Accidental Blogger

Do you come home, empty your pocketful of change into a jar and forget about it?  Or do you take the trouble to occasionally carry some of those coins in your purse and count out the exact change for your purchases? Or at least, do you once or twice a year, take that full jar to a coin machine to convert the metal money into paper?   It would better be one of the latter two.  The tendency of most folks to hoard their coins drives up the cost of minting them. The copper penny which has little copper now and is mostly zinc, is becoming especially expensive to make due to rising metal prices. It already costs the US mints more than a cent to make a penny – nearly half as much more. We could do away with the penny as many countries do with the smallest of their currency denomination when it ceases to have any significant buying power. But that is difficult to do in the US. A retail sales gimmick which fools no one, has businesses pricing their items at $4.99 instead of $5 or $9.99 instead of $10. Tack on to it a sales tax which has a decimal component and you end up with a final figure that requires businesses to make change requiring pennies when the customer tenders an amount of $10 or $20. So businesses must have a ready supply of pennies and Uncle Sam must go on making them at a loss ! Please do your bit for the national treasury – fill up your pocket with change when you go out to the store and put those coins back into circulation.

"What happens if a penny is worth more than one cent? That is an issue the U.S. Mint could soon face if the price of metals keeps rising. Already it costs the mint well more than a cent to make a penny.

This week the cost of the metals in a penny rose above 0.8 cents, more than twice the value of last fall. Because the government spends at least another six-tenths of a cent — above and beyond the cost of the metal — to make each penny, it will lose nearly half a cent on each new one it mints.

Appearances aside, pennies no longer contain much copper. In the middle of 1982, after copper prices rose to record levels, the mint started making pennies that consist mostly of zinc, with just a thin copper coating.

But these days, zinc is newly popular. Rising industrial demand and speculation have sent the price rocketing. Since the end of 2003, zinc prices have tripled. Gold, by contrast, is up only about 50 percent.Asked if the mint had a backup plan for what it will do if zinc prices rise far enough that it could pay to melt down pennies, a spokesman said that such issues were for Congress to decide. Perhaps the mint could go back to making steel pennies, as it did during World War II when copper was needed for the war effort.

Pennies, meanwhile, are in high demand. Last year, the mint made 7.7 billion — more than all other coins. In the first three months of this year, the pace of penny production rose to an annual rate of 9 billion — the highest since 2001.

Why so many? Perhaps there is now some hoarding in expectation that metal prices will keep rising, but mostly it is an issue of sales taxes. In most states, sales taxes are added to the retail price and assure that the total price of many items will require pennies to be given in change if a customer pays with dollar bills. That helps explain why the idea of eliminating the penny has gone nowhere.

So retailers demand pennies from their banks, the banks demand them from the Federal Reserve, and the Fed orders them from the mint. Many of the people who get the pennies in change throw them into a jar, where they may sit for years, requiring the mint to make more and more of them.

And, at these prices, lose money on every one."