Thursday, July 06, 2006

Future of the Penny

Pennies are in the news lately, as in this AP article by Jeff Donn:
For the first time, the U.S. Mint has said pennies are costing more than 1 cent to make this year because of higher metal prices. "The penny is going to disappear soon unless something changes in the economics of commodities,'' says Robert Hoge, an expert on North American coins at the American Numismatic Society.
Actually, this turns the real situation on its head: the "cost" of making a penny is not really going up. The value of the dollar, and consequently the penny, has been declining for many years. Inflation is not rising prices, it is a decline in the value of money.

People tend not to think of the value of money, but rather the cost of things. The government perfers that mode of thinking, since it obscures the government's role in destroying the dollar. That way it's much easier to blame "greedy" companies and workers for raising prices and wages.

Without actually looking it up, we're willing to bet that the real, inflation-adjusted cost of producing pennies has even been declining for decades. The costs just haven't declined as fast as the dollar has declined.

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