Entry 260: Don’t Take Any Copper Nickels (or Zinc Pennies)

There are many reasons why the U.S. government has accumulated a massive amount of lemonade_stand[1]debt, not the least of which is that it only pays the minimum on its MasterCard bill each month.

But the main reason is a failure to grasp a basic business principle that even a kid selling lemonade understands:

Always sell things for more than they cost to make.

You would think, wouldn’t you, that a fairly intelligent person would be able to figure out that if you lose money on every item you sell, you’re not going to make it up in volume.  If you sell your product for less than half of what it costs you, you have what is known at Harvard Business School as “a problem.” If you have no competition and you’re still selling that product for less than half of what it costs, you are what is known at Westchester Community College as “stupid.”

The U.S. government has two such products, one of which costs 11.18 cents to produce and sells for 5 cents. The other costs 2.41 cents to produce and sells for one cent. And they sell millions of these things every year, all at the same great profit margins.

I speak, of course, of the nickel and the penny. And, yes, that’s right: a nickel costs more than a dime to make.

Now, that same fairly intelligent person who knows enough not to sell things for less than they cost could probably also figure out that if you have such an item, the solution is fairly simple. To paraphrase the late Henny Youngman:

“Head of the U.S. Mint is giving an economist a tour of the mint, and they see a penny being produced. The head of the mint says, ‘It hurts the U.S. economy every time we do that.’ The economist replies, ‘So don’t do that.’”

loaferOur fairly intelligent person could intuit that the government could literally save billions of dollars one cent at a time by taking pennies out of circulation, and there have been numerous attempts to discontinue the penny product line, but they have always failed, possibly because we’re not talking about fairly intelligent people. We are talking about Congress, which simply won’t allow the penny to be eliminated, perhaps because then our esteemed representatives wouldn’t have anything to put in their loafers.

Your average Americans don’t want to see the penny go either. They figure all businesses would then round everything up, and they are probably right, because that’s what businesses do in order to—what’s that phrase again that they government doesn’t get?–oh right: make money. Americans also worry that if the penny was removed from circulation, that jar Uncle Felix has been filling up for two decades would be worthless, instead of being worth all of $9.48…if he could lift the jar to take it to the bank…and if the bank didn’t have coin counting fees.

The Mint could circumnavigate our lawmakers by replacing every “Take a Penny; Give a Penny” tray in the country with something that operates on the same principle as the last hole on a miniature golf course; you’d put a penny in and it would disappear down some complex tube system that leads to a furnace behind the guy who hands out the scorecards. It would then be melted down. On the other hand, that might cost more than it does to continue producing pennies, what with the free games and all. And anyway, it wouldn’t solve the nickel problem.

I, however, have one elegant solution to both problems. If you have an item that you’re losing money on, there are three possible solutions:

  1. Stop selling it.
  2. Cut the cost of production.
  3. Raise the selling price.

Most of the discussion regarding coins has focused on the first option. And the second choice is problematic because it probably wouldn’t go over too well to have U.S. coins made in China, and we’ve already cut manufacturing costs by making copper pennies out of zinc and nickels out of something called “cupronickel” which is, weirdly, primarily copper.

But what about the third option? That’s right–raise the price of a penny.

Instead of eliminating pennies, take the nickel out of circulation and declare that pennies are now worth three cents. That would greatly reduce the rounding problem, and we’d be replacing two coins that sell at massive losses with one that turns a small profit, and we’d be injecting a massive amount of money into the economy by virtue of Uncle Felix now having $28.44 in his jar.

It’s this kind of out-of-the-box thinking that we need from our politicians.

I urge Congress to consider my idea, and to send me 1/10th of a cent for every 3-cent penny minted. The government will still make about half a cent on each coin, and if they make, say, a million 3-cent pennies a year, I’ll be able to retire a wealthy man because that would mean I’ll get…um…wait a sec…let me get a calculator…um…that would be a million times .001 right? So that’s…

…oh.

I guess the government could donate my thousand dollars to charity.

See you soon.three-cent-piece-nickel[1]

P.S. If the idea of a 3-cent coin sounds ridiculous, you should know that we’ve had one before, from 1865 to 1889. It was made out of nickel.

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2 Responses to Entry 260: Don’t Take Any Copper Nickels (or Zinc Pennies)

  1. Pingback: Entry 265: What We Did on Our Summer Vacation, Part 3 | The Upsizers

  2. Pingback: Entry 429: Nickel for Your Thoughts? How About a Dime? | The Upsizers

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