Uncle Sam Does The Impossible: Loses $105 Million/Year Coining Money!

Tyler Durden's picture

Submitted by NCPA via Contra Corner blog,

It costs the United States nearly twice as much to make a penny as that penny is actually worth, writes Christopher Ingraham for the Washington Post, reporting that it costs the government 1.7 cents to make a penny.

 

And pennies aren’t the only problem: it costs the government more than 8 cents to make a nickel.

A new report from the U.S. Mint reveals that it’s still not cost-effective to make pennies and nickels. Pennies and nickels used to be profitable in the early 2000s, says Ingraham, but the cost of producing the coins began rising in 2006 and has only gone up. While currency costs fell overall this year due to declining copper prices, the two coins still cost more than their face value. The rest of American currency is doing alright:

  • It costs 5.4 cents to make a dollar bill.
  • It costs 8.95 cents to make a quarter.
  • It costs 3.91 cents to make a dime.

Ingraham writes that America could save $100 million each year simply by getting rid of the penny and the nickel, noting that Americans lost $105 million in 2013 due to their production.

While, alternatively, the United States could save money by changing coins’ metal makeup, such a move would require vending machines to be upgraded across the country, costing billions. 

*  *  *

As a reminder, here is Kyle Bass' famous 'nickel' trade from 2011 (that is working even better now)...

On nickels:

He still owned stacks of gold and platinum bars that had roughly doubled in value, but he remained on the lookout for hard stores of wealth as a hedge against what he assumed was the coming debasement of fiat currency. Nickels, for instance.

 

“The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?”

 

I didn’t.

 

“I just bought a million dollars’ worth of them,” he said, and then, perhaps sensing I couldn’t do the math: “twenty million nickels.”

 

“You bought twenty million nickels?”

 

“Uh-huh.”

 

“How do you buy twenty million nickels?”

 

“Actually, it’s very difficult,” he said, and then explained that he had to call his bank and talk them into ordering him twenty million nickels. The bank had finally done it, but the Federal Reserve had its own questions. “The Fed apparently called my guy at the bank,” he says. “They asked him, ‘Why do you want all these nickels?’ So he called me and asked, ‘Why do you want all these nickels?’ And I said, ‘I just like nickels.’”

 

He pulled out a photograph of his nickels and handed it to me. There they were, piled up on giant wooden pallets in a Brink’s vault in downtown Dallas.

 

“I’m telling you, in the next two years they’ll change the content of the nickel,” he said. “You really ought to call your bank and buy some now.”

 

Anyone want to buy a wheelbarrow?

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TheAnalOG's picture

Canada got rid of their pennies, so AnalOG loaded up on pre-96 coppers!

Publicus's picture

So you make money melting down pennies?

Gaius Frakkin' Baltar's picture

The problem with abolishing low denominations of fiat currencies is that people on the street begin to ask questions.

TheAnalOG's picture

We broke into one recycling centre and stole thousands of dollars worth of scrap metal.  Sold it to another center across town, good score yay!

tawdzilla's picture

I logged in just to give you a down arrow...asshole.

TheAnalOG's picture

Why you do to we?  We had to repaint all the cans tho just so they never figure out whodunnit "KROOKIN' COLA".  Smelly guy inside the counter say to we, "oh never seen Krookin' for?".  "Eh, spend lots of time down in Mendez" says to he.  Gives us the change to we and go to the drug store for some cough syrup mixing giggling to we's.

chumbawamba's picture

This is not a Kyle Bass trade, it's a Chumbawamba trade that Kyle Bass read about in a comment here on ZH years ago and copped for himself.

Credit where credit is due, gentlemen.

I am Chumbawamba.

TheAnalOG's picture

A penny fer yer thoughts chumblez and a bit for your bunghole too.

Manthong's picture

Nickels, even in small quantities, are a real pain to move about and you need a strong or floor level shelf to stow a few stacks of bank boxes ($100.00).

Nonetheless, I have been Gresheming nickels and pre ’82 pennies for some years now.

I figure nickels will be the new quarter or more after the deflation/inflation cycle plays out.. plus, they do tend to help tone the arm muscles.

 

The9thDoctor's picture

Ingraham writes that America could save $100 million each year simply by getting rid of the penny and the nickel

With a $16 trillion national debt,  $100 million is nothing.  This is a non-issue waste of time.  Typical "conservative" rhetoric.

Let's fail to see the big picture.  Reminds me of those Faux News stories where a researcher had shrimp on a treadmill on a $3 million government grant over a course of TEN years, and gasp what a waste of taxpayer money.  Next story they are supporting a "surge" in Iraq to fight "insurgents" which costs $280 million a day to sustain.  Look at what a great investment that was.  ISIS is in charge, and Iraq is a bigger disaster and more of a risk to global stability than when Saddam was in power.

