When Polimom’s Adorable Child (AC) was born, we were painfully poor, but we always knew that we wanted AC to go to college one day. Since we really had no expectation of hitting the Lotto (I hear the odds are better if you actually buy a ticket), we started collecting all our spare change.
There are jars on the bedroom dresser, in the laundry room, and on the counters of both the kitchen and the master bathroom. Not only that, but every time I clean out the car, I collect another handful (or three) of coins from the floorboards and seats, and add them to the handiest pot.
Obviously the coins start to overflow now and then, so I roll them… and today — ten years later — I have quite a collection of (mostly) pennies and nickels, that add up to (maybe) $400.
But I never seriously expected to send AC to college this way:
How dumb do you have to be to mint money at a loss? In the latest only-in-Washington episode, we find that the government may have lost as much as $40 million coining pennies and nickels last year.
The metal in them — the zinc, copper and nickel — has soared in value in the last few years, making the coins more valuable as raw materials than they are as currency. The government reaction has been to ban the melting of the coins to get the metal. But there is a good chance that we will find ourselves in an outright coin shortage of a form we have not seen in four decades and one that harks back to the monetary problems of medieval times.
How funny! It hadn’t occurred to me to melt the coins down to get the metal. Can I do that on my stove? And where would I spend raw zinc?
Nowhere — and that’s really the point. According to the article, the value of our money (and especially the coins) is not tied to the metal with which they’re made; coins are worth whatever the government says they are. (See nickels, wooden; “don’t take any”)
We could mint them from plastic if desired, and if the government decides that a plastic dime should be worth a quarter, then that’s what it would be worth. Thus —
Mr. Velde, in a Chicago Fed Letter issued in February, has come up with a solution that would abolish the penny, solve the excess costs of making nickels, help the poor, keep the Lincoln buffs happy and save hundreds of millions of dollars for taxpayers.
[snip]
He would rebase the penny by having the government declare it to be worth 5 cents.
It’s almost enough to make me feel sorry for the poor, unloved nickel.
So — assuming all of my rolled coins to be pennies (they’re not, but who’s counting?) — my / AC’s $400 would suddenly be worth $2,000… but I’m still left wondering about the real value of that metal. Would the rebasing of the penny bring it up to the actual value of its materials?
Or are they just trying to nickel and dime us?
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Other views — all of which are interesting — at Poliblog, Economist’s View, and Marginal Revolution.
h/t — memeorandum