US Pennies To Be Worth Five Cents?

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."

then make them out of plastic or such...

[Shivetya]

Hell telling people not to do this is like inviting every crook and wannabe to do so, hell now even the dumb ones will know about it.

Just make them out of something worth less than 1c, hell it doesn't even have to be a long term item... plastics should work fine. I would go ceramics but I bet they would break too easily.

Follow Australia

[ill dillettante]

and get rid of the useless penny! What we did was phase out our 1 and 2 cent coins and now just round up or round down to the nearest 5 cents. Works well.

Re:Follow Australia

[new_breed]

Not just Australia, most European countries ditched the 1 and 2 eurocent coint some years ago as well.

Re:then make them out of plastic or such...

[duguk]

Well I'm from the UK and I've been reading the Wikipedia Cent (US coin) [wikipedia.org] article, which says:

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

Re:Follow Australia

[xeper]

I wouldn't call Finland & The Netherlands "most"
http://en.wikipedia.org/wiki/Euro_coins#Small_deno mination_coins [wikipedia.org]

Re:Wouldn't happen under a libertarian government

[packeteer]

You cant deface money and attempt to use it in commerce. Meaning you cant try and change the dollar value on the bill.

As for destroying your own moeny you absolutly may do that if you want. A dollar bill is essentially a recepit for a loan you have given the government. If you destroy your recepit then they keep all the money. Yes i know we are not on the gold standard anymore but wheny ou destroy cash it increases the value of the government's stockpile of the stuff.

Re:Why

[walt-sjc]

That's a fair question - fortunately the answer is fairly simple.

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.)

Re:no more pricing in penny increments?

[skribe]

Oz did away with 1c and 2c pieces in the early 90s. If bought here your $1.96 item would actually be cheaper at $1.95 because we round to the nearest 5c.

Re:Steel

[jackbird]

Actually, only 1943. They needed the copper to make shell casings.

Printing presses in high gear

[Wansu]

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.

It's not the copper, it's the zinc

[LinuxParanoid]

This is kinda a side-note, but I found the article didn't explain what was going on very well.

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:Wouldn't happen under a libertarian government

[Smidge204]

No, you can't deface it period. The physical currency is the property of the federal government, and any deliberate act that renders the bill or coin unusable is a federal crime.

United States Code
Title 18 - Crimes and Criminal Procedure
Part I - Crimes
Chapter 17 - Coins and Currency

Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.

Source [findlaw.com]

What you describe is called forgery, which is also illegal and is punishable on a whole other level.
=Smidge=

Copper and zinc

[Anonymous Coward]

Actually, this inflation problem with pennies has happened before. They took copper out of pennies in the 1980's and replaced it with mostly zinc, which at the time was cheap enough to still be profitable for the mint. The problem is that now zinc prices have risen to the point that it costs more than 1 cent worth of the metal to make a penny. Copper is still more valuable than zinc, so any would-be coin melter is better off taking the time to sort through for pre 1980 pennies.

In the 1960's, the government decided to take the silver out of quarters, dimes, and half dollars due to rising silver prices. They told the public that there was no need to hoard the older coins and that the transition would be seemless. Meanwhile, they secretly told the reserve banks to sort through and retain any of the silver coins that came through their system.

Re:Better yet...

[Bitsy Boffin]

In New Zealand we dropped the 5c coin last year (1 and 2 were dropped more than a decade ago), we now just have 10c 20c 50c $1 and $2 coins.

Actually, is legal

[asiansteev]

"In the United States, U.S. Code Title 18, Chapter 17, Section 331 prohibits "the mutilation, diminution and falsification of United States coinage." The foregoing statute, however, does not prohibit the mutilation of coins if the mutilated coins are not used fraudulently, i.e., with the intention of creating counterfeit coinage. Because elongated coins are made mainly as souvenirs, mutilation for this purpose is legal." http://en.wikipedia.org/wiki/Elongated_coin#Legali ty [wikipedia.org]

Re:Inflation!

[Wylfing]

This week it very, very, nearly reached £1 = $2 for the first time in my lifetime.

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.

Re:Inflation!

[Anonymous Coward]

You're right, inflation is the problem, not the value of metal. But what is the cause of inflation? Government certainly doesn't want you to spend much thought on that, because in reality government is the cause of inflation. Slick politicians will try to convince you that "rising prices" is the cause of inflation, but in reality that is only a result of inflation, not the cause. The old bait and switch, just as they've been doing since the gold standard was foolishly abolished.

