In America, it is a relatively common bit of trivia that producing a penny costs more than one cent (its street value). Someday, we will likely follow Canada’s syrupy example and make coins out of iron-based metal blends so that their value at the checkout counter always exceeds their value when they are melted down (illegally) for the amusement of middle schoolers or the profit of bored, pyromanic cartel heads.
But really, why make Mounties of ourselves with such a switch? Wouldn’t integer-increment paper (dollars) and plastic (debit and credit cards) be more efficient than including change in our monetary system? What would we gain by getting rid of change in circulation? More importantly, how might this “change” to our currency system provide a way to bolster the value of the weak and stumbling U.S. dollar at home and abroad?
Research question: Can we end the current global recession by getting rid of our loose change?
First we must determine how much change we’re talking about. If coins were deemed worthless for common use by law, and Americans were given a deadline by which they could redeem them at FDIC-insured banks for cash (under $1 being altogether worthless), this expense would be minimal. It would be somewhat counter-balanced by the extra bank teller hours and other necessary labor stimulating the economy, as well as the significant incentive for folks to dig change out of sofas and cars, reintroducing otherwise “lost” money into the economy. Assuming there are roughly 300 million Americans, with a labor force of approximately 153 million, if every American (roughly 300 million of us) found $5.50 in change behind the loveseat and redeemed the metal coins for one paper $5 bill, then 300 million people times $5 would mean $1,500 million reintroduced into the economy. If only Americans in the labor force (153 million capitalist cogs) found and redeemed this change, then 153 million times $5 would still be $765 million reintroduced into the economy with no creditor or individual taking a loss. (If you had $5.50 behind your loveseat and could only redeem it for $5, you haven’t really lost $.50 because the whole $5.50 was lost to you to begin with.) Thus we can estimate a national gain of m for moolah (or circulating money) where $765 million ≤ m ≤ $1500 million.
Heavy metals are a limited and diminishing resource. When the rate of diminishing for such resources increases, or when for a conglomeration of related reasons, the market prices for such resources increases, and the resources are important enough to everyday life, global economic downturn tends to result. Like oil, heavy metals are integral to numerous micro- and macro-economies, with starring roles in the technologies that make farm equipment and government mainframes run. Also like oil, their prices have multiplied over the past several years.
Pennies, for example, are 97.5 percent zinc and 2.5 percent copper. Zinc is a conductive filler in plastics, and copper’s mouth-watering-and-electrocuting conductivity makes it indispensable in electronic industries from music recording to telecommunications. Worldwide shortages of silver already caused the U.S. to remove the silver that used to largely compose our other coinage, and replace it with cupronickel: an alloy of copper, nickel (a notorious skin irritant), and smaller traces of cheaper metals like iron and manganese. Thus today’s dimes, quarters, and nickels (the other, silver-colored U.S. coins) aren’t good as gold. They’re heavy, easy to lose, cheapened, inconvenient mixes of metals we could be using for other things.
To quantify the benefits of this whole endeavor, we need to approximate the metal gained for more productive, industrial uses by melting down U.S. coinage, where z = zinc, n = nickel (the metal, not the coin), c = copper, and u = uh, some other kind of metal (manganese, iron, mutant ninja turtle shells that fell in the melting pot decades ago). If there are 200 billion pennies (weighing 2.5 grams each) in the U.S., several billion of which are not in current circulation, and 140 billion are turned in for demolition, they will melt down to approximately 341.25 billion grams zinc and 8.75 billion grams copper. (Up until 1982, pennies were 95% copper; many of these higher-copper content coins are still in circulation, so the copper obtained from pennies might be a much higher figure – but we’re being modest.) If there are 20 billion nickels (weighing 5 g each) in the U.S., they’ll give us about 75 billion g of copper and 25 billion g of nickel. If there are 10 billion (91.67% copper, 8.33% nickel) dimes (weighing 2.268 g each) in the U.S., they’ll render about 20.79 billion g of copper and 1.89 billion g of nickel. If there are 2 billion quarters (weighing 5.67 g each) in the U.S., they’ll melt down to about 10.40 billion g of copper and .94 billion g of nickel.
We need to subtract estimated costs of melting and separating or purifying the metals, and these are hastily approximated figures for starters. We should also estimate other potential costs of losing coins – such as throwing regressive sales taxes into the twentieth century (where they belong), and putting thousands of Tooth Fairies and U.S. Mint employees out of work. But I feel your eyes glazing over, and the Mint wants to know WHO wants to know how many circulating coins we could collect for melting and WHY, so I’ll just go ahead and estimate that we’re talking about a grand total of z = 341.25 billion grams zinc, n = 27.83 billion grams nickel, c = 114.94 billion grams copper, and 0≤u≤5 billion grams of miscellaneous crud.
