Here’s a weird application of logic, brought to you by the Federal Reserve Bank of Chicago. It started when the cost of creating the U.S. penny went above one cent. The Mint (and therefore the government) is losing money for each of the millions of one-cent pieces it produces and puts into circulation each year. The chart shows how the intrinsic value of the metal within the penny, nickel, and dime have approached and even exceeded the face values of the coins, through 2000.
Francois Velde, a senior economist at the Chicago Fed, suggests revaluing the penny at five cents. This might deter some who might hoard and melt pennies for the higher value of their intrinsic metal.
Here’s the full Chicago Fed Letter [pdf] from Velde describing his suggestion. The letter mentions some drawbacks, such as refitting vending machines to take pennies and attributing their new value. Think it’ll ever work?
Reminder: This week I am giving away a copy of The Maui Millionaires. There is still time left to enter the random drawing. It’s easy.
Updated February 10, 2011 and originally published January 24, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.