Comments (15)

• Al-Bob

• Thanks Max!

  I've been hoarding every last penny since 1996. It will be fun to see the day when the Penny will be accepted at par or more with with paper bills.

  So, what's the value of the heating content of a $100 bill anyways?

• Published: April 21, 2008 9:09 AM

• Berin Szoka

• Unless I missed it, there's no link to the actual article--which I found through the miracles of Google:
  http://mises.org/story/2938

• Published: April 21, 2008 9:18 AM

• Brad Wogsland

• Hi Max,

  You have wildly misreported the price of Zinc, which has been falling for the past two years. See data from the London Metals Exchange:

  http://www.lme.co.uk/zinc.asp

  American pennies (post 1982) are 97.5% Zinc and 2.5% copper so if we use the current prices of $2240/tonne and $8629/tonne respectively (remember a British tonne is 1000 kg), then our 2.5g penny is worth about .5999 cents. This is quite a bit less than the 1.7 cents listed in your article. If you really want to stock up on American coins, chose the nickel. At 5g it's 75% copper and 25% nickel, so even though the price of nickel has fallen the surge in copper makes its value about 6.82 cents.

  Hoping to see a correction,
  Brad Wogsland

• Published: April 21, 2008 9:37 AM

• Nat

• Am I the only one who envisioned Bernanke getting in his helicopter and pelting people with pennies?

  It is for that reason I'd rather see the penny be abolished before $100 bills do :)

• Published: April 21, 2008 9:38 AM

• jl

• Brad, there is a difference between the cost of making a coin and the cost of the material used to make it. I think Max is referring to the total cost for the mint to produce the coin.

  A neat website that shows the value of the metal content of all the coins, going back to even the silver ones, is here:

  http://www.coinflation.com
  

• Published: April 21, 2008 11:21 AM

• Ken Zahringer

• Max, my boy, the universities are going to be fighting over you when the time comes! Excellent article - theoretically sound, a model of clarity and brevity.
  You make a fundamental point that I think we don't emphasize and repeat enough: Commodity money is economically sound and a check on inflation simply because it actually has a significant cost of production, just like every other product in the world.

• Published: April 21, 2008 2:42 PM

• John

• Very good article. An absolutely sound argument for managing money value. But an argument worthy of locking in a time capsule and throwing away the key, as far as the "print masters" are concerned.

• Published: April 21, 2008 3:49 PM

• billwald

• Also a good argument for electronic money and one world wide money system.

• Published: April 21, 2008 7:53 PM

• vlad

• Al-bob,

  I just weighed a $10 bill, presumably the same as a $100 bill, at .97g. Assuming it is all cellulose fiber (6100 BTU/lb) you get about 13 BTU's for your c-note. Not a great deal.......yet. Just give give the fed a little more time, and your "green energy" plan will be viable!

• Published: April 21, 2008 9:15 PM

• Bruce Koerber

• Will it be the demand for coins that ultimately causes the 'bank runs' that close down the banks? At least the coins are commodities and have some real value.

  What happened historically to the coins in countries that experienced hyperinflation? Were they deemed no longer legal tender?

  Regardless they would retain value as a commodity.

• Published: April 21, 2008 9:40 PM

• Peter

• Coins are typically only legal tender for a limited amount anyway. 1c coins for no more than 20c, etc. Of course, when the coins are worth more than the legal tender value, who cares if they're legal tender - use them for bullion value if you can.

• Published: April 21, 2008 9:59 PM

• TJR

• A quibble:

  "Any increase in the money supply, however minute, dilutes the purchasing power of existing dollars and thus throws off economic calculation."

  I suppose the overall context mitigates interpretation of this statement, but I have to strongly disagree that ANY increase necessarily does both as you claim, in particular the second claim.

  Even in a laissez-faire economy with a gold standard, money supply would grow over time. By your assertion above, this increase would allegedly "throw off economic calculation." But surely you do not mean to imply that a laissez-faire economy is thereby inherently "unstable" because even an infinitesimal increase of the gold-money supply somehow discoordinates the plans of rational selfish individuals and thereby pushes the economy into chaos.

  You'd be amazed how even in the face of some (relatively limited) inflationary government policy a market system manages to compensate somewhat and still function coherently. It's a highly resilient, robust system that's hardly prone to bits of instability and chaos at the mere slight increase of the money supply.

  Secondly, it's quite possible--and I believe it has even occurred in the past--that a currency may rise in value and purchasing power over a long period of time despite a growth in the money supply, without any chaotic, disruptive effects in the process.

• Published: April 21, 2008 10:43 PM

• David C

• A quibble: Part 2.

  "Any increase in the money supply, however minute, dilutes the purchasing power of existing dollars and thus throws off economic calculation."

  Except where that increase in the money supply is accompanied by the introduction of additional production in the economy.

  Even a fully gold-based currency is prone to inflation in some circumstances: Witness what happened when all that South American plunder hit Spain and flowed into the rest of Europe, leaving a swathe of price disruption in its wake.

• Published: April 22, 2008 9:56 AM

• mike

• Good article, Max.

  For the last two years, I've been carrying around an 1835 US Large Cent. When people complain that a penny isn't worth anything anymore, I pull it out to show them what 'pennys' used to look like around the time of Andrew Jackson. That's also about the last time that the US wasn't in debt, I think.

  If I compare the current cost of the copper in 100 of those cents to the current cost of the silver in two 1835 half-dollars, I see that the result is pretty close to the cost of a 2008 cent in todays dollars. That is, .0059 to .0069.

  Although this is a calculation for only one point in time, it's fascinating that the numbers are so close.

  (The values are the current melt values of copper and silver, found on www.coinflation.com. The cent weighs 10.89 grams, the half-dollar weighs 13.48 grams with .8924 parts silver and the rest copper. Material for 100 cents cost $9.55, material for two half-dollars cost $13.64.)

  Thanks again..

• Published: April 22, 2008 10:33 PM

• nicholas gray

• Years ago, our Australian Treasurer, Mr. Keating, took the one and two cent pieces that we had been using, and abolished copper coins. We were required to round everything up or down to the nearest multiple of 5 (6 and 7 cent items became 5, and 8 and 9 cents became 10, etc.). We have learned to live with it, and those small, annoying coins no longer become lost! Of course, a true free-enterprize economy would have all types of coins, but still allow electronic banking, so we could have the best of all worlds.
  Perhaps you could burst the banking system by introducing money that you could call 'medallions', in fixed weights of gold? And trade them amongst yourselves as substitutes for money? Isaac Newton was a gold-standard man, so have 'Zacs' minted in his honour. How many dollars to the Zac? If an average Zac is a gram of gold, many dollars indeed!

• Published: April 23, 2008 2:04 AM