Saturday, May 27, 2006

Nickel and Cent Content Exceed Face Value

There are some recurring stories in the numismatic (coin collecting) press: should we get rid of the $1 bill so the $1 coins will circulate, and should we stop producing the cent and just round all purchases paid in cash to the nearest nickel.

Well, this blog isn't the appropriate place to go into the pros and cons of each of those positions, although my 6 loyal readers might well have guessed that I have pretty firm opinions on both topics! However, an article on the cover of the May 23rd issue of Numismatic News sure got my attention, as it relates to the second of the topics above:

"Escalating metal prices are not only pushing the cost of striking a U.S. cent above face value, but they have pushed the cost of a nickel above face value as well.

"If the Mint had to buy zinc, copper and nickel at current prices, it would cost 1.4 cents to strike each cent and 6.4 cents to strike each nickel...."

The US mint "makes money" two different ways. One way is the physical production of money, and the other is through what's called seigniorage--the difference between the cost of making a coin and the face value of that coin. For example, if a dime costs 3 cents to make and is worth 10 cents, that's 7 cents seigniorage for each dime made. Think of it as profit. I don't have figures for how many dimes are made a year, but over 2 billion quarters were made last year. You can see how much money we're talking about here. Numismatic News says that in the next fiscal year, if copper and nickel prices stay at these historic highs, the mint could generate $45 million dollars less in seigniorage due to increased costs of all coins, including losing $32 million minting nickels and cents.

There's another lengthy article in the same issue that states that, contrary to popular legend, there is currently no law that exists that prohibits the melting of minor US coins.

1 comment:

Errant said...

Found your blog through the "recently updated" list on blogger.

I found your post on coins fascinating. You've added a new word to my vocabulary - seigniorage. My husband, who doesn't collect coins but has an interest in them (he's holding onto uncirculated state quarters), would probably be interested in this, too.

Hope you don't mind my stopping by & posting .. .