Via the NYT, Economic Professor Austan Goolsbee argues that Now That a Penny Isn’t Worth Much, It’s Time to Make It Worth 5 Cents and starts up with the following provocactive question:
How dumb do you have to be to mint money at a loss? In the latest only-in-Washington episode, we find that the government may have lost as much as $40 million coining pennies and nickels last year.
The piece is interesting and provides several possible solutions including abolishing the penny, revaluing the coin and changing the material from which it is made. Certainly the current situation is ridiculous–there is no excuse for the feds to be making coins that cost more than they are worth.
Filed under: Uncategorized | Comments/Trackbacks (4)|
The views expressed in the comments are the sole responsibility of the person leaving those comments. They do not reflect the opinion of the author of PoliBlog, nor have they been vetted by the author.
February 1st, 2007 at 10:04 am
Hmmm, I’m not completely ready to “buy” that conclusion.
The cost I want to know is not that of production and distribution, but that to consumers.
What happens to our prices if they are all in five- or ten-cent increments? My guess is we all pay more to save the government a little, and forty million dollars is just pennies to the federal government, after all.
February 1st, 2007 at 10:04 am
It shows a lack of understanding of money to say they “lost” money on making pennies. Minting money is not a profit making endeavor but is a service provided by the government. By this reasoning how much did they make printing $100 bills?
Any request for a change should originate from citizens.
February 1st, 2007 at 11:03 am
Steve:
As the story notes, coins are simply tokens. There is no reason that a penny’s content should be worth more than a penny.
In fact, it cost far less than $100 to produce a $100 bill.
And the idea of the cost of producing money versus its value is actually a long-standing notion: seinorage.
MSS: It would seem that making the coins out of something else would be the solution. Still, I have to wonder about the long-term benefit of the penny.
February 1st, 2007 at 11:28 am
[...] Other views — all of which are interesting — at Poliblog, Economist’s View, and Marginal Revolution. [...]