Conservatives are the biggest joke out there, because they don't "conserve" anything.  They whine about black people on EBT getting $250 a month to feed their kids, yet are readily to defend 67 year olds who collect $900 a month social security ON TOP of their pension/retirement investments, then have the audacity to whine that the $900 doesn't go far.

DoD, Social Security, and Medicare make up the vast majority of the federal pie chart, yet righty tighties don't want any of those reduced because, hey, they collect from that.  If we stop coining nickels, let the post office go bankrupt, let roads fall apart, abolish NASA, and stop giving the working poor subsidies to pay bills because $8 an hour doesn't go anywhere, then we can finance their pet projects with the "savings" that don't add up.

This is the type of crap the TEA party has turned into, from its libertarian roots. 

wendigo's picture
wendigo (not verified) The9thDoctor Dec 22, 2014 4:28 PM

The 9th doctor is my favorite but you're certainly not. 

Your guess is as good as mine's picture
Your guess is as good as mine (not verified) The9thDoctor Dec 23, 2014 3:56 AM

I can't vote up / down more than half of your comments. Guess which ones they are.

Antifaschistische's picture

well....it's funny fighting over who thought of investing in coinage for their metal value first....since that problem has been around for thousands of years.  But I'm with you...

I do two things....

1)every time I'm at a bank I take out $10 or $20 in nickels just to force the US Treasury to make more.

2)every time I get a penny I throw it in the street or on a sidewalk in protest so others will see how meaningless our currency has become.   Sure, one out of every 20 is a pre-81 copper penny...my time is way more valuable than that and the point I'm making is more valuable than 1 cent.

TRASH PENNIES - HOARD NICKELS

Almost Solvent's picture

I used to drop pennies on the ground as I exited a store, but a few years ago I started telling the cashier to 'keep the pennies'.

 

Now that I hate corporations, I take the pennies from them and drop the on the ground, usually in the parking lot. However, if it is a 'mom & pop' local shop, I still tell them to keep the pennies.

Ahoy Polloi's picture

Why would a bitcoin turd be interested in anything like that?

TheAnalOG's picture

to get a little high and get more bits?

TruthHunter's picture

"stole thousands of dollars worth of scrap metal.  Sold it to another center across town"

...a born again Keynesian...

fleur de lis's picture

Why is the US Mint worried about a lousy hundred million or two? That really is pocket change. If they're so stuck for money they can go to the same cash register where sticky fingers Nuland found 5 billion. She squandered that for nothing, and shows no signs of letting up. No accounting charts, nothing. She only got busted by chance, and still nothing happened to her. She's still sniffing around for more easy money that's not in a vault welded shut.  

USA USA's picture

105 Mil....

A fucking blip on the charts. Probably spent more than that crying about it!

At least the nickle has value.

Pick up a penny that has been in the dirt or sand and it is a white piece of unrecognizable zinc!

 

FU oBUMmer

 

Cheduba's picture

Exactly.  Besides the fact that the Federal Reserve wants to further debase coinage by having us carry around steel pennies (from the coming flood of oversupplied steel from China) and then lead into a completely digital currency by abolishing coins, they keep focusing the sheep on these millions of dollar "savings".

What about the billions we pay in interest, the hundreds of trillions in unfunded liabilities, and the quadrillions of derivatives?  I know every hundied million counts, but sheesh.

Antifaschistische's picture

Yes, it's a blip....but you have to understand how Public Sector Budgetting works.

For the US Treasury to go into a new budget year, and have to explain why their costs keep going up, even when metal prices are declining is a very tough proposition. 

Secondly, as with all public sector funding....this is the same pool of money that people potentially receive raises from...so, the US Treasury, being a Public Sector parasitic organization would rather cannibalize the penny, and hand out raises than defend the penny.

But, TPTB don't want to blow the lid off the counterfeiting/debasement party going on at the FED and the BIG Bank Brotherhood.   So, they'll keep throwing money at the Treasury to fund the negative ROI penny/nickel scharade. 

Stuck on Zero's picture

At least ZHers can't claim the U.S. currency is backed by anything anymore.  Zinc and nickel backed currencies are the new gottahave.

 

Eyeroller's picture

I moved to Australia in 1986, and they had 1 and 2 cent coins and a $2 bill at the time.

In 1984 they replaced the $1 bill with a coin.  Worked great because they took the bills out of circulation, so no one had a choice but to use the coins.

While I lived there they did the same with the $2 bill (and $2 coin is smaller than the $1 coin), and they got rid of 1 and 2 cent coins all together.

The transition was smooth.  No one questioned it.

