Daily Dose of Optimism

US Coinage Hoard/Spend Index: Value of Metal in US Coins

Times were, when kids asked their parents why nickels were called "nickels," they got an answer about how the coin was once made out of the metal nickel, even though they are now made primarily from copper.

You will soon know how old you are when you tell your kids about buying anything with pennies, nickels, quarters, or dimes, and they ask you what the hell a penny, nickel, quarter or dime is, as that type of money won't exist anymore. Then, you will remember that metallic currencies were phased out around 2015 when the price of the metals used to make those coins was prohibitively expensive, and you will kick yourself for being old.

I have written for about the value of the zinc in pennies, and said that the metal in a penny would be worth more than a penny when zinc hit about $3,200 per metric ton. (Turns out that figure wasn't exactly correct - new calculations say, depending on the price of copper, that this would be around $3,900 per metric ton.)

I now realize that we are probably just a few years away from a scenario where the US decides that all money is either paper or electronic. Why would I say this, after calculating for myself the prices of just a few coins?

Take a look at the US Coinage "Hoard/Spend Index" below (a DDO exclusive!). Coins to hoard have a metal value greater than the currency value. Coins to spend have a metal value less than the currency value.

Conclusion? Dimes and quarters still have a few years left as coins. However, pennies and nickels have either outlived their usefulness, or are close to it. - Ed

Note: I am not factoring in the cost of producing the coins, and only have pricing for high grade metals. Metal prices:

Currency Devaluation Watch: Zinc and Pennies

In an earlier post, I cited an article from the NY Post quoting "Lance Lewis, a hedge fund manager at Lewis Capital in Dallas, [who] estimates that the metal content of a penny would be worth more than one cent when zinc hits $3,282 a ton." Since I am a visual creature, and I assume readers are too, I thought a handy chart would help illustrate the current situation in the world of metallic currency:

For an update on the daily price of Zinc, see the LME website. - Ed

Currencies and Commodity Prices

The item below brings new meanings to the phrase, "your money's not worth the paper it's printed on."

Courtesy of the New York Post. - Ed

NYPost: In case you didn't know — and who really would — a penny is made up of 97.5 percent zinc and 2.5 percent copper.

The coin used to be all copper but that metal became too expensive decades ago. [...]

[W]hat's really important here is zinc, which yesterday was selling for about $2,330 a ton. That was up by nearly $1,000 a ton from September.

Lance Lewis, a hedge fund manager at Lewis Capital in Dallas, estimates that the metal content of a penny would be worth more than one cent when zinc hits $3,282 a ton.

But the cost to make a penny may be the bigger story.

The U.S. Mint says a penny cost 0.93 of a cent in 2004 to manufacture, with much of that for actually making the coin. That is up from 0.89 of a cent in 2003.

The new 2005 figure is due out in a couple of weeks.

The Mint says its manufacturing costs for the penny have been reduced, but the rising cost of zinc could send the penny over its equilibrium point of 1.00 cent.  Link