When I was in high school a friend of mine visited East Germany (the fact they have dissolved, similar to the Soviet Union seems to be an important fact to keep in mind). Anyway, I’m a very amateur coin collector with a little shoe box half full of interesting finds from across the world. My friend brought me an “East German Mark.” He told me he had to smuggle it out of there because it was illegal for that money to leave the country. I remember thinking, “Wow. I’m glad I don’t live under such an oppressive regime.” That was somewhere around 1983. Fast forward now to 2007. Americans know, if they remember or if they were told, that U.S. coins (half dollars, quarters, and dimes) prior to 1965 were minted in 90% silver. At some point silver rose in value and the dollar dropped in value such that the metal content in these coins began to be worth more than the face value of the coin. Now back in the “good old days” before the establishment of the Federal Reserve (1913), this concept wouldn’t even make sense. After all, a dollar was defined to be 1 oz of silver. A “half-dollar” was 1/2 oz of silver. A “quarter-dollar” was 1/4 oz of silver. A dime was 1/10 oz of silver. Back then, even gold coins were minted, and the face value really was the value of the coin. So, anyway, silver coins are now a commodity and our dollar is now nothing more than a promise from a government who hasn’t exactly proven their moral character lately. Lurking in the background is the lowly penny. Its composition prior to 1982 was mostly copper. As copper prices began to rise, it also succumbed to the same fate of its superior brothers. The metal content was changed to only a little copper with mostly zinc. Well, throughout 2006 copper and zinc continued a steady rise in price, so that at the end of 2006, both the penny and the nickel were worth slightly more in metal content than their face value. Better yet, though, is that pre-1982 pennies were worth about two cents each! That means one could get a 100% rate of return just by hanging on to old pennies and spending the newer ones. I was in the middle of thinking through a business plan on how to capitalize on this concept when I caught wind that the feds have passed new legislation making it illegal to either melt down pennies and nickels or to take more than $5 (face value) out of the country. The penalty is up to five years in prison and/or a fine of up to $10,000. Suddenly 1983 flashed back to my remembrance. It seems as though I do now live under “such a regime.” When coins are obtained lawfully, by working, selling goods, investing, etc. don’t we actually “own” these coins? It’s not like a Microsoft Licensing Agreement where you are just authorized to “use” software. I’ve always thought “mine” meant “mine.” If I have a copper penny, no one should be able to tell me I can’t melt the thing down or sell it to a Chinese man. The government complains that those who do such things are “taking advantage of the American taxpayer.” Excuse me? How do I, by doing things with my own property, take advantage of the American taxpayer? If waste is happening like this, the fault lies squarely on the idiotic institute that would continue to produce a product that costs more to manufacture than its end value represents. I’ve got several suggestions for the government:
1) Stop making pennies. It’s insane to keep on producing things that cost more to make than they’re worth.
2) Make pennies out of a different material. You’ve done it once in 1982. What’s the big deal if you start generating them out of aluminum?
3) But the best suggestion I have is…return our money supply to a gold/silver/copper? standard where the value of our money actually reflects the value of the underlying metal.
Only then will we be able to stop trading in “slugs and rags” and actually possess real money that has actual value. If they did this, then I wouldn’t want to sell my U.S. copper coins or my 90% silver coins either for that matter.