End of the Penny and the Next Phase of Currency Debasement
International Man: President Trump has ordered the Treasury to stop minting pennies after 232 years, citing the fact that each one costs more than two cents to produce—calling it a waste of taxpayer money.
What’s your take on this move?
Doug Casey: It may seem odd that we’re talking about something as trivial as the disappearance of the penny while we may be staring World War 3 in the face any day now. We can visit that next week since the situation is so fluid.
But let’s turn our attention from a potentially traumatic war to a gradually degrading coinage, starting with a fun fact. People have forgotten that the US used to have a half-penny coin, which circulated from 1793 until 1857; it was pure copper and only slightly smaller than our current quarter. The debasement of coinage is a long-standing trend in the United States.
Now, the US is abolishing the penny. As usual, Trump is understating the negative, just as he always overstates the positive. It doesn’t cost two cents to produce a penny. It costs 3.7 cents. He mentioned that it’s uneconomic to mint them, but he should explain that it’s only because the currency itself is being destroyed. However, I’m uncertain that he understands the cause and effect of the matter.
It’s necessary to get rid of the penny because they cost the Treasury about $60 million a year to mint, even though nobody uses them. People don’t even bother picking them up off the street anymore. It’s estimated there are about 250 billion of the things pointlessly saved in mason jars. They’re a total waste of metal.
A bit of history is in order: When the first US penny was minted in 1793, it was pure copper and weighed 208 grains (13.48 grams), larger and heavier than the current half dollar. It was reduced to 168 grains (11 grams) in 1795. In 1856, it was further reduced to 72 grains (5 grams).
In 1864, it was reduced to 48 grains (3 grams) and was no longer pure copper but an admixture of 5% tin and zinc. This version of the penny lasted until 1982 when the government perpetrated a genuine fraud by replacing all the copper with zinc, disguised by a copper coating. Boobus americanus never noticed. Zinc usually trades at about a quarter of the value of copper. The weight of the penny also dropped to 38.6 grains (2.5 grams).
The trend of reducing the penny’s intrinsic value has been
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