silver coin" are fetching about 6 and a half times face value.
The US dollar may soon lose it's status as reserve currency in the world. When that happens, we will be faced with hyperinflation. This is happening because of our burgeoning trade deficit causing by offshoring, our rapidly growing budget deficit caused by this insane war and the government printing currency like there's no tommorrow.
Tommorrow will come and we will be confronted with a bitter reality.
Re:Printing presses in high gear (Score:5, Insightful)
When inflation hits a certain point, your currency becomes worth next to nothing, salaries fail to keep up, mortgages are too high (those real estate deals people are so happy about making cash off of...), and we fall into a deep depression. Happened in the early 90's, happened when the tech bubble popped, and the parent is talking about us being on the verge of it happening again.
It's a lousy hole to dig yourself out of, because it's a cycle that no one knows exactly how to break. It just seems to take time (and lots of it) for values to fight their way close enough back to equilibrium and life goes on.
It makes me sick every time I see articles about people flipping real-estate. They HAVE to know properties are over-valued. They just have to. With each sale, the next owner expects the property to either keep its value or go up. When people are flipping properties so quickly, everything has a sale price higher than its actual value. Here in St. Louis, the impact of it has already started to take hold: no one is buying. The market will only bear so much insanity.
As for the mints running money like mad, he's mostly right. For each dollar in circulation, the less each dollar is actually worth. The catch there is circulation. I know many older bills have been coming out of circulation, but I don't know at what rate, so I can't start jumping up and down at that point just yet, but he may very well be right. So we're over-valuing the land we live on, we over-value our money. We're in debt up to our eyeballs to other nations, and we're fighting a war with no clear-cut objective for victory or retreat. Without any bias toward or against our president, we are nearing par with Vietnam, the difference here I have to say is that our body count is not anywhere near the same (thank goodness!) and there is no draft.
Those who study economics have to realize something here too: all of our really serious depressions in the past have been resolved by wars. War creates jobs. War stirs the economy, makes individuals wealthy. Morality aside, each time we've gotten into a bind, a war has bailed us out. This may very well be the first time that *while* at war, this is happening. A war won't bail us out this time (or at least, we'd all best pray it doesn't, because if it does, it means we as a country p*ssed off the rest of the world and they come here to set us straight).
It really is sad to see. I bought my first home 3 years ago. I *thought* the value was a bit high, and managed to buy it just short of what it was appraised at, and was praying my wife and I didn't become too screwed by the real-estate market bombing. Here's to hoping.
Parent
It's not the copper, it's the zinc (Score:5, Informative)
The article implies that copper prices ($4.16/pound last May) are the reason pennies can be melted down profitably.
Since pennies are 97.5% zinc, 2.5% copper (says US Mint via google), the issue is that, at 154 pennies per pound, it's the zinc price rising above ~$2.00 that becomes an issue. And that happened last November (although it's now ~$0.77/pound for Zinc.) Zinc prices are the problem, not copper.
--LP
Re:then make them out of plastic or such... (Score:5, Informative)
1982- present 97.6% zinc core, 2.4% copper plating 2009 (planned) New designs in bronze per the Presidential $1 Coin Act of 2005 [wikipedia.org]
Rather than getting rid of the cent, will it be replaced with bronze? Is this worth any less?
DugUK
Parent
Re:then make them out of plastic or such... (Score:5, Insightful)
As for the dollars becoming coins... I can agree with $1 bills being coins, but I think $5 is too much. I can't say 'Oh well, I lost $5. I won't even bother to look for it.' A $1... I'd still look for it, but I wouldn't be heartbroken if it disappeared. That's what happens to coins. They get dropped. Bills don't get dropped because they are easy to put in a wallet. (If you suggest a coin wallet, I'll slap you. That'd be huge with the number of $1s I carry for the vending machine.)
Pennies, I never look for it they drop. Dimes I usually look for.
Parent
Re:Here's a thought... Use them! (Score:5, Funny)
My wife does the same thing. It drives me nuts. I'm much more into never dealing with change, putting all of my coins into a huge pile, and then dumping them into the free Commerce Bank change counter after the pile achieves critical mass and things begin to orbit it. Last time I had $80 worth, and that's with me removing the quarters for laundry.
Parent
Re:then make them out of plastic or such... (Score:5, Insightful)
Parent
Re:then make them out of plastic or such... (Score:4, Funny)
Parent
Re:Why (Score:5, Informative)
The value of the metals used to make pennies didn't just increase along a gentle slope, they jumped. A lot. According to kitco.com, zinc went from 40-50 cents per pound in 2003-04, to over $2 per pound this month.
Copper is similar (although pennies don't use much copper anymore.)
As everyone knows, the government does not move fast. They knew the day was coming, they had no idea it was going to happen this fast. Now they are scrambling, and that scrambling could take a few years yet.
The easiest thing to do is not to "re-base" the penny, but simply pull it from market and eliminate it. Re-basing would make the penny the same value as the nickel, which would cause havoc.
Nickels have the same problem actually, the price of nickel has nearly tripled in the last year. We probably need to get rid of both the penny and nickel, or at least make nickels out of much less expensive metals (which will fuck up machines that take coins.)
