

Why pennies cost more than they're worth - gronkie
http://theincidentaleconomist.com/wordpress/why-pennies-cost-more-to-mint-than-theyre-worth-in-one-picture/

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ryandvm
Whenever I hear the phrase "a penny saved is a penny earned", I like to point
out that if you do a back of the envelope calculation for inflation you'll
come up with a penny being worth approximately $5 when Benjamin Franklin made
his famous quote.

He probably would have thought us to be morons for hand-wringing over a few
cents.

~~~
hugh3
Is that so? I find it hard to imagine a currency in which the smallest
denomination available is the equivalent of five dollars.

If you're inventing a new currency from scratch, why not have a smaller
minimum denomination?

~~~
jws
There were half pennies and farthings (quarter pennies).

Once the US got done with revolting and got around to writing a constitution
they decreed the "mill" would be 1/10th of a penny. They seem to have largely
only useful for sales tax.

I think a smaller coin would have been impractical:

• Coins were self-backing with their metal value. Even in copper, it gets too
small to keep track.

• Manufacture was more labor intensive, the cost to produce a very low coin is
a problem.

• Mass production hadn't devalued objects, so things we think of as cheap
today would have been relatively more expensive.

• If you live in a small community and "run a tab" at the general store, you
don't make payment in small batches.

None of these speculations should be mistaken for accurate historical facts.

~~~
hugh3
OK, I looked it up for myself, and the one penny = five dollars conversion
doesn't seem too far from the truth. This page gives some 18th-century prices
for various things; in British pennies rather than US pennies, but I'm
assuming they were similar in value since they were both small coins of
copper:

<http://footguards.tripod.com/08HISTORY/08_costofliving.htm>

Half a penny = half a loaf of bread, implying bread was five bucks a loaf...
just a bit too expensive by today's standards.

1.5 pennies was an hourly rate for a boy to chop firewood -- I bet you could
hire a kid for $7.50 an hour nowadays.

1 penny was enough gin to get drunk on... a third of a bottle of the cheapest
$15 gin would get you pretty drunk.

4d was a quart of beer. OK, that's pretty expensive.

1s (12 pence) gets you a dinner at a steakhouse with beer... yep, sixty bucks
is a plausible price for a steak dinner. It's also the sign-on bonus for
joining the Army, which seems like a bit of a gyp, or postage for a letter
from London to New York. (!)

So in conclusion, if you take the one penny to five dollars conversion, then
some things (basic foodstuffs) seem expensive while others (labour) seem
cheap. This is consistent with the fact that people were much poorer (in real
terms) back then, and you'd have to chop wood for 40 minutes just to buy a
loaf of bread.

It still seems like a weird way to use money, but I guess that's just because
I've grown up in a world where it's entirely possible to undercut your
competition by 1% on the price of a loaf of bread. If that ability went away,
I might not miss it.

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kijinbear
Would have been more interesting if there were numbers attached to each step
of the minting process. For example, +0.05 cents for stamping, -0.1 cents for
recycling damaged coins, etc.

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mattew
A penny is "worth" one cent in that it is the value it represents. However, it
can be exchanged many times contributing value in each exchange. Also, there
are many other coins that likely cost less to mint than they are "worth". I
think you need to look at the overall cost of minting for all coins and blend
it together to get a more accurate view.

~~~
bhc3
That's along the lines of what I was thinking too. The cost of making a penny
isn't really material to the fact that it's worth 1 cent. That'd only be
relevant if pennies were used one time, which then would be an issue.

But pennies are re-used multiple times. So a cost of two cents is fine when
you consider that.

Now a better question to ask is what are the transactional costs of
maintaining prices that require pennies (as oppose to, say, 5 cent
increments). Those costs are the better ones to look at, I think.

~~~
hugh3
_But pennies are re-used multiple times. So a cost of two cents is fine when
you consider that._

Right, until you get to the point where the metal inside a penny is worth so
much more than the face value that it becomes worthwhile for somebody to start
melting them down. Luckily that doesn't seem to be the case yet (at least not
with the new-denomination pennies).

They're still pointless coins, though. Get rid of them.

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Semiapies
A penny is pretty much negative money, if you care about the debt.

I see no major problem with getting rid of it - other countries have, after
all. <http://en.wikipedia.org/wiki/Swedish_rounding>

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maeon3
Pre 1982 pennies are worth like 2 or 3 cents melted down I believe. They are
becoming more and more rare because they are made of copper, a valuable
resource. The federal reserve is printing money out of thin air and diluting
the currency more than ever. This means that as we move forward, too many
dollars are going to chase too few goods and the prices will rise. Eventually
if this grand theft is left to continue without limit, the Federal reserve
will print so many dollars that one day even the paper fabric of the money
will become worth more than what you can buy with it.

Nickels are worth about 6 cents I recall. Don't get caught melting down
pennies or Nickels for the guaranteed profit because it is a crime. However,
as inflation continues, the value of the materials in the coins will rise to
infinity, at that point all coins will mysteriously vanish and the mint will
not make new ones. They will instead add zeros to the dollar bills.

Buy gold, it's going to $5000 an ounce in the next year. Gold is flatline, it
is a stable store of value, the gold is not gaining value, it's the unit of
measure you're using that is depreciating.

~~~
mey
Gold is _not_ flatline, nor stable, especially when adjusted for inflation
(CPI-U). Gold, like money, is based on faith. People expect it is a limited
resource, but in reality, the price of gold simply hasn't always been at a
point where it is profitable to mine more of it.

<http://en.wikipedia.org/wiki/File:Gold_price_in_USD.png>
<http://en.wikipedia.org/wiki/Gold_as_an_investment>

~~~
maeon3
Your correct it is not flat, it's value is modified by how much gold can be
mined by companies. Also it is modified by how many people want the metal
itself.

What I meant to say that if you worked hard for a year 200 years ago and saved
yourself maybe 10 ounces of gold, and buried it in the ground for 200 years
and now you have those 10 ounces. The goods and services you could buy between
then and now would be comparable. whereas the various currencies he used 200
years ago would be either completely worthless or decreased in value 99.99%.

Gold is going to be around for another 50 years, and you'll be able to buy
things with it. The US Dollar however is not. When I say gold is flatline, I
mean that in principle a ounce of gold saved will buy you nice things 50 years
from now, a thousand dollars now will buy you nothing 50 years from now.

~~~
crpatino
The belief that gold holds an intrinsic value is wrong, and the advice you
derive from it is incredibly misguided.

There's nothing special about gold. It has some nice properties that make it
intrinsically valuable, but not more than copper or other metals. The reason
basically all cultures value gold is that other people like it also, and it is
hard to counterfeit.

That being said, gold goes through the same ups and downs in perceived value
as any other commodity. For what I have read, it is trading now more or less
around its long term historic value (think centuries long). If there's so much
buzz about gold now, it is because it is coming from a few decades long of
sub-valuation, but this is correcting fast, and the pendulum begins to swing
now to the other side. If you are not able to pick your time correctly, you'll
be loosing money soon enough.

Besides, there is the fact that it is a long time investment. If you are
forced to liquidate your position to pay whatever need you have, you will
probably loose money. And there's the commissions that will eat out on each
transaction, so you better hold to gold until it is a really good time to
sell.

