Disappearing Coins

This is no magic trick. Thanks to the Federal Reserve’s inflationary policies, many coins are now worth more as bullion than their face value.

A pre-1982 copper penny is worth three cents.. Post 1982 pennies are made from plated zinc and only worth a small fraction of their face value.  A nickel is worth seven cents. Expect to see this replaced with a cheaper metal soon. The mint can’t afford to make them from copper and nickel at these prices.

Gresham’s Law says that bad money drives out the good. What this means is that coins with a face value lower than price of the metal in them will be removed from circulation as people save them. There’s a reason you no longer see silver coins in circulation even though they’re still legal tender. When a silver dime is worth over two dollars it’s silly to spend it for ten cents.

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6 Responses to Disappearing Coins

  1. SayUncle says:

    metal prices aren’t the only issue. i had a client in about 2000 who made pennies for the .gov. while the price of the metal was below the value per penny, overhead meant the pennies were actually worth less than the cost.

  2. Crotalus says:

    That stems back to when we were on the gold standard. Our coin was made from precious metals, and the face value of the coin represented the actual value of the metal, or at least, very close to it. Paper money used to be redeemable in gold, and even said so. Once the gold standard was removed, then it only made sense to switch to “fiat” metals for fiat money

    Nowadays, if we made coins that represented the actual value of the precious metals in them, they’d be so small that we’d need tweezers and magnifying glasses to handle them.

  3. Ian Argent says:

    Money is an illusion, lunch money doubly so. Since almost all metals have an industrial value nowadays, using them for money is distortionary to the industrial economy.

  4. Kristopher says:

    The industrial economy has no rights or privileges in excess of anyone else’s.

    Real money is not an illusion. It is a commodity counter that can be used to easily barter with.

    Fiat money is a hidden tax on everyone. Only the first spender ( the government ) gets full value, everyone else has their cash savings taxed by the inflation inflicted when the new fiat money is spent.

    Fiat money is a false and imaginary substitute, that requires government force to maintain.

  5. Ian Argent says:

    I don’t want to come off sarcastic here, but I think I’m going to have to.

    The government declaring that 0.9675 troy oz of gold is worth $20 (weight and nominal value of a US Double Eagle) is not price fixing, but the commodities market determining that you need 1300-odd pieces of funny-looking paper to lay claim to an oz of gold is price fixing? Which of them is the “right” value?

    Inflation is not a sin exclusive to fiat currency – and in fact is less harmful to the marketplace in a fiat currency. Sir Thomas Gresham penned his law in an era of … hard currency. I don’t believe that governmental notes existed in England at the time, only notes-of-hand of the nobles, and possibly private banknotes. Governments inflate the money supply. It’s one of the things they do. In a hard-money situation, the market can’t do a whole lot about it, because the government is always fixing the price of the currency commodity. In a fiat money regime (with a free market), the market is free to value the money at whatever is appropriate given the laws of supply and demand, and every commodity can float value relative to each other commodity (this is what usually does in bimetallic coinage).

    Also, commodity money depends on a fixed amount of commodities or there is non-governmental inflation (or deflation, if productivity increases). More gold (or whatever) in the system = inflation, as the money supply increases.

    I said what I said about money being an illusion deliberately. Money, hard or soft, is worth exactly what someone will sell you something in exhange for it, no more, no less. Fiat moeny is at least honest about it.

  6. DaddyBear says:

    I’ve turned it into a hobby to look for junk silver and copper money. No real collector’s value, worth hanging onto anyway just because they’re made of something other than zinc. Plus it gets the kids looking at the money and learning about the people and such on them.

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