With all the fuss about the Fed raising interest rates- which is going to go straight to the banks’ bottom line, it’s time to take a look at a commonsense approach to handing some money back to the people at the bottom of the economic ladder- and save the government money at the same time:
A new report shows the cost to produce a penny was 1.7 cents [1] in the 2014 fiscal year. That’s down from 2.4 cents in 2011 but still more than face value.
And that won’t change.
“There are no alternative metal compositions that reduce the manufacturing unit cost of the penny below its face value,” the biennial report to Congress said.
The nickel, too, is dead weight for taxpayers. Production costs stood at 8 cents last year, down from 11 cents. The lower cost per coin is largely a result of rising production and reduced metal costs.
Other coins turn a profit. A dime costs 3.9 cents to make, and a quarter 9 cents. All together, the Mint made $289.1 million on seigniorage–the difference between the value of the coin and the cost to make it–despite a $90.5 million drag from the penny and nickel.
Congress in 2010 told the Mint to examine ways to save money on coin production [2], a mandate that so far has led to detailed testing of alternative metals and production methods, including the use of a laser to produce coin blanks.
The Mint estimates that switching up the metallic content of coins could save taxpayers $5 million to $57 million a year, though vending, amusement, laundry and other groups with coin-operated machines warn that it could cost them billions to reconfigure machinery and make other adjustments needed to accept altered specie, the Mint said.
Source: Just How Much Does It Cost to Make a Penny? [3]
So, how do we do this? You know that pile of pennies you have, sitting around the house? In kids piggy banks, and on top of the washing machine? Buy them back at more than a penny.
Have a day set where you can bring in 100 pennies and get a dollar bill and a dime back. Making the effective cost of putting a penny back into the Fed’s coffers .0011 cent. You could even spiff people who brought in 1,000 pennies and give them back $11.25 etc.
If the cost to make the nickel is that high and the Mint needs more- simple, buy them back too.
Since the super rich probably won’t waste the time running their spare change to the banks for the buyback- this will put a bunch of extra dollars into the hands of those who’ve been penny pinchers for a good reason. Pay the banks a small premium for handling the cash, but stop the stupidity of minting new coins that cost so much. Economic stimulus made easy.
Dr. Yellen are you listening?
Thoughts?
I’m sure the buggers at the Fed will make it illegal to hoard or eventually own the metal in copious quantities. Remember . . . .
Executive Order 6102 – United States presidential executive order signed on April 5, 1933, by President Franklin D. Roosevelt “forbidding the Hoarding of gold coin, gold bullion, and gold certificates within the continental United States”. The effect of the order, in conjunction with the statute under which it was issued, was to criminalize the possession of monetary gold by any individual, partnership, association or corporation.
Fiat money is all that we really recognize in our artificial economy. A constitution moot by use of executive order by a current president who thinks he’s King. Good idea David but if you are going to act on it – better hurry up.
The cost of getting a penny out of circulation in this plan would 1.1 cents (110 cents/100 cents) not 0.0011 cents. That of course does not include the “premium”, man hours to handle it, transportation, storage and destruction.
The highest estimate I’ve seen of pennies in circulation is 250 Billion. So here is the math:
250,000,000,000 total pennies in circulation
1.1 Price per Penny in cents
275,000,000,000 Total price in pennies to buy all pennies in circulation
318,900,000 Estimated US Population
784 pennies per person
8.62 $ per person
The idea wasn’t to eliminate pennies from circulation- the point was to put them back in circulation as needed without minting more.
They do have a shelf life. The problem is hoarding.
The buy outs are cheaper than making new ones- that’s all.
How about we just stop minting pennies altogether? Cost to make a new non-existent penny=$0.00.
Do you R E A L L Y think that people would actually turn in their “hoarded” pennies for a 12.5% “premium”???? Over the years I’ve seen a few people that collect loose change and put it the old 5 gallon glass water jugs, but most of them are just doing that as a way to save a few bucks and not walk around with a jingling pocket. But to think that someone will go separate their pennies and go through all the hassle just for an extra couple of bucks. Although I have no empirical evidence to support my assertion, I would think that the number of people that have significant amounts of pennies stored away where it would make it worth their while to take advantage of the premium is pretty small. And to think that there are large numbers of people who would rush to the bank with $5 or $6 worth of pennies to make an extra $0.75 or so is minuscule. To Diane’s point – the cost of producing a penny has been costing close to it’s face amount or more for as long as I can remember. And people have been talking about getting rid of it ever since I was a kid (and penny candy was phased out). The most common suggestion was that there should be a round-up / round-down system in place. If your change due from a transaction is $1.52, you’d get back $1.50. If it was $1.53, you’d get $1.55. The idea was that it would average out to being even for all parties involved. Another reason that this idea was advocated was that many cash register drawers only had a limited number of coin bins and the gub’mint was trying to force the $1 coin down our throats. Merchants complained that unless they could get rid of the penny, there was room in their cash registers for the $1 coin. For me – I don’t hoard change. I’m the guy that will reach in his pocket for change while paying for his coffee at Speedway and I’ll count… Read more »