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The U.S. Mint's Production Materials Problem: Nickels Cost 11 Cents to Make. Here's Our Design Solution
It makes such little centsIt makes such little cents
You probably know that the U.S. penny used to be made out of copper, which was once inexpensive. As the cost of copper began to rise, it would have cost more per penny than the penny's own value, so the U.S. Mint switched over to a zinc alloy.
But the price of zinc has been steadily rising since 2005. Which is why U.S. currency is in the absurd situation it is now: A one-cent piece costs about 2.4 cents to make. A penny is 97.5% zinc and 2.5% copper, and that zinc ain't cheap.
The nickel's got it even worse. This five-cent coin costs 11.2 cents to manufacture. That's because 75% of it is zinc and 25% is, well, nickel, another expensive metal. Which means that a nickel costs more to produce than every U.S. bill from a one-dollar bill (5.2 cents) all the way up to a C-note (7.7 cents).
The money math starts to make a little more sense when we get to the smaller dime (92% copper, 8% nickel), which rings in at a production cost of 5.7 cents. The quarter, which has the same ingredients as the dime, is only a slighly better bargain at 11.1 cents.
Clearly the U.S. Mint needs to start researching cheaper alloys or phasing out the penny and the nickel. It's true that the math is a little more complicated than it would be for pure product manufacturing; for example, while you'd quickly go broke selling a product for $100 that cost $240 to make, currency is a little trickier. The government has an obligation to produce and circulate currency because it enables commerce, so it's okay if they lose a little in manufacturing costs, as its citizens will theoretically make it back up by creating wealth. But if we don't do that fuzzy math and look at it in terms of straight production, in 2012 alone the U.S. government lost $58 million dollars just by making pennies.I have two brilliant ideas concerning the future of money production:
1.) Let's make pennies and nickels smaller, so that they use less materials and cost less. In fact let's make them tiny, like smaller than an Advil. Sure, we'll constantly lose them, accidentally eat them when they fall into a salad, and need to use tweezers at vending machines et cetera, but it will be funny.
2.) It would be awesome if currency was made out of some magic material that could grow and shrink in proportion to its fluctuating value. I'd love to go to a country where the dollar was strong, and the U.S. bills I'd brought would physically grow huge, like the size of menus. Conversely it would shrink down to matchbook size in countries where the dollar was weak.
I guess those are terrible ideas, but it would certainly make wallet design more interesting.
Seriously though, if they're going to insist on keeping the penny and nickel and using the same metals at the same overall size, couldn't we switch over to a donut design? If we kept the outer perimeter the same but removed material from the center, we could cut down on the metals cost. Of course we'd have to lose the portraits, but I think Abe Lincoln would be down to take a powder if he knew it'd save us $58 mil a year.
Someone, please Photoshop what a donut penny and nickel oughta look like.
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you are on to something... hollow out 5cent and penny and use the plastic they make casino chips out of for the center... put the photo of the pres on the plastic part. you can weight it if needed with a lead filler in the plastic.
Q: I have a 2013 copper nickel ?
And then those guys who are hoarding millions of [copper] pennies make a killing.
It's only a matter of time to represent all the money in the world in a digital way. And after reading this article it makes sense: inflation is part of our system, so governments needs to create more bills/coins, but as the population grows even the resources to create paper bills will become more expensive. "bits" doesn't suffer from this scale issues.
And that brings a lot of interesting topics to think about:
- How was the history of money related to the development of our societies?
- What happens if all the money goes digital? Do the people really need to be in physical contact with bills/coins to assign them value? Is that change going to bring more awareness on how abstract the concept of money is... and maybe changing our mind set about money in a way that changes our societies too?
Who knows... Interesting times ahead :)
He endorsed the answer to this problem weeks ago with the platinum trillion dollar coin (the idea was nixed).
Losing $58mil? Please. Less. Than. Chump. Change.
$Millions means nothing anymore to the govt. $Billions are fast going going out of style. Heck, the tax payers gave out something like $1.6 billion in free cell phones to its citizens and non-citizens in 2012 alone.
$58 million? We spend more on advertising for food stamps.
Or make it out of the same metal combo as pennies.
Seems like others who love that gold prices are rising forget that it is only because we're off the gold standard. The minute we go back, all their gold will be worth $24 an ounce.
I look at data not what I'm told. Here is just one example of the value of the dollar vs gold (metal).. http://pricedingold.com/us-dollar/
Notice everyone asking for gold and China and other major players buying it up like its better then the dollar, oh wait it is.
Best investment I have made was switching all my stocks to silver when it was at 8 dollars an ounce, its now at 30..I hope more people fall into believe paper and bits on a machine have value when you turn off the power.
Do you know what the fractional reserve system is.
To the whole idea, most machine use weight to determine which value is being used. Going digital is a great solution but what happens when the place you want to eat doesnt take cards or bitcon?
1. kill the penny
2. kill the paper dollar
3. Make the dollar coin out of copper and zinc to keep those industries happy.
4. Take a nap.
On a adjacent note, I was at a museum the other day looking at roman coins featuring a profile view of Caesar. It's crazy 2000 years later we still have the same traditional format.
You dont't know what you are talking about. The DOW was not at an all time high. (Adjust for inflation). The DOW is a terrible measure for the economy (see the latest episode of planet money's podcast). We got of the gold standard and it helped us get out of the great depression. Gold value has plummeted, and is "the worst investment of 2013".
Now, for a solution, lets just stop making physical currency. Easier to track, impossible to cheat on taxes, ends the problem of undocumented workers being paid in cash and not paying income tax. You essentially end the grey market, except for bartering, which shouldn't and wont be taxed.
This is a just one of the signs of a poor financial house. Th bubble is always biggest before it pops. Note last weeks all time highs of the stockmarket.