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No firm cent ground to stand on

The fifth World Money Fair to be held in Berlin is now history and I am on my way back to the United States. There are many things on my mind as I try to digest what I have experienced over the past week.

A conversation I had with a blank supplier was most interesting. We were talking about the most recent news that it cost 1.61 cents to make a U.S. cent and a bit over 6 cents to make a nickel in fiscal year 2009.

What were the U.S. Mint’s options, I asked?

Bottom line, the reply came, was the Mint probably just has to live with it.

The only cheaper alternative was some sort of coated steel planchet, copper coating for the cent and nickel coating for the nickel. These would be cheaper, but in the case of the cent, it would still cost more to strike the cent than face value. However, even to make this change, the Mint would be taking on a future problem. Apparently, when coins of this composition need to be retired, there is no easy way to dispose of them. Metal recyclers do not like coated steel blanks. It is just not commercially feasible to do it. That makes the coins little more than trash for a landfill and that is not the most environmentally sound thing to do. This hasn’t stopped countries from using this type of blank, though.

The supplier recounted a story where one place used retired unrecycled coated steel coins as footings in a small construction project to get rid of them. That is not something that could be done in the United States on a large scale or perhaps any scale at all, so why create the problem in the first place?

So the problem of what to do with the cent and the nickel will probably persist for years.

“You can’t very well drop the cent, now can you?” I was asked rhetorically. “If you do that, you might as well go and add a zero to the currency.”

With all of the inflation fears out there, even a hint of such an outcome would be enough to prevent any boat-rocking actions with the cent.

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3 Responses to No firm cent ground to stand on

  1. Mark says:

    What makes the most sense is to revalue the penny to 5 cents and revalue to nickel to 25 cents since it costs about the same to produce a quarter as a nickel. Dimes can stay as they are. The quarter then can be revalued to a dollar and the Presidental and Sag series can be discontinued since almost no one uses them. So everyone who has a stash of coins would get a bit of a windfall, but the mint producdion costs would go down. Many stores I go to have already stopped giving pennies and nickels as change.

  2. Revaluation of the currency in this market will cause a bigger fear that the dollar is weak and add ruin to our economy. Revaluation is not an option for those in political power to deal with this. It would be considered political suicide!

    The bottom line is correct, the Mint just has to live with it. However, even with their losing seigniorage on the cent and nickel, the Mint still earns a significant seigniorage on other coins to meet its financial obligations and still have money left over in their Public Enterprise Fund to return to the general treasury.

    The only alternative is to revive fractional currency. How many people want that?

  3. Vachon says:

    I’d never support revaluation either. The United States has never done that. It would send a very bad message to both the world and the American public. I would support making our coins more useful by ceasing production of the cent, nickel, dime, and replacing paper currency below the $20 with corresponding coins but that’s about it.

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