Parent
Re:Wouldn't happen under a libertarian government (Score:5, Informative)
United States Code
Title 18 - Crimes and Criminal Procedure
Part I - Crimes
Chapter 17 - Coins and Currency Source [findlaw.com]
What you describe is called forgery, which is also illegal and is punishable on a whole other level.
=Smidge=
Parent
Re:Wouldn't happen under a libertarian government (Score:4, Insightful)
Horseshit. Inflation has exactly one root cause - the use of fiat ("non-specie") currency.
Horseshit. Gold has no more innate worth than any other currency. Not to mention that you can be proven wrong by example, namely that inflation was quite well known in economies in the past that HAD NO PAPER MONEY.
Long-term, productivity increases force prices down, not up.
That's quite correct, which is why you see inflation in recessions quite often.
Why is it worth less? Because the man behind the curtain has printed a few trillion copies of the dollars in your pocket, and handed them out to his best friends, making yours worth less/worthless. Wasn't that nice of him?
This is an incredibly simplistic view of things, and still doesn't go back far enough to the root problems of macroeconomics. The problem isn't some clown with a printing press (unless he's as dumb as Germany was between the wars; that's how they paid off their war debt and screwed their economy). The problem is that more money is coming out of banks and being spent than is being saved during an economic downturn, at the same time that fewer goods are being produced. This increases prices. Note that this effect would be the same regardless of whether the currency is digital, paper, gold, or cowrie shells. It doesn't matter a bit. This is something I'll never successfully pound through the heads of the gold nuts who have absolutely no grasp of economics.
The dangers of fiat currency are legion and well-known of old; we were warned, well in advance, that the establishment of a fiat currency provides limitless, subtle, and inevitably abused powers to its wielders. We're still being warned, today. Few listen, even as the signs of such abuse are evident.
This naive approach forgets that any currency, by definition, is NOT something of innate value. EVERY currency is a fiat currency. Go study the gold/silver fights in England of a few hundred years ago; that was the man foisting a gold standard on the populace to keep money at a denomination they couldn't afford, thereby disempowering the poor. Any currency can be wielded as a weapon by those in power. Also, if gold wasn't accepted as a type of currency, what the hell would you do with it? Make rings, for God's sake? That gold you're hoarding is only worth a damned thing if someone comes around and buys it from you. So it's still a fiat currency as much as anything else. Who says it's worth anything? Only those with a false sense of security who feel that a bit of metal will serve as their security blanket. And what happens if people decide they don't want it? It's not useful at all on its own outside of the semiconductor and jewelry industry. What do you do then?
If the shit really hits the fan, the only worthwhile currency will be food, so I suggest you cash in your hoard of gold and invest in baked beans and twinkies, those things last forever.
Parent
Re:Wouldn't happen under a libertarian government (Score:4, Insightful)
Your grasp of macroeconomics is remarkably weak. We live in a world where more goods are being made every day, as China and India rev up their production. Go to your local car dealer, and look at the inventory piled up on his lot. Yet we have inflation, which is actually far higher than the government's posted CPI. (Government and business love to keep the CPI low, as it lets them avoid cost-of-living-adjustments.) Why? Because there is too much money being created, thanks to the US deficits and the fractional banking system.
Your statements contradict each other and fail to account for the fact that they take place at different timescales. We live in a world in which more goods are being made every *decade*. However, on a year to year basis, the GDP is quite capable of going down, which is a definition of recession/depression. If you're not aware of this,then you're not in a position to question anyone's understanding of macroeconomics. Second, while India and China do ramp up their production, that hardly helps our GDP, does it? Third, what the hell this has to do with money being created no one knows. If we were creating extra money, we wouldn't have the deficit but we would have more inflation. Instead, we have incredibly low inflation (check the numbers, it's below 4%), and a high deficit. So, through your line of reasoning using actual evidence that does exist, we should be printing more money. Fractional banking doesn't have that much to do with inflation, but if done wrong, results in banking disasters like teh S&L crisis in the 80s. This hasn't happened lately, so your evidence is woefully out of date.
Look at Great Britain from the end of the Napoleonic wars to WWI - a span of roughly 100 years, during which Britain was on a bimetalic standard of gold and silver. It cost 2p to mail a letter when Victoria ascended to the throne; it cost 2p when she died 75 years later. That's price stability. I paid C$3,500 for a Honda Civic in 1975; 30 years later, when presumably it should have moved way down the cost curve, it costs $15,000 for a base model. That's monetary inflation
Your examples are extremely weak, and the aggregate inflation in Britain over that period was not 0% regardless of what they chose to charge for a stamp. Your Civic example works out to under 5% inflation annually which is quite in the healthy range and fails to account for the fact that the 2005 model is a far better car than the 1975; the real rate of inflation on cars (assuming the same product in 1975 and 2005) is far less than 5% and quite likely would be negative if it were legal to sell a vintage 1975 car today. So again, your point is moot. There's no inflation there.