Groovy. Now you can wear your teeny-tiny jeans without jingling all the way. And industry will get a nice boost in essential heavy metals supply at a time when food prices globally have doubled over a few months due to heightened oil prices. If industrial agricultural expenses fall, and food prices follow suit, then fewer people starve.
How might lack of decimal points at the checkout affect international exchange rates? Could we all gain from this, effectively creating injections of capital as if from the abyss to counter-balance the current credit crisis? If so, this business of collecting change would address two of the three major factors in the current global recession: diminishing supplies of limited resources (although we can’t make oil from cupronickel, it’s something), and a paucity of liquid credit due in part to the third factor, the collapse of the U.S. and other real estate bubbles, all due in larger part to our vast overspending in other arenas, such as consumer goods and imperial expansion. (Think these last two things are unrelated? Look out your office window anywhere in the world. Wave at the McDonald’s.)
The exchange rate of the U.S. dollar (USD) is determined freely in the foreign exchange market, in which the average daily trade is about $3 trillion, roughly 89% of which ($2.67 trillion) is USD. In theory, we might utilize a valid mathematical loophole whereby during a set transition period to metal-free currency, the exchange rate expressed as an infinite geometric sum (such as.9999999…) is rounded a certain decimal place (such as .999), and the leftover portion of the sum (in this case, .001) is funneled into an account ear-marked for national debt. Using the numbers in this random example, that gives us $2.67 trillion times .001, which we can think of as (2.67 times 1012) times 10-4, or 2.67 times 10(12-4). This funnels $267,000,000 (or 2.67 times 108) annually into our national debt-zapping account, in broad daylight and as if from thin air. With a national debt of approximately $9 trillion, assuming zero interest, stable foreign exchange market trading, and yearly payments of $2.76 times 108, we should be back in black by the year 35717.
While intellectually honest, such a move would likely be interpreted in some corners as American embezzlement of international funds exchanged in good faith. But we need this money to help pay off the massive account deficit that underlies the lurching fall of the value of the U.S. dollar that in ten years will seriously threaten the place of our currency as the world reserve currency. The world needs stable reserve currency in order to ride out one-to-two decade-long housing market corrections and credit collapses from Peoria to Dublin. Thus a currency adjustment plan wherein we rid ourselves of metal coinage and temporarily alter international exchange rates to an infinitesimal degree during a set transition period helps domestic and foreign economies short- and long-term.
Of course, science is defined by the process of experimentation based on theory – theory alone is merely history forgetting its place. Although there is no way to predict with certainty the consequences of any such large-scale action intended to manipulate myriad economies, we may well ameliorate worldwide suffering by tempering our current global recession in this way – creating better global political and economic stability for our children in the process. Such a large-scale move would also be a powerful gesture coming from America at a time when it appears to much of the world that we care more about world domination than the welfare of our brothers.
Now go buy yourself an ice-cream already. That quarter will melt before you know it.
1. (link) “Coins cost more to make than face value,” by Barbara Hagenbaugh, in USA TODAY, May 10, 2006. Although less well-known, it also costs more than its 5 cents to produce a nickel, a fact also provided in this article. All electronic sources last accessed 05-01-08.
2. (link) The World Factbook, “United States.”
3. See, for example, this link. “Finding the Silver Lining,” Moneyweek Magazine, by Merryn Somerset Webb, Jun. 14, 2007.
4. (link) “A Penny for Your Thoughts,” New York Times, by Floyd Norris, Apr. 22, 2006.
5. (link) “The Composition of the Cent,” Fun Facts about the United States Mint, fact sheet compiled by the U.S. Department of Treasury.
6. (link) Wikipedia “Yeah, I Just Cited Wiki. So What Are You Gonna Do About It?” by Katelyn Sack, May 1, 2008.
7. There are numerous well-known proofs that infinite geometric sums equal their integer neighbors. For example:
x = 9.999999999…
10x = 99.999999999…
10x – x = 90
9x = 90
x = 10
8. This is similar to the embezzlement scheme in the cult movies “Superman III” and “Office Space,” but without the part where we escape the rat race and retire to the Bahamas with Kirsten Dunst.
9. Note bene: As before, my sincere thanks and praise to Mark Nandor of The Wellington School, who kindly provided math and science editing of this article. However, any remaining empirical errors or miscellaneous idiocies are mine alone.