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."

Comments

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[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: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: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..

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