As for why gold should be used, it has many unique qualities. First, it makes pretty, shiny things that ladies have liked for thousands of years. So ladies want it. Men have learned that if they give ladies pretty, shiny things, they can get sex. So men want it. Gold is not too abundant, so scarcity makes it desirable. Gold is perfectly fungible - one gram of gold in China is exactly the same as a gram of gold in Burkina Faso. (Diamonds, for example, are also pretty shiny things that ladies like, but they don't function well as a currency because clarity, colour, flaws, etc. mean your 1 carat gem might not be worth as much as my 1 carat stone.) Gold is easily divisible into smaller amounts to facilitate smaller transactions, while retaining its value. (Gemstones lose much of their worth as they become smaller; check out the difference between the cost of a 1 carat solitaire at your local jeweler, versus a ring with "1 carat total weight" of teeny tiny diamond chips.) Gold, unlike copper or silver, doesn't tarnish easily.
Lame. The love of ladies for baubles is not enough to sustain a real economy in a time of crisis, which is the only time that any sort of paper economy would fail. If the revolution comes, metaphorically speaking, no one will care how much gold you have. Scarcity doesn't make a
Parent
Re:Obvious plan: (Score:5, Interesting)
1) Show all prices after sales tax (if applicable)
This would solve the problem right away.
Stores would start pricing things to the nearest nickel or dime except for small items under a dollar, where differences of under a nickel are significant.
Japan had a similar situation before instituting a 3% consumption tax in 1989. Before that, in general, prices of items over 1000 yen usually ended in a zero, so people didn't have to carry 1 and 5 yen coins around as a matter of course; they were used sparingly.
Then the consumption tax came in and the government found itself having to produce many more of these aluminum and brass coins because of all the odd prices that people were paying.
But very recently they went to tax-inclusive pricing, which has smoothed things out quite a bit. You only really need three significant figures in prices anyway. If you're shopping for a baseball glove or a suit jacket, you can leave the small coins at home.
Sales tax, which creates odd prices, is the real culprit here, not the existence of a small unit of currency. I actually favor the existence of a small unit because little kids buy things with their own money and learn how to manage it. They can't learn these skills if 25c packs of gum and 3c Tootsie Rolls are only sold in bulk (and consequently bought by their parents) because cents aren't in use anymore.
I recognize that tax-inclusive prices would pave the way for "stealth" increases, and shift the preceived burden of consumption tax from the purchaser to the retailer, but it's just smoother. Either this or have retailers set prices that result in round totals after tax, such as charging $5.67 + 6% tax for a $6 item.
I'd really like to convince governments to return to inflation-proof hard currency, or to eliminate consumption taxes, but since that doesn't look very possible, how about a solution more creative than eliminating small coins?
Parent
Re:This is bad but in the wrong sense. (Score:5, Insightful)
Parent
Re:This is bad but in the wrong sense. (Score:4, Insightful)
1) Now all people with whom I wish to conduct transactions need to be capable of accepting electronic money. I've bought several used cars in private sales from people who were unable to accept Visa. The possibility exists of introducing generally-available third parties who can mediate the transaction (as PayPal already does, obviously), but that introduces a new cost to the transaction that is not necessarily matched for either party: there's no benefit to me or the seller individually (though you could argue we derive an indirect benefit from the society-wide benefits).
2) All those transactions are now taxed. While some would view this as a good thing, an awful lot of transactions are performed currently that are not taxed, and, in my view, should not be. For example, I helped a friend paint his house a couple years back, and he paid me $100 (plus beer and pizza). I felt no ethical or moral obligation to pay income tax on that money, much less the taxes involved in being a seller of a good or service.
3) There are privacy concerns, as well. For example, who wants to tip a stripper with a credit card? How will she accept the money without disrupting the show? Even if the logistical hurdles are overcome, who wants that particular transaction recorded in a master government database? Or, more personally, who wants that transaction recorded in a place his wife can see it (as would be mandated under some states' financial regulations regarding marriage)? While you can make a case that these sorts of transactions shouldn't happen in the first place, I think such an argument ignores human nature - not to mention that even if true, since when is it government's job to curtail legal activities?
4) Truly illicit transactions become impossible to conduct in money. This sounds like a good thing (who wants to make heroin easier to purchase?), but I don't believe it would be. The transactions would still occur (if waiving most of your Constitutional rights isn't enough of a disincentive, I sincerely doubt lack of cash would be), but now they'd be in some more chaotic barter system. I suspect this would lead to increased violence.
4a) Moreover, the economic impact of that might be significant. How much construction, cleaning, and other menial labor is paid for under the table? I suspect rather a lot. I also recall finding out that the drug trade is Florida's second- or third-largest industry. Whether or not this is a good thing, suddenly taking that out of the economy would have potentially disastrous effects.
The most important thing, here, is I don't think society as a whole will, in the foreseeable future, shift over to an entirely electronic monetary system. Even if the US government goes for it, I strongly suspect there would be sudden, widespread adoption of non-fiat fungible currency, á la the liberty dollar [libertydollar.org] for all the reasons I've already stated.
Of course, it's entirely possible I've just proved your point: the government should get out of the business of selling currency, and shift to an entirely electronic system. Then let the free market decide what kind of currency it wants to use.
Hrm.
Parent