The Price of Pennies and Nickels

Figuring we've just finished up a week's worth of commodity classes, maybe it is time to look at some real world applications of our subjects?

In both, a great analysis of metals in our everyday life and (my personal favorite) the utter incompetence of the Federal Government, David Morris rips into perhaps the greatest inefficiency in any market...ever.

I don't care how illegal it might be, I'm getting myself a smelter and melting down pennies and nickels. If you really want a risk-free return, I see no smarter investment vehicle out there.

Apparently, as of 2009 it cost the U.S. government 1.62 cents to produce each individual penny and 5.79 cents to produce each individual nickel...No...I'm not joking, at all.

We discussed copper's likely price spike in the near future a few days ago, now there seems a realistic potential for pennies to cost 2 cents each to produce in 2011.

Can you imagine what this particular measure of idiocracy is costing us on a yearly basis?

SB to the first monkey who can reasonably quantify the cost of this incompetence.

For those interested in the metallic breakdown:

One Penny= 2.5% copper + 97.5% zinc

One Nickel=(75% copper, 25% nickel).

This whole story is too funny not to be absolutely true. I am (as always) tempted to say that Rome is Burning but it is actually not burning, but building itself into rubble.

Not only is our currency going down the toilet, we get to pay for the flush, as well.

If anybody can please post a comment that will explain the logic behind continuing to produce these annoying ching-chingers I am more than willing to read and be enlightened.

As of reading this article, I would say the score in my head goes a little something like:

Sanity-0

Stupidity-Wins via Slaughter Rule

 

Yeah, it's pretty ludicrous, but short of everybody switching to plastic we're still going to need change. Even if we were to include sales taxes in advertised prices, we wouldn't be paying round numbers for anything. If we start making cheaper pennies, the Tea Party will go ape saying this is a clear sign of inflation and the debasement of our currency.

As a very casually related aside, did anybody notice the Oregon sign for a play that included Jim Rome? Hysterical.

 

u know that the "cost" of penny includes things like processing costs, bureaucratic costs, distribution costs, etc.. the actual cost of copper is much less than the advertise price.

Veritas
 

It's my personal take that it's far too difficult to estimate how many pennies are minted and cease to circulate in a given year. At $0.02 per penny to produce (correct me if I'm wrong on this one), if half of the pennies produced cease to circulate (essentially being indefinitely "saved" by consumers) there's no money lost on the transaction. I know that I see pennies being lost constantly so I assume the figure to be somewhat large.

Of course, I think the practice is still a waste of time and money. Concerning overall economic significance, I have no idea.

 

As it stands currently, the US is losing about $3.41 billion per annum to produce about 5.5 billion pennies every year. I got the 5.5 BB number from an LA Times article from 2009, so can't swear by it

 

There is a congressman that has been trying to stop the production and circulation of pennies for the longest time, but he is viewed as Anti-American. Plus, think about the disgustingly litigious nature of our country. If we stopped penny production all the black people, and their lobby groups, would say that the government is anti-black b/c Lincoln was their savior. Or something to that extent. you get my point.

 
tyrets:
There is a congressman that has been trying to stop the production and circulation of pennies for the longest time, but he is viewed as Anti-American. Plus, think about the disgustingly litigious nature of our country. If we stopped penny production all the black people, and their lobby groups, would say that the government is anti-black b/c Lincoln was their savior. Or something to that extent. you get my point.
lol
 
Mezz:
tyrets:
There is a congressman that has been trying to stop the production and circulation of pennies for the longest time, but he is viewed as Anti-American. Plus, think about the disgustingly litigious nature of our country. If we stopped penny production all the black people, and their lobby groups, would say that the government is anti-black b/c Lincoln was their savior. Or something to that extent. you get my point.
lol

Haha, I thought you were going to say it was anti-black because it's the only dark colored coin

 
tyrets:
There is a congressman that has been trying to stop the production and circulation of pennies for the longest time, but he is viewed as Anti-American. Plus, think about the disgustingly litigious nature of our country. If we stopped penny production all the black people, and their lobby groups, would say that the government is anti-black b/c Lincoln was their savior. Or something to that extent. you get my point.

I wonder what this random racial comment has to do with the topic at hand. Classy!

 

I'm in Canada and the government is contemplating to cease production of the penny next year. Apparently it costs $0.02 to produce $0.01.

But if they cease production, then there will be instant inflation as everything will be rounded upwards to the nearest nickel.

 

But think of the benefit of switching prices to being dime-based rather than cent-based. Sure, there'd be that initial miniature sticker shock as everything rolled upwards, but wouldn't it be saving us so much more in the long run even at the current cost of producing these coins, ignoring that the cost could fluctuate even higher?

I am permanently behind on PMs, it's not personal.
 

Yeah but the thing is changing how pennies are made will mean each vending machines and the like will have to be reconfigured to accept the new coins. This will probably cost a lot more for those businesses than it does for the federal government

 
loki276:
Yeah but the thing is changing how pennies are made will mean each vending machines and the like will have to be reconfigured to accept the new coins. This will probably cost a lot more for those businesses than it does for the federal government

Either you are fat or just a great outside the box thinker. Either way, hat off to you, SB.

 
derivstrading:
loki276:
Yeah but the thing is changing how pennies are made will mean each vending machines and the like will have to be reconfigured to accept the new coins. This will probably cost a lot more for those businesses than it does for the federal government

Either you are fat or just a great outside the box thinker. Either way, hat off to you, SB.

It was more reading an article when the mint in UK wanted to change the composition of coins and the vending industry said it would cost around a billion. But thanks for the sb
 

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