Then all of the bills were changed to what felt like a paper/plastic material.

 

El Vaquero's picture

It's polyvinyl chloride money.  PVC.  At the very least, it's more durable than paper money.  If a tear starts in it, it is easy to rip along that that tear, but so long is an AU bill remains untorn, it takes more strength to rip than most or all people have.

TheAnalOG's picture

PVC bills means fewer losses for subsatnces going up we nose too. 

Almost Solvent's picture

Correct.

 

I take those new Canadian 20s home for friends everytime I visit.

cynicalskeptic's picture

The problem with abolishing low denominations of fiat currencies is that people on the street begin to ask questions.

 

Tis is an old - and ongoing story.  I worked in operations for the NY Fed way back in the 80's.  

Remember when businesses were giving bonuses if you brought in pennies?  People were dumping pennines in jars at home because they wern't worth carrying THEN but businesses still weren't willing to round down to give nickels in change.   NOW businesses routinely round off - they don't care - which says something about the real value of money these days.

Truth is that it costs a fortune to mint pennies and nickels - AND to print $1 bills.  Classic money debasement scenario when coins are worth more for their (even base) metal value athan their purchasing power.  KEEP IN MIND tht pennies aren't even the 95% COPPER pennies any more - THOSE are worth 1.92 cents for the metal alone.  Nickels are still only worth 4.3 cents for their metal content.    As for the old 90% silver and 91% gold coins...... THAT's another story..... A silver dollar - even at ridiculously low silver proces is worth over $12..... and a $20 GOLD piece is worth over $1100.  

Is now is the time to ask about about all those DEFLATION memes?

You'd also be far better off eliminating the $1 bill  - it lasts maybe 6 months and makes up more than half of the money that's printed.  Sooner or later it's going to cost more in labor and materials to print a $1 bill than it's worth.    Most other nations use coins for equivalent buying power denominations but it is politically unfeasable in the US.  Makes it way too obvious that they've debased the currency.

 

and regarding debasement.....

There was one guy working in the coin vault at the Fed who came up with the dowpayment on his house when they (quietly) started pulling silver coins from circulation.  He went around to every coin changer he could find and pulled all the silver coins he could (and the appreciaton was not all that much at the time he cashed in).


We're following a classic historical pattern of money debasement - best not to make it too obvious to the masses.  

Have been doing some genealology work of late.  Makes it VERY clear at just how much we've been screwed.  In the late 1800's serious wealth was measured in thousands - rare was a house worth more than $1000.  Jump ahead 75 years to the 1940 census which has all kinds of good info on wages and worth.  If you made over $1000 a year then you were pretty comfortable.  One guy making $5000 a year as a District Manager for a large company was living high on the hog - cruises to Europe, big house.   Peons made hundreds a year.  Rents were less than $30 a month for a house.  

Post WWII - when prices started soaring, my grandparents paid $12,000 for a house - about 2 1/2 times annual earnings then.  Twenty years later my parents bought the place for $29,000 - again about 2 1/2 times annual earnings.  Then you had the soaring prices of the late 70's and its value shot up to over $200,000..... and it kept going.  It sold near markte peak for close to $500,000 - a fairly ordinary (and OLD) 2 family place - albeit within commuting distance of NYC.

I was highest paid in my engineering degree major in the late 70's - made just over $20,000 a year.  An accounting major friend was making $16,000 for a big firm.   Now you pay a high school grad receptionist that.  The new car that cost me $3500 back then (IF I could have afforded it) runs $30,000 or more now.  My whole college degree cost less than ONE YEAR of what it costs for my kids.  being 'old' - over 60 - I remember when candy bars cost a nickel - they're well over a dollar now.    But that seems unbelievable to anyone born after the inflation of the 70's.  

We are SOOOO Wemiared  or  Zimbabwed - to make a more current reference.  Keep in mind that in the past when a nation had completely debased its money and lost confidence there was always some other 'safe haven' to run to. There is NO other option available to meet the demand that's going to arise if/when people start to panic over the dollar.  

It seems like the current strategy is to destroy any and all possible competitors to the $US as a means of propping it up - a monetary 'Mutually Assured Destruction'.    I wonder how long that can last?

TruthHunter's picture

At Big Box stores margins, every penny they handle loses them money.

 

They ought to price in pennies then round up for very small purchases and

down for larger.

 

Get rid of the penny, in a couple of years we can come out with little copper dollars.

We can even put Lincoln on them instead of that Sacajawea person.

noben's picture

"The problem with abolishing low denominations of fiat currencies is that people on the street begin to ask questions."

