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.
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.
If they can make everyone buy insurance, why can't they make everyone switch to plastic?
I would imagine the fact that coins are kept in circulation for a longer period of time (relative to paper currency) offsets the initial production cost.
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
Price everything in increments of tenths (think Europe does this, not sure though). No more pennies and nickels.
what's a penny?
Seeing as there is about 3.2 cents of CU in a nickel and 6x10^-4 cents in a penny given current market prices (and assuming it costs nothing to melt them down) I think we're safe for the moment.
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.
Haha, I thought you were going to say it was anti-black because it's the only dark colored coin
I wonder what this random racial comment has to do with the topic at hand. Classy!
http://www.retirethepenny.org/
Retiring the penny will cause inflation. A few couple of pennies extra per trade multiplied by several trillion = quite a bit of extra cost tacked on.
The Fed loses FAR more money keeping interest rates low.
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?
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.
Vending machines don't take pennies and more and more of them are taking debit/credit cards...
The mint took a loss of $27 Million to produce the penny and a $15.2 Million to produce the nickel
http://news.coinupdate.com/cost-to-make-penny-nickel-0619/
Pennies don't have a smelt value of $0.02, it's there cost to produce. None the less it does show how shitty the dollar is realitive to commodities.
On a side note a penny minted in 1909-1982 has a smelt value (as in the value of copper in it if it were to be melted) of 2.85794 cents
http://www.coinflation.com/coins/1909-1982-Lincoln-Cent-Penny-Value.html
why dont we digitalizzee dat curren$y? like have that monetary system implemented in our driver's licesence or health card..
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