Losing Money On Money

[dsvochak]

Just when I thought that it would be really difficult for the US budget deficit to get any worse, this happens:

Representative Jim Kolbe wants to do away with the penny - and for a second time has introduced legislation that would effectively kill it.

The Currency Overhaul for an Industrious Nation (COIN) Act would force the rounding off of all cash transactions to the nearest 5 cents, making the penny coin useless for everyday transactions.

The move is in part a reaction to the rising cost of zinc - the penny's main ingredient - which at current prices brings the cost of making the coin to 1.4 cents each.

http://money.cnn.com/2006/07/18/news/pe ... tm?cnn=yes

In June, Rep. Kolbe had this to say about the issue:

"When the price goes to 1.5 cents per cent then everybody will figure it out," said Kolbe. "Then everyone will hoard their pennies because the metal will be worth more than the coin." Kolbe, who is set to retire from Congress after this term, joked he should go into the business of buying people's pennies to sell them for their value.

http://articles.news.aol.com/business/_ ... 0109990006

One more article on the topic: http://articles.moneycentral.msn.com/Ne ... Penny.aspx

It looks like Ben Franklin was wrong. A penny saved may be .23 (or .4) cents lost instead of a penny earned. For reasons I can't explain, I find this highly amusing.

[GomJabbar]

The move is in part a reaction to the rising cost of zinc - the penny's main ingredient - which at current prices brings the cost of making the coin to 1.4 cents each.

"When the price goes to 1.5 cents per cent then everybody will figure it out," said Kolbe. "Then everyone will hoard their pennies because the metal will be worth more than the coin."

The thing is, the cost of making a penny is not the same as the scrap value of the metal that goes into it. I seriously doubt that people will hoard their pennies if they get less than a penny when they sell them for scrap metal.

A quick search on the net pulled up the weight of a US penny as 2.5 grams. At 453 grams to the pound, that means it would take 181 pennies to make a pound. The price of scrap zinc is less than a dollar a pound. http://amm.com/subscrib/price.asp?f=scmt
You do the math.

Kolbe's argument above does not hold any water in this light.

[AlphaKilo470]

The thing is, the cost of making a penny is not the same as the scrap value of the metal that goes into it. I seriously doubt that people will hoard their pennies if they get less than a penny when they sell them for scrap metal.

In followup to the quoted comment, as far as hoarding pennies goes, there's just no real money behind it. Statistics show that the average American has around 1,000 loose pennies laying around the house in different places and if these statistics are anywhere within a mile of ballpark, there's enough of these things to spare that demand would be little to none even if people were hoarding them.

[dsvochak]

I think one of the reasons I find this amusing is the mental picture of a guy with a semi load of pennies driving to a scrap yard. With the cost of gas, truck, and the time involved to amass that many pennies, it's like a bad practical joke.

Last night one of the analysts on MSNBC said that, by his calculation, Congress has only 16 more voting days left in 2006. Let's hope he's right.

[Kyocera]

I hate pennies.

[christopher_wolf]

Does this mean we can't say "My 2 cents" as it will be a dated and obsolete expression?

I dare not explain certain legislation that gets voted on in Congress.

[bill bolton]

Australia withdrew 1c and 2c coins from circulation several years ago without any problems for anyone.

Cheers,

Bill