Because the US currency is no longer backed by anything of actual value (like gold), the people who control the currency (the power elite) can simply print money out of thin air to serve their agenda. And that is exactly what they do. When you have X dollars in circulation, and you print Y more dollars out of thin air (with nothing of actual value to back them up) and inject those dollars into the circulation, what happens? It's not rocket science. The value of the dollar goes down, due to the principle of supply and demand. Dollars are now more common (less scarce), and therefore less valuable.

Hence inflation.

Re:Nickels I know, but you have farthings?!!!

[itlurksbeneath]

The individual states often minted them, which would likely not be allowed under our increasingly powerful central government of today.

Not true. It's perfectly legal for states or cities to mint their own currency, as long as the value of the currency is pegged 1 to 1 to the US dollar. Quite a few local cities/areas have local currencies. See the full list. [wikipedia.org].

Re:181 Pennies to the Pound

[yurnotsoeviltwin]

Pennies haven't been 100% copper since 1982. They're currently made of Zinc, with only a thin copper plating. 97.5% Zinc, 2.5% copper. Even still, the zinc in a penny is, according to Wikipedia, worth 1.1 cents now, so the penny is still worth more than a penny. If you find a pure copper penny laying around, that's worth quite a bit more, at 2.224 cents a pop. So the new law makes sense, but what would make even more sense would be getting rid of pennies altogether.

Re:Inflation!

[Anonymous Coward]

Yes, the inflation rate is 2.5% if you leave out food, energy. Maybe this winter we call all heat our houses with cheap plastic crap from walmart. I hear plastic tastes pretty good too.

BTW, the Austrian school of economics defines inflation as an increase in the money supply, not prices. Increase in prices is a symptom and it can't be predicted which prices will rise. Currently it's been asset prices mostly, which everyone loves. They call it a bull market. But, if you look at the Dow vs. gold, or copper, or Euros it's been headed down steadily since 2000. Production over-capacity in China has kept the prices of manufactured goods down, but the money has to go somewhere.

The current money supply growth (as per the Fed) in the US is about 5%, but that doesn't take into account all the money created by easy credit and the fractional reserve banking system and the fact that banks and investors can borrow money from Japan for next to nothing and buy whatever they want with it.

Lots of stuff muddled up, so it's hard to say what's really going on and how it will all end up.

Re:Nickels I know, but you have farthings?!!!

[ComputerSlicer23]

From the US Constitution... one of the things the Legislative branch has power over:

"To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures" [cornell.edu]

Those are not legal tender, and it is in fact illegal for anyone except for the Federal Gov't to print money. It was a total disaster when it was allowed to happen under the Articles of Confederation. It was one of the significant changes that was made when the gov't was re-formed under the constitution. Under the Articles of Confederation, state gov'ts used to have banks print notes, the state of NY in fact had a $3 bill for instance (despite the rarely said "That's as fake as a $3 bill"). If a city or state decided to force businesses to accept those local currencies, the Feds would shut it down in an instant. The fact that they have a mutual arrangement where everyone agrees to exchange things of value is completely legal (it's essentially bartering, which is completely legal). Don't confuse that with it being legal for a city or state to print legal tender.

Kirby

Re:This is bad but in the wrong sense.

[Anonymous Coward]

And how do I borrow ten bucks from my friend? How do I tip a stripper? How do I pay a homelss guy to shovel my sidewalk? How do these people come up with such stupid, unworkable ideas? How do they get modded up so people actually see them?

Re:Nickels I know, but you have farthings?!!!

[arban]

In the same way, if the penny goes, we might as well rid ourselves of the nickel as well and just price round to a tenth of a dollar. A Nickel is worth $0.07185 as of yesterday.

This seems inevitable anyways unless you get the fed to shut off the printing press.

Re:Nickels I know, but you have farthings?!!!

[ComputerSlicer23]

Depending on how you interpret the defintion of "money" you might have a point. When I said "money" I meant things that a business in the US must accept as payment. There is no gov't entity besides the Federal Government appointed folks who are allowed to print money that must be accepted as payment by everyone in the U.S.

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

Re:Inflation!

[Panaphonix]

Is it possible that US Dollars are locked up in foreign reserves? And one day Asian countries will try cashing in their dollars for American goods and everything will inflate like nuts?

See also: https://www.cia.gov/cia/publications/factbook/rank order/2187rank.html [cia.gov]

Re:Live phone wires? That's nothing.

[Anonymous Coward]

RTFA you linked to, they stole data cables from alongside the track, not power cables and certainly not the third rail.