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Posted 03/04/2012 10:58 am
On the original topic of copper cents:
As others have said, congress will have to authorize the melting of copper cents in order for people to realize the full metal value. The reason that 90% silver coins trade near the metal value is because anyone can melt that coin realize the full value. That is why coin dealers, jewelers, and cash-for-gold shops will take those coins. On the other had, copper cents currently sell for about 1.5 cents our about 60% of the metal value. So yes I keep the ones I find in change. I don't actively sort large quantities.
On the topic of currencies backed by commodities:
There is a reason that no country in the world is still on a gold or silver standard. It does not work in a global economy. Unless everyone in the world agrees to move to a commodity backed currency, the individual countries that do are at an economic disadvantage. This happened to the US after European countries dropped the gold standard after World War II. European countries would buy up US Dollars on the world market and then redeem them for gold. This caused a net outflow of gold from the US to the rest of the world that was unsustainable.
Even if the entire world decided to move to a commodity backed currency there would still be problems. Take a gold standard. The entire amount of money in the world would be restricted to the amount of gold that could be extracted. You essentially would limit the supply of money while the world population would continue to increase. The is a textbook case for deflation. Deflation is good for those that have money and bad for those that owe money. Global governments have trillions of dollars of debt. That debt would become increasingly expensive to pay at time passes. Who pays national debt? The people do. That means at a collective level our debt would become harder harder to pay off. The gold standard would be great for China but disastrous for the US. Again you would have a huge outflow of wealth from the US to the rest of the world.
That is deflation at the national level. At the local level the average person gets hit too. Take most families biggest asset - their house. With inflation, that mortgage payment becomes effectively smaller as time passes. I remember my parents mortgage payment was comically small when they made their last payment 20 years later. You have the opposite effect with deflation. A mortgage payment would become more and more expensive as time passed since the payment would be fixed but your wages decreasing. At the same time your house's value is also shrinking.
I find it interesting that the idea of commodity based money is supported mainly buy those that it would hurt the most. The average person in the United States is holding a large amount of debt. However they support an economic model that would make that debt harder and harder to pay. Again, deflation is good for those that have money / bad for those that owe money.
On the topic of US States and commodity backed currencies:
States have the same problem that nations do. Regardless of constitutional issues of state currencies, any state that created a commodity backed currency would get crushed by the rest of the states. Say Wyoming created a currency based on silver. Why would any silver investor pay a premium to buy a Silver Eagle from the US Mint when they could buy the Wyoming equivalent at face? You would have people driving to Wyoming with bags of dollars and driving out with silver coins.
If they tried to prevent that outflow by banning the export of their currency out of the state you have other problems. You essentially have a local currency that can only be used in Wyoming. Now a Wyoming resident would have to pay a premium to buy products and services from other states because you would need to pay an intermediary to exchange currencies.
As others have said, congress will have to authorize the melting of copper cents in order for people to realize the full metal value. The reason that 90% silver coins trade near the metal value is because anyone can melt that coin realize the full value. That is why coin dealers, jewelers, and cash-for-gold shops will take those coins. On the other had, copper cents currently sell for about 1.5 cents our about 60% of the metal value. So yes I keep the ones I find in change. I don't actively sort large quantities.
On the topic of currencies backed by commodities:
There is a reason that no country in the world is still on a gold or silver standard. It does not work in a global economy. Unless everyone in the world agrees to move to a commodity backed currency, the individual countries that do are at an economic disadvantage. This happened to the US after European countries dropped the gold standard after World War II. European countries would buy up US Dollars on the world market and then redeem them for gold. This caused a net outflow of gold from the US to the rest of the world that was unsustainable.
Even if the entire world decided to move to a commodity backed currency there would still be problems. Take a gold standard. The entire amount of money in the world would be restricted to the amount of gold that could be extracted. You essentially would limit the supply of money while the world population would continue to increase. The is a textbook case for deflation. Deflation is good for those that have money and bad for those that owe money. Global governments have trillions of dollars of debt. That debt would become increasingly expensive to pay at time passes. Who pays national debt? The people do. That means at a collective level our debt would become harder harder to pay off. The gold standard would be great for China but disastrous for the US. Again you would have a huge outflow of wealth from the US to the rest of the world.
That is deflation at the national level. At the local level the average person gets hit too. Take most families biggest asset - their house. With inflation, that mortgage payment becomes effectively smaller as time passes. I remember my parents mortgage payment was comically small when they made their last payment 20 years later. You have the opposite effect with deflation. A mortgage payment would become more and more expensive as time passed since the payment would be fixed but your wages decreasing. At the same time your house's value is also shrinking.
I find it interesting that the idea of commodity based money is supported mainly buy those that it would hurt the most. The average person in the United States is holding a large amount of debt. However they support an economic model that would make that debt harder and harder to pay. Again, deflation is good for those that have money / bad for those that owe money.
On the topic of US States and commodity backed currencies:
States have the same problem that nations do. Regardless of constitutional issues of state currencies, any state that created a commodity backed currency would get crushed by the rest of the states. Say Wyoming created a currency based on silver. Why would any silver investor pay a premium to buy a Silver Eagle from the US Mint when they could buy the Wyoming equivalent at face? You would have people driving to Wyoming with bags of dollars and driving out with silver coins.
If they tried to prevent that outflow by banning the export of their currency out of the state you have other problems. You essentially have a local currency that can only be used in Wyoming. Now a Wyoming resident would have to pay a premium to buy products and services from other states because you would need to pay an intermediary to exchange currencies.
