Photo: morgan via Flickr
There’s an old New Yorker story from the 1940s called “Mister 880” involving a decade long Secret Service search for a counterfeiter who passed $1 bills all over New York City.Eventually, it was made into a movie, centered on the titular 880, whose counterfeits were so bad — according to the story anyways — that George Washington’s name was spelled “Wahsington.”
Fast-forward half a century and it looks like it’s the federal government getting into the business of making low quality copies of our currency. According to the Obama administration’s most recent budget — now available as an app (!) for iPhones, Androids, and even Blackberries — the Treasury Department may start minting coins with “more cost-effective materials.”
All kidding aside, lower denomination coins are actually quite expensive to make. As of right now, each penny minted costs 2.4 cents and each nickel 11.2 cents. Worse yet, the production costs are inextricably tied to copper, nickel and zinc markets and the price of all three has been going up.
Considering those facts, the administration’s plan begins to make a lot of sense. Yesterday, the Atlantic ran some of the numbers and revealed just how far this country’s coin problem goes.
The US Mint created around 6.3 billion coins in 2010, over 4 billion of which were pennies. 2011 numbers were even worse, with 8.2 billion coins made and over 60% of those pennies. (The mint produced substantially less nickels.)
More interesting yet are the numbers on coins considered “out of circulation.” Generally, this is change that’s fallen between people’s couch cushions or has languished in their change jars for years. According to a Coinstar (CSTR) spokesperson, estimates for out of circulation coins (again, read “in the couch”) equal $10 billion.
Coinstar processed 46 billion coins last year, half of which were pennies. That’s 23 billion pennies.
It stands to reason that few people go to the bank exclusively to turn in pennies, so it seems possible that a lot of the $10 billion in out of circulation change comes from pennies. Combine that with the cost of production and one begins to wonder why, exactly, we keep making pennies at all.
Then again, if we’re going to get rid of pennies, why not just stop printing money altogether?