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dbarberic
01-24-07, 01:49 PM
Could someone comment on the article below? I'm trying to think through the article and understand its implications to the other currency denominations (if any). Is this akin to the article "Can the U.S.A. have a "Peso Problem (http://www.itulip.com/faceofinflation.htm)"?", where there is a sudden devaluation of the currency? I'm thinking that there has to be more implications than what is simply stated.



http://us.i1.yimg.com/us.yimg.com/i/us/nws/p/reuters120.gif
Coin shortage could turn pennies to nickels

By Kevin PlumbergMon Jan 22, 4:39 PM ET


Talk about pennies from heaven.
A potential shortage of coins in the United States could mean all those pennies in your piggy bank could be worth five times their current value soon, says an economist at the Federal Reserve Bank of Chicago.
Sharply rising prices of metals such as copper and nickel have meant the face value of pennies and nickels are worth less than the material that they are made of, increasing the risk that speculators could melt the coins and sell them for a profit.
Such a risk spurred the U.S. Mint last month to issue regulations limiting melting and exporting of the coins.
But Francois Velde, senior economist at the Chicago Fed, argued in a recent research note that prohibitions by the Mint would unlikely deter serious speculators who already have piled up the coinage.
The best solution, Velde said, would be to "rebase" the penny by making it worth five cents rather than one cent. Doing so would increase the amount of five-cent coins in circulation and do away with the almost worthless one cent coin.
"History shows that when coins are worth melting, they disappear," Velde wrote.
"Rebasing the penny would ... debase the five-cent piece and put it safely away from its melting point," he added.
Raw material prices in general have skyrocketed in the last five years, sending copper prices to record highs of $4.16 a pound in May. Copper pennies number 154 to a pound. Prices have since come down from that peak but could still trek higher, Velde said.
Since 1982, the Mint began making copper-coated zinc pennies to prevent metals speculators from taking advantage of lofty base metal prices. Though the penny is losing its importance -- it is worth only four seconds of the average American's work time, assuming a 40-hour workweek -- the Mint is making more and more pennies.
Velde said that since 1982 the Mint has produced 910 pennies for every American. Last year there were 8.23 billion pennies in circulation, according to the Mint.
"These factors suggest that, sooner or later, the penny will join the farthing (one-quarter of a penny) and the hapenny (one-half of a penny) in coin museums," he said.

http://news.yahoo.com/s/nm/20070122/us_nm/usa_pennies_shortage_dc_1&printer=1

Copyright 2007 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Tet
01-24-07, 04:52 PM
The Federal Reserve is just trying to remind everyone that we live in their reality not your own. Penny is a long way from becoming a nickel, but just in case you thought it was going to be worth that much the Fed can always just call a Penny a nickel at anytime.

metalman
01-25-07, 12:41 AM
The Federal Reserve is just trying to remind everyone that we live in their reality not your own. Penny is a long way from becoming a nickel, but just in case you thought it was going to be worth that much the Fed can always just call a Penny a nickel at anytime.

ok with the five cent penny but at the same time i want my $500 note! what, i gotto go to euroland for it? maybe i can melt my ford down into a lexus while i'm at it. yar!

Tet
01-25-07, 10:07 AM
ok with the five cent penny but at the same time i want my $500 note! what, i gotto go to euroland for it? maybe i can melt my ford down into a lexus while i'm at it. yar!
Been awhile since I read up on my Fractional Reserve, does a $1,000 deposit turn into $10,000 of money creation or something more? If this is the case then how much can you turn a $1 billion deposit into some third world shitstain central bank? With this said, third world shitstain deposits are off over 80% from just three short years ago. Now the question to ask is what direction is M3 really headed? Why is it when the entire Mass Hype Media is pointing and shouting to look one direction it is always much more profitable to look the other way?

My Uncle Buck's are buying over 35% more crude, 15% more house and 30% more NG then just seven months ago. Maybe this penny we find out really is worth a nickel again, wasn't that long ago that a penny bought you what a nickel does today. Fortunately all the shiny yellow metal fans have the tiny little gold market to point at and show an inflation gauge, or there might not be anything to point at.

Aurakill
04-20-07, 03:06 AM
It is an historical fact that when the market value of a metal used in the coinage rises above its nominal value it will be disappear from circulation over time, providing of course that the costs associated with its recycling do not defeat the purpose of it being a profitable enterprise. But that has the work-around of smaller stocks being discounted by the metal-buyers if there is sufficient margin to allow for this.

