Commodity Inflation Might Lead to a Revaluation of the Penny

Courtesy of a fellow FreeMarkets alum, Tony Poshek, I read this short Reuters brief noting that because of commodity inflation and "a potential shortage of coins" that "all those pennies in your piggy bank could be worth five times their current value soon," according to a Fed expert. The solution to the penny challenge, at least according to one economist, is to "rebase" the penny and inflate its value to five cents rather than one.

Given that pennies are now worth far more melted than in monetary trade, this option might make the best sense because as "history shows that when coins are worth melting, they disappear." But quick, before that happens, enterprising companies looking for a hedge against copper price increases might want to move as many pennies offshore as possible and melt them down. Or not (if they want to avoid Federal Prosecution). Still, it's tempting. I wonder what Alexander Hamilton would have had to say on the subject!

Jason Busch

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