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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."
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.
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Well I'm from the UK and I've been reading the Wikipedia Cent (US coin) 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
Rather than getting rid of the cent, will it be replaced with bronze? Is this worth any less?
DugUK
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.)
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.
Blog
Actually, only 1943. They needed the copper to make shell casings.
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.
Wansu, th' chinese sailor
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
United States Code
Title 18 - Crimes and Criminal Procedure
Part I - Crimes
Chapter 17 - Coins and Currency Source
What you describe is called forgery, which is also illegal and is punishable on a whole other level.
=Smidge=
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.
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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.
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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.
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