The Cost of Small Change: Feds Look for Parity in Coin Manufacturing

If it cost you more to make an item than it was worth in the market place, you would either stop making it or find cheaper raw materials and very likely outsource its manufacture to a country with the lowest labor rates. You would also know darned quickly that you where losing money on every piece produced and would not make it up on volume. If this sounds logical, you probably don't work for the U.S. Federal Government.

Dan Tangherlini, the Treasury Department's chief financial officer, according to this morning's WSJ, claims "making coins from more cost-effective materials could save more than $100 million a year, which isn't just pocket change..." The article states that "It costs the federal government up to nine cents to mint a nickel and almost two cents to make a penny." But doesn't say for how long the Fed's have been throwing good money after less valuable coinage. It does hint, however, that this tardy initiative wasn't taken up sooner out of fear that a public backlash would ensue.

The Journal states that "history shows it would rekindle an emotional debate among Americans who fear changing the composition of their currency will hurt its value... [citing] In 1974, with copper prices soaring, President Richard Nixon suggested making the penny from lighter, cheaper aluminum. Machine vendors and most of the public were horrified. The plan fizzled when Mr. Nixon resigned that year." And "trade groups from the coin-laundry owners to the Zinc Association have lobbied for years to keep small change just the way it is."

The "Coin Laundry Association", "Americans for Common Cents" -- who fear the elimination of the penny -- , and even the "American Academy of Allergy, Asthma & Immunology" -- who claim "nickel is the most allergy producing metal in the world" -- are all standing by to weigh in on proposed manufacturing changes. But the most distressing protest of all comes from U.S, citizens who "believe that we are still on some sort of precious-metal standard, says Rod Gillis, educator at the American Numismatic Association." Gillis, states The Journal, "often asks people what gives a paper dollar its value. 'Eight in 10 people make some sort of reference to the gold in Fort Knox,' he says. But America has been off the gold standard since 1971, and gold currency stopped circulating in 1933." Let's hope that $100 million savings gets funneled to public education.

William Busch

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