The U.S. Currency Problem and the Return of the Wooden Nickel | Hacker News Reader

The U.S. Currency Problem and the Return of the Wooden Nickel

paul.kedrosky.com

11 pointscwan20 comments

I love the solution Austan Goolsbee semi-seriously proposed a few years ago: "re-base" the penny. That is, declare that all Lincoln pennies currently in circulation are now worth 5¢ alongside the nickels (and then remove the nickels from circulation as a natural phaseout). Subsequent mintings of the penny would actually say "FIVE CENTS" but the old pennies would also be worth 5¢.

Advantages: The five cent penny would cost less than five cents to mint. The expensive nickel would no longer be minted. Immediate but relatively contained inflation that puts the "printed" money in the hands of the poorest people (who would have more pennies as a percentage of their cash on hand than richer folks)---a lightweight form of stimulus. Brings pennies back into circulation because they're not worthless anymore.

Disadvantage: vending machines wouldn't accept pennies for the new amount, but most don't accept them at all so that's less of a problem than it might be.

Awesome, I wish I would anticipate such a move and start hoarding pennies!

And it will never happen for that exact reason. At least not exactly like that. I rather like the idea, though.

The continued existence of the penny is a great mystery to me and has been for some time. One cent is not a meaningful unit of currency anymore. Eliminating the penny seems like an obvious way to save on costs. I'm not saying it could happen overnight, but it seems high time to put a phase out plan in effect.

If a nickel lasts 30 years and is taxed multiple times during that period, the government should get back the cost of producing the nickel during that time period quite easily.

Oh no, certain metals are becoming valuable...what will we do....

That's right. Use other metals.

(copying the comment I made on the blog)

If you are "buying" nickels for the metals, it would appear the value exceeds the cost.

The way the statement about cost and value is phrased implies that the value of the coin is equivalent to the face value--which is incorrect. The value provided by the nickel is its usefulness as a tool to perform transactions. When the mint mints a nickel, it is not adding five cents to the GDP.

Micropayment is still an unsolved problem.

Correct, the nickel can be thought of as infrastructure that is used to facilitate the transfer of funds.

It's a bad sign when you have to debase your currency twice in a quarter century period: in the early '80s the copper alloy penny was replaced with zinc with a copper wash.

Inflation has been "under control" during that period (compared to the Carter peak of nearly 15%), but it adds up.

Well, the history thinks differently, the penny has been "changed" 5 times in the last centure that's 20 years on average. And the last change happened in 1982 (28 years from now) well above the average time period and is the third longest survival period for a penny ever.

http://en.wikipedia.org/wiki/Penny_%28United_States_coin%29#...

You miss my point, I said "debase" not change. Except for the WWII save copper by using steel penny, it was 95% copper from 1864 to 1982, and I can't count the two previous changes as debasing it (pure copper to a 89% copper/11% nickle alloy was surely for durability, the change 7 years later might have been related to the Civil War at the time but strikes me as the only possible previous debasement).

Sigh.. and I thought somebody was wrong on the internetz...

But reading the wikipedia article it seems they were trying to debase it in the 70s and went the wrong path and minted AL based coins which were rejected before making the actual change in 82.

It's fiat money; it doesn't matter what's in it.

You speak in contradictions. For example, a 1946-1964 Roosevelt dime has a face value of $.10 but a "melt value" of $1.2022 (today) according to http://www.coinflation.com/

The U.S. government may not like it but there is little they can do about someone melting down coinage, especially outside the country. (But don't do it -- silver coins are worth more than their melt value).

Paper money is different, of course.

Since you bring it up, Dhirubhai Ambani, who was a major Indian businessmen did something like this in his early career. http://en.wikipedia.org/wiki/Dhirubhai_Ambani#Life_in_Aden

Speaking as a regular person and not a numismatic geek, I don't know anyone who will give me melt value for my coins, and I wouldn't think it was worth the trouble of sorting out the old ones anyway. Thus all pennies are worth one cent to me and it isn't possible to "debase" them.

It seems to me that the problem is the price of these particular metals, not inflation in general.

A penny in 2008 is worth 44% of what it was worth in 1982, when the last change was made.

I wasn't able to find a 25 year chart, here's the oldest I could find, going back 15 year: http://www.infomine.com/investment/charts.aspx?c=zinc&r=...

From 1995 to 2004 it was basically flat, it took a huge jump during the recent bubble and is now again going up beyond that historical range. The previous recent bump wasn't due to a decline in the dollar's value, but this one just might be related to it.

Well, this is (to varying degrees) a problem for any country that uses copper coins - not just the US, but also the EU, China (nickel-clad steel 1 yuan coin0 and so on. edit (s/copper/nickel)

As "hga" mentioned penny is made with zinc with a copper. 97.5% zinc core, 2.5% copper plating

From http://en.wikipedia.org/wiki/Penny_%28United_States_coin%29#...

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