A while ago I went on a tear about "decimalizing" the American monetary system. For a while, people have been talking about eliminating pennies because they're more trouble than they're worth. I took things one step farther and said: Hey, let's get rid of nickels, too. My theory was that we could make the economy a lot more efficient by just rounding everything off at the nearest dime. It was a stupid idea and I got a s certain amount of comedic mileage out of it and then, much to my regular reader's relief, moved on.
So now Fox News quotes an economist with an idea that is even more stupid than the idea I had. I mean, seriously more stupid. The economist, Francois Velde, wants to increase the face value of pennies so that they're worth five cents each. This, Dr. Velde points out, will save the penny! Dr. Velde then points out that, historically, coins worth more than their face value disappear from circulation because people are melting them down and selling the metal.
The best solution, Velde said, would be to "rebase" the penny by making it worth five cents rather than one cent. Doing so would increase the amount of five-cent coins in circulation and do away with the almost worthless one cent coin.
The point Dr. Velde misses is that there are too damned many pennies in the world to begin with. He is, by my shoddy research, the only person in the universe worried about a shortage of pennies. Everyone I know has more pennies than they want or need or can even figure out a way to dispose of. In this nation of 300 million people, there are approximately 140 billion pennies in circulation. That's nearly five rolls of pennies per person.
When silver prices in the 1970s skyrocketed, speculators trying to corner the market were shocked to discover that, the higher prices went, the more silver poured out onto the market. When silver rose from about $2 an ounce to more than $50, it was all the rage to sell unused Sterling tea sets and pickle forks to scrap metal dealers in exchange for ridiculous amounts of money. My own father, who had collected big bags of silver dimes and quarters back when they were made of real silver, made thousands of dollars dumping those coins into the inflated market. I remember him bragging that he had exchanged three rolls of silver quarters -- face value, $30 -- for a full set of Ben hogan irons worth over $500. Far from cornering the market, the speculators found themselves awash in silver.
Which says to me: Leave the face value of pennies alone! If the price of copper rises so high that it becomes worth trading in all those pennies, the penny will disappear and we'll all be better off for it. More likely, the price will rise and all those pennies will come back out of hiding and the price will fall again, and we'll all be exactly where we are now: Flush with coins we have no use for.
You'd think an economist would understand that.
Comments