What would possess the United States of America to continue producing a monetary unit that costs twice as much as the unit is worth?
The venerable U.S. penny, according to the 2012 report from the U.S. Mint, now costs exactly 2.0 cents to produce.
That's correct. Our government, with its $1.07 trillion deficit and the economic burden the current government seems to insist on placing on the taxpayers' shoulders through increased social spending, is offering us a penny, but charging us twice as much to make it.
Simply put, your roll of 50 pennies you're saving for that rainy day cost you $1.00. And we wonder why we have inflation!
- The nickel (.05) cost .1009 to produce, also more than twice its value
- The dime (.10) cost .0499 ... yes, less than half the cost of the nickel
- The quarter (.25) cost .1130
- The half-dollar (.50) has not been produced for the last 3 years
- The dollar coin cost .2111
QUICK HISTORY OF THE COIN:
Back in the day when the chicken farmer wanted to buy broccoli, he would approach the broccoli farmer with the proposition of trading chickens for broccoli. The trade was simple. However, as the family started wanting spices, salt, plates and silverware to complete the meal, the economics of trading to complete the family meal became more complicated.
That's how coins evolved. They were made of a metal most everyone valued (usually gold and silver). Soon, gold or silver weighing a certain amount took on a value of its own.
To keep things organized, the government took on the responsibility to mint coins of that same metal everyone valued. That way, everyone continued to use the valued metal as an intermediate exchange, instead of just using chunks of the valued metal. The government would charge the people a small fee to stamp the coins at a mint.
People would accumulate the precious metals in the form of coins, and place them in safe storage at a bank. The bank's role was to simply store the metals for its customers, and charge a small fee for the secure storage.
Important to note that two extremely vital things existed that kept this system very, very stable:
- The monetary unit consisted of a metal that was of value. It wasn't the government-created coin that was of value; it was the metal the coin was made of.
- The amount of monetary units was limited to available gold and silver. If no one mined more gold and silver, no more coins were produced. If someone DID mine more gold and silver, more coins were produced, causing some inflation. However, with no extra coins produced, there was no inflation.
To paraphrase Bob Dylan, 'things they have a'changed!'
Look for tomorrow's article to see how they changed. It's a fascinating story, culminating, unfortunately, in a government that has both taken more control and caused completely unnecessary inflation and debt they've chosen to saddle us taxpayers with.
And the out-of-control United States government's economic problems all started with how they minted the penny, which now costs two pennies to produce.