

The U.S. Currency Problem and the Return of the Wooden Nickel - cwan
http://paul.kedrosky.com/archives/2010/02/the_us_currency.html

======
blahedo
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.

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

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

------
DanielStraight
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.

------
patrickgzill
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.

------
gte910h
Oh no, certain metals are becoming valuable...what will we do....

That's right. Use other metals.

------
notaddicted
(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.

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

------
hga
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.

~~~
awa
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#...](http://en.wikipedia.org/wiki/Penny_%28United_States_coin%29#History_of_composition)

~~~
hga
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).

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

~~~
BearOfNH
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.

~~~
awa
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>

------
anigbrowl
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)

~~~
awa
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#...](http://en.wikipedia.org/wiki/Penny_%28United_States_coin%29#History_of_composition)

