June 7, 2006--Makes Good Cents

For years the US Mint has wanted to eliminate pennies. Prices have become so inflated that one would assume people would be happy to get rid of them. Why not just have all prices either rounded up or rounded down—so $4.34 would become $4.35 while $4.32 would be rounded down to $4.30 (though don’t hold your breath about the latter).

There is more interest now in getting rid of these pesky coins (what do you do with a fist of them when wearing tight pants?) now that it may soon cost the Mint more than a penny to produce a physical penny (see NY Times story on this linked below).

A penny is made of zinc with a thin copper coating; and with the price of both rising, it is estimated that it will soon cost 1.4 cents to make a cent, if you follow. Zinc in itself is a commodity of interest to investors. And that is a part of the problem. There is considerable speculation in zinc. If a savvy George Soros type can corner the market on pennies, so to speak, and melt them down to extract the zinc, he can make a buck. Or a million.

But not to worry, Congress is on the case. After fixing our intelligence gathering problem, solving our illegal alien problem, and of course figuring out how to rebuild New Orleans, they promise to turn their attention to our penny problem. They are cleverly considering legislation to have pennies made from steel as the Mint did during World War II. Brilliant! Who needs Jack Abramoff?

But in spite of their lowly status and diminished buying power, pennies continue to be in hot demand. Last year alone the Mint made 7.7 billion of them. Yes, billion.

Why do we need so many, you might ask, since pennies do not get worn out like One Dollar bills--also for years slated for elimination? (Remember Susan B. Anthony?) It is thought that some pennies are being hoarded in the hope that zinc commodities will continue to soar; clearly pennies are essential in those states that have sales taxes—at every Seven-Eleven they need to collect every last dime, I mean penny; and then there are those of us who toss our pennies into a big jar and every 12 years gather them in rolls of 50 and deposit them in the bank.

I did that just last week and found I had more than $73 worth. This helped me feel virtuous—maybe I am not putting enough into my 401(k), but at least I’m saving pennies. Let me see, $73 every twelve years; if I amortize that, that means I’ll have enough money to retire in only 732 more years.

As they say, “A penny saved is a . . . .”

Help me out here because I forgot what they say. But next time rather than roll them up, which is a pain, I’ll just melt them down like George.