A similar phenomenon is found in relation to the function of money as measure of value (not to be confused though with the token money of the non-precious coinage). For a long period of British history (Edward III - George II) the practice was to maintain some fixed ratio in the nominal values in respect of gold and silver coins. The venture proved ultimately untenable in the face of the fluctuating value of either metals. Likewise this effect knows no national borders as when the 19thC Indo-Chinese demand for silver led to a slight fall in the value of gold in relation to silver resulting in drainage of the latter metal from France, i.e. export of silver and its replacement in circulation by gold.

The obstacle to re-nominating the cent as 5c is that of giving a gift of 4c to those who have 'hoarded' it. This might be a substantial cost considering all those jars-full which probably outnumber old copies of National Geographic. Sounds like a silly move when the same could be achieved by adopting the Australian measure of simply removing the penny from legal tender. The very practical solution adopted there is that of rounding up or down on prices. Thus for an item whose price is say $0.57 you pay $0.60 and for one whose price is say $1.62 you pay $1.60.

DDG

Tet
04-20-07, 09:56 AM
It is an historical fact that when the market value of a metal used in the coinage rises above its nominal value it will be disappear from circulation over time, providing of course that the costs associated with its recycling do not defeat the purpose of it being a profitable enterprise. But that has the work-around of smaller stocks being discounted by the metal-buyers if there is sufficient margin to allow for this.

A similar phenomenon is found in relation to the function of money as measure of value (not to be confused though with the token money of the non-precious coinage). For a long period of British history (Edward III - George II) the practice was to maintain some fixed ratio in the nominal values in respect of gold and silver coins. The venture proved ultimately untenable in the face of the fluctuating value of either metals. Likewise this effect knows no national borders as when the 19thC Indo-Chinese demand for silver led to a slight fall in the value of gold in relation to silver resulting in drainage of the latter metal from France, i.e. export of silver and its replacement in circulation by gold.

The obstacle to re-nominating the cent as 5c is that of giving a gift of 4c to those who have 'hoarded' it. This might be a substantial cost considering all those jars-full which probably outnumber old copies of National Geographic. Sounds like a silly move when the same could be achieved by adopting the Australian measure of simply removing the penny from legal tender. The very practical solution adopted there is that of rounding up or down on prices. Thus for an item whose price is say $0.57 you pay $0.60 and for one whose price is say $1.62 you pay $1.60.

DDG
You make no mention that this Indo-Chinese demand for silver during this time period was brought about entirely by opium. This in turn allows the Bank of England to plunder Continental Europes store of Silver causing Continental Europe to revert to the Gold Standard the Bank of England is operating on. Now what became more valuable? The Silver? or the Opium? Certainly helps to explain why Opium production is skyrocketing in Afghanistan today. Opium, Heroin and all the opiates are of course a very big D0llar crop today. The Narco D0llar plays a big role in providing demand for the D0llar since almost all illegal drugs sell in d0llars. This is not something to overlook, estimates are this market is anywhere from $800 billion to $1 trillion.

Sapiens
04-20-07, 10:43 AM
You make no mention that this Indo-Chinese demand for silver during this time period was brought about entirely by opium. This in turn allows the Bank of England to plunder Continental Europes store of Silver causing Continental Europe to revert to the Gold Standard the Bank of England is operating on. Now what became more valuable? The Silver? or the Opium? Certainly helps to explain why Opium production is skyrocketing in Afghanistan today. Opium, Heroin and all the opiates are of course a very big D0llar crop today. The Narco D0llar plays a big role in providing demand for the D0llar since almost all illegal drugs sell in d0llars. This is not something to overlook, estimates are this market is anywhere from $800 billion to $1 trillion.

Tet,

It makes my heart ache every time I remember that we are our worst enemy. I mean, humanity it's its own worst enemy, temptation is too much for our mortal bodies, hence I can't even trust myself to make the right decision in the face of being tempted by power.

Lord Acton was correct, absolute power corrupts absolutely.

-Sapiens

DemonD
04-20-07, 09:17 PM
And the really sad thing is that if we just made all drugs legal and taxable, so many problems we have now would not exist. Making opium 100% legal would absolutely crash the black market and prices would drop through the floor. Then we could use the tax money to have real drug education and prevention as well as treatment options. Of course too many people make too much money on the black markets for that to realistically ever happen, but then again if they were able to do it in Holland, there is always hope.

Tet
04-21-07, 01:00 AM
Tet,

It makes my heart ache every time I remember that we are our worst enemy. I mean, humanity it's its own worst enemy, temptation is too much for our mortal bodies, hence I can't even trust myself to make the right decision in the face of being tempted by power.

Lord Acton was correct, absolute power corrupts absolutely.

-Sapiens
The only thing I've come up with my friend is to always take more from the banksters than they take from you, that's the only way to change things.