Fed Friday: Change We Can’t Believe In
February 17th, 2012
At current metal prices it costs 2.4 cents to make a penny and 11.2 cents to make a nickel. I gotta tell you, it is truly sickening to watch mainstream talking heads report this and laugh like it’s just some goofy piece of trivia and not a really bad sign for the long term health of an economy. But don’t worry, our fearless Executioner in Chief has the answer. This week President Obama asked Congress for permission to change the mix of metal that goes into these coins, because apparently the zinc and tinfoil they’re made of now is just too expensive. Never mind the long forgotten days when they were actually made of copper and nickel.
Pennies used to actually be made of copper, but now they’re only copper plated. Since 1982 pennies have been 97.5% zinc, which is about the least expensive metal you can find except for steel. Get this. The administrative overhead alone to make a penny costs half a cent, so even with the cheapest alloy they can concoct they can’t get it cheap enough. Here at Silver Underground we often talk about the melt value of an old silver dime, but we’re getting to the point now where spikes in the zinc market are putting the US Mint over budget.
These days it’s nickels that are made mostly of copper. 75% copper and 15% nickel to be precise. But even without the overhead, the raw melt value of a nickel is about 6 cents right now. So basically, the nickels of today are what yesterday’s pennies were. And the pennies of today would not be worth the effort of salvaging the metal in yesterday’s economy. And it’s still not cheap enough.
The real infuriating thing about the coverage of this is the complete absence of any analysis. News anchors say things like, “it just so happens to cost 2.4 cents to make a penny.” As if it’s only a coincidence and not related to monetary policy at all. They parrot the language of Treasury spokesmen blaming the “volatile metal prices” reporting that the spot prices of copper and zinc have “fluctuated” 400 percent over the last 10 years. It’s not a “fluctuation” if it’s a steady increase. A market fluctuation oscillates with peaks and valleys. It’s nothing but propaganda to blame the market for the Treasury’s $200 million annual losses minting pennies and nickels when the culprit should be obvious to every economist everywhere.
The 2013 Budget will enable the Treasury to “explore, analyze, and approve new, less-expensive metals for all circulating coins” which they’re calling, “more sustainable” missing the point as always that the sustainability of the currency results from a sound monetary policy, not some federal alchemist who discovers a cheaper alloy.
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