Are we throwing away possible 5x gains with Zincolns?

[palmvtree]

A few years back in the Chicago Fed letter on 2/1/2007 François R. Velde of the Federal Reserve Bank of Chicago pointed out the value of coins and asked "What's a penny (or nickel) really worth" http://www.allbusiness.com/economy-econ ... 772-1.html in a four page article. Another gentleman Austan Goolsbee (who has appeared quite often on the Daily Show with John Stewart) on the same day (2/1/07) wrote an article for the New York times http://www.nytimes.com/2007/02/01/busin ... d6&ei=5090 about rebasing the penny to substitute the nickel. I just thought I would raise the question and ask the forum the thoughts of this rebasment suggestion actually happening and if so, should we be hoarding Zincolns as well? The crazy thing is Nickel and Copper hoarding is already happening at a high level so will that lead to this possible rebasement faster? I know the idea was out there 4 plus years ago and still has not happened but we are getting closer and closer to an implementation of someone's idea to "change" coin composition so what else is possible? I am looking forward to the feedback and thoughts on Zinc hoarding now? If this rebasement would happen, talk about a great stimulus plan! But then I would think about all of the Zincs I threw away!

[blackrabbit]

Interesting reading there. I don't know if I'd call Goolsbee a gentleman, more of an economic plunderer. However, I think this rebasement might happen when even more debasement of the dollar occurs. The coppers will be worth more than 5 cents in metal at that point so us miners will still be doing well. Eventually all our coinage will have to be revalued or it will be hoarded and melted.

[mrbill]

This is something I have been pondering as well.....I have followed Jim Rogers for many years ( he is a contrarian-styled investor and an advocate for commodities)...I have heard him mention zinc quite often........SO what would be "wrong" about valuing zincolns more highly?

Buying $100 face rolled and assuming a 20/80 copper/zinc ratio......that roll is "worth" approx $1.39...a nice "return".....you can treat rolls like nickels...sort out wheats, errors, etc.....or just hoard the unsorted boxes.....if copper goes up your happy....if zinc goes up your happy......if they BOTH rise........smart people would think you were smart! Plus think of all that time you would free up to sort halves or something else.

Just my 2.96 cents....a penny for your thoughts.

[highroller4321]

This happening would show that the USD is in trouble. I don't think we will ever see anything like this.

[68Camaro]

This is something I have been pondering as well.....I have followed Jim Rogers for many years ( he is a contrarian-styled investor and an advocate for commodities)...I have heard him mention zinc quite often........SO what would be "wrong" about valuing zincolns more highly?

Buying $100 face rolled and assuming a 20/80 copper/zinc ratio......that roll is "worth" approx $1.39...a nice "return".....you can treat rolls like nickels...sort out wheats, errors, etc.....or just hoard the unsorted boxes.....if copper goes up your happy....if zinc goes up your happy......if they BOTH rise........smart people would think you were smart! Plus think of all that time you would free up to sort halves or something else.

Just my 2.96 cents....a penny for your thoughts.

If one rates financial decisions as smart or stupid, and assign different levels of goodness and badness, I would rate this as one of the least stupid things you could do with your money.

There is some merit to it, and you aren't likely to lose on it, but there are so many more obviously better things to do with your FRNs.

[Lemon Thrower]

i think this is highly unlikely. they already have a 1, 5, and 10 cent coin. whats the point of making the 1s equal 5? haven't you then just made an equal number of 5's obsolete? a more plausible thing would be to designate a dime to now be worth 20 cents - at least that would serve a purpose. they could then demonetize everything below a dime. both steps would be profitable. making a penny a nickel doesn't accomplish anything more than to just stop making pennies.

I think the first step is we'll see the nickel composition changed. then the penny eliminated. maybe the nickel eliminated. but all of these adversely affect the consumer CONfidence, so they'll put it off as long as possible.

it won't be long before nickels are worth a dime. when that happens, they'll start disappearing from circulation. its not happening with pre-83 pennies so much because you have to sort them. but with nickels it will be different. which is all the more reason to make them out of steel soon.

[AGgressive Metal]

The US government has NEVER, in over 200 years of minting, re-valued any coin. There is no precedent for this it is just some academic idea. MUCH more likely is something like what we see in Australia, New Zealand, Sweden, Norway, Denmark, Great Britain, Switzerland, etc - specifically, simply stopping production of the smallest denomination(s). Since no US coin has ever been declared void, I believe we will simply see Zincolns go the same way as the half-cent, large cent, three-cent silver, three-cent nickel, etc. There will be no re-valuation and no void, just cease of production and move to the dime as the smallest coin in production.

EDIT: to elaborate, consider what other countries have done:

Great Britain - reduced size of 50p, 20p, 10p, and 5p coins, changed 2p and 1p from copper to clad steel, and eliminated half pence.
Switzerland - eliminated 1 and 2 rappen coins, and changed composition of the 5 rappen
Canada - changed to clad steel from monetary base metals nickel and copper
Australia - eliminated 1 and 2 cent copper coins
New Zealand - reduced size of 50 cent and 20 cent coins, changed 10 cent from CuNi to copper-clad steel, and eliminated 5, 2, and 1 cent coins.
Sweden - stopped production of small denomination coins, gave a window for redemption
Norway & Denmark - similar stories as Sweden.

[AGgressive Metal]

My best educated guess is that the US will simply stop making pennies but will not demonetize them - same with the nickel. They will remain legal tender (like every other US coin ever made, save the Trade Dollar), but just like the Half Cent, Large Cent, and Three Cent coins, they will quickly fall out of use and prices will be rounded to the nearest Dime. Also, just as Mills (tenth of a cent) are still used in accounting and gas prices, so will cents. Electronic payments and checks will still be made to the exact cent, but cash will be to the nearest $0.10. It won't be hard, since vending machines no longer take pennies as it is.

[HoardCopperByTheTon]

Since no US coin has ever been declared void,

Al contrar.. what about the Trade Dollar?

[exbingoaddict]

There is some merit to it, and you aren't likely to lose on it, but there are so many more obviously better things to do with your FRNs.

Agreed, there's more to financial life then metal.

[misteroman]

I was thinking a few yrs back that they would turn them into $.05 coins but don't really believe that anymore.