Thursday, August 16, 2007

IN FOR A PENNY . . .

The Tribune ran a story today about zinc pennies. That's right. Pennies are not made from copper. They are made from zinc, and have been for a while. That was a good deal. Now less so.

It turns out that the price of zinc has risen dramatically. In fact, zinc is up 450% since 2003. Since zinc is one of the only raw materials in a penny, this means that the cost of production for pennies has risen dramatically. This is bad for the United States, since it undercuts the seigneurage benefits of minting money. In other words, the United States is actually LOSING money by MAKING money. Time to switch away from zinc, I'd say.

Wikipedia, the most reliable source on the Internet, says that the U.S. government has earned about $5 billion in seigneurage on the "50 State" quarters. They spend a nickel to produce a quarter (hopefully not paying with ten cent nickels, as discussed below) and people tend to hold on to "50 State" quarters. Thus, the quarters are cheap to produce, and do not come back for reimbursement.

By the way, it costs ten cents to produce a nickel, but there are not as many nickels in circulation, so this only costs roughly $100 million.

1 Comments:

Anonymous Annhb said...

this is my new favorite word

2:08 AM  

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