Well, think of it as another version of "Broken Windows":  Good for the economy.  Especially when key Commodities are being price-crushed.  Right?  ;-)

hedgeless_horseman's picture

 

 

Uncle Sam Does The Impossible: Loses $105 Million/Year Coining Money!

Loses?  What price for freedom?

HALF DISMES [NICKLES]--each to be of the value of one twentieth of a dollar, and to contain eighteen grains and nine sixteenth parts of a grain of pure, or twenty grains and four fifths parts of a grain of standard silver.

 

http://www.constitution.org/uslaw/coinage1792.txt

I used to think that someday we would be required to have a tattoo of a bar code for our VISA/AmEx/IRS/DHS/SNAP/Obamacare/PASSPORT/FEMA/Driver ID on our foreheads or hands.

And he causes all, the small and the great, and the rich and the poor, and the free men and the slaves, to be given a mark on their right hand or on their forehead, and he provides that no one will be able to buy or to sell, except the one who has the mark, either the name of the beast or the number of his name. Here is wisdom.

Then, I got my driver's license renewed...

Privacy advocates last month jumped on a story out of Texas when they learned that the state’s Department of Public Safety was taking full sets of fingerprints as citizens renewed their driver’s licenses.

...the rich and the poor, and the free men and the slaves...

Got cash?  DHS says you are possibly a terrorist, and should be reported.

One PSA specifically targeted at hotel employees and
hotel guests (watch it below), characterizes paying for a room with cash
as a suspicious activity that potentially indicates terrorism. In the
clip, the man paying for the reservation presents and ID but his lack of
a credit card causes the receptionist to report the man to her boss.

 

Not using a credit card to settle a hotel bill “is suspicious behavior,” according to the voiceover in the clip.

 

http://www.infowars.com/big-sis-brings-see-something-say-something-to-ho...

If you aren't on this DHS list, then you aren't trying very hard.

noben's picture

"Mark of the Beast" can't be far off now. Just wait till after the Monetary Reset.

Note that TPTB are using all historic admonitions for disaster (Bible, 1984, Brave New World) or Sci-Fi tech toy ideas as INSPIRATION, not as a warning. Evil and the ever-burning need to rule over others is strong in these Global Imperialists.

. One (ring) for the Dark Lord on his dark throne
. In the Land of ____ where the Shadows lie.
. One Ring to rule them all, One Ring to find them,
. One Ring to bring them all and in the darkness bind them.

Great metaphor for the One-World Currency that will lead to a One-World Government. Headed by ONE. Not chosen by God (i.e. a Noble, Higher Power), but the SELF-CHOSEN ONE.

NoDebt's picture

No.  Plus its illegal.

TheAnalOG's picture

We never care about the illegal!

NoDebt's picture

I would love to hear how you make money from melting down pennies that have been 97% zinc since 1982. 

TheAnalOG's picture

Canada pennies more pure.  Canada pennies 1942 - 1996 are 98.0% copper.  Yay!

romanko's picture

They also happened to be the purest copper circulating coin in all of history.

 

Quiz: What was the purest circulating coin of any metal in all of history:

Ans: Canadian nickels to 1981 – 999 pure nickel, 100 = 1 lb.

TheAnalOG's picture

So you make money melting down pennies?

 

No, we swim in them pretending they are physical satoshis.

DetectiveStern's picture

This article seems to suggest couns are one use only. If a penny is minted it can be used endless times.

odatruf's picture

I think you missed the point.

DetectiveStern's picture

Not really its a fiat currency. The value of the coins is nothing to do with what theyre made out of.

logicalman's picture

The idea of coins, originally, was that their metal content was value, now they are really just tokens.

ebworthen's picture

And what are Kyle Bass's storage costs/year on pallets of nickles in a Brinks vault?

This kind of article is to push for the abolition of paper and coin currency.

Then the banks will really have us trapped within the Matrix.

El Vaquero's picture

"So you make money melting down pennies?"

 

Nope.  Part of the cost of making a penny is in the energy used to melt and stamp the zinc, and in the chemicals used to plate it in copper.  Material wise, its not worth more than 1c.  Yet. 

JuliaS's picture

Coining metal is another way of price fixing a commodity (whatever the coin happens to be made of). Since you're enumerating a fixed quantity of the metal, you're actually placing a short bet on its value, but since money, in a fiat world, always depreciates over time, you end up on the wrong side of a trade. Mix in multiple coins made of different metals and you end up in even a tougher position, as value of metals fluctuates differently.

The best way of denominating physical curerncy, therefore, is by weight, like it was done for thousands of years. An oz. of gold or silver. If you simply measure mass and purity, then you do not automatically lock yourself into an exchange value. An oz. remain an oz. rain or shine. How much that oz. buys fluctuates and it's not a problem in the slightest.