16 May 2010

Will the U.S. mint porcelain and aluminum coins?

It was over two years ago that I wrote a post entitled "Will the U.S. return to steel pennies?"  At that time there was a bill before Congress to authorize the Treasury to mint steel pennies.  I quoted Ron Paul's comment on the subject:
"While I sympathize with the aim of Section 4 of this bill to save taxpayer dollars by minting steel pennies, it is disappointing that our currency has been so greatly devalued as to make this step necessary... Based on the price of gold, what one penny would have purchased in 1909 requires 47 cents today... HR 5512 is a sad commentary on how far we have fallen, not just since the days of the Founders, but only in the last 75 to 100 years. We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard..."
I was reminded of that post this week when a Wall Street Journal article reported that consideration is being given to cheapening the metal content of the American nickel.
The president's plan to save money by making coins from cheaper stuff seems simple on its face. But history shows it would rekindle an emotional debate among Americans who fear changing the composition of their currency will hurt its value...

Market forces, not metal prices, determine the value of American currency... "People believe that we are still on some sort of precious-metal standard," says Rod Gillis, educator at the American Numismatic Association.

As the White House looks to cut costs across government, "making coins from more cost-effective materials could save more than $100 million a year

The government isn't saying which new materials it might use in coins. Most coin experts say creating non-metal coins would go over like a wooden nickel. Still, industrial porcelain, embedded with an identification chip, is seen as an outside possibility. A more likely candidate: an aluminum alloy, used by other countries for coins....
Much more at the link.  The point is well taken that the metal content of our coins is virtually irrelevant.  Our country's coinage is already "fiat" money - worth whatever the government declares it to be worth and nothing more.

As far as saving taxpayer's $100 million per year by switching to porcelain tokens, I'll just note for comparison that in 2008 the U.S. spent $100 million per day conducting the war in Afghanistan.

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