Since minting coins have become more expensive and costs taxpayers more, governments are beginning to have second thoughts about issuing them. Some have even pondered to prohibit hoarding or collection.
From Bloomberg’s chart of the day:
Pennies and nickels have cost more than their face value to mint since 2006, resulting in a loss of at least $436 million to U.S. taxpayers.The CHART OF THE DAY shows that in 2012, the penny cost almost 2 cents to make and the nickel more than 10 cents, according to the U.S. Mint’s annual report released in January. Those prices have almost doubled over the past seven years.“If you look around in the budget, there aren’t a lot of places you can find savings where you don’t cut a program and you don’t raise anybody’s taxes and you can impact the deficit,” said Jim Kolbe, a former Arizona congressman who sponsored legislation to abolish the penny and dollar bill. “This is one where you can do that.”Neither of Kolbe’s bills, introduced in 2001 and 2006, made it to a full congressional vote.
Canada has scheduled to phase out their version of penny.
As pointed out above, both coins in the US costs about or more than twice the face value.
The real reason for the rising costs of coin issuance has been due to the government’s domestic monetary policies of inflationism or currency devaluation.
The Nickel, which is a 5 cent coin issued by the US Mint, has maintained its composition of 75% copper and 25% nickel since 1866, according to Wikipedia.org
On the other hand, the penny, a one cent coin, has changed content over the years.
Table from Wikipedia.org
As I earlier pointed out, as the US government debates on the destiny of coins, some people like hedge fund manager Kyle Bass have embarked on hoarding coins. Popularly been known for introducing the “Nickel trade”, Mr. Bass bought 20 million nickels worth $1 million in order to hedge.
The difference between the Nickel and the Penny aside from the nominal face value has been that content-wise, Nickel has maintained its mix, while the penny has been gradually reconfigured or debased. Thus I believe Mr. Bass’ preference for the Nickel.
Former Texas Congressman Ron Paul has likewise advocated that people shelter their savings through coins.
People hoarding coins in the realization that coins provide hedge against inflationism has been a natural response. This is known as the Gresham’s Law
As the great Ludwig von Mises explained,
Mintage has long been a prerogative of the rulers of the country. However, this government activity had originally no objective other than the stamping and certifying of weights and measures. The authority's stamp placed upon a piece of metal was supposed to certify its weight and fineness. When later princes resorted to substituting baser and cheaper metals for a part of the precious metals while retaining the customary face and name of the coins, they did it furtively and in full awareness of the fact that they were engaged in a fraudulent attempt to cheat the public. As soon as people found out these artifices, the debased coins were dealt with at a discount as against the old better ones. The governments reacted by resorting to compulsion and coercion. They made it illegal to discriminate in trade and in the settlement of deferred payments between "good" money and "bad" money and decreed maximum prices in terms of "bad" money. However, the result obtained was not that which the governments aimed at. Their decrees failed to stop the process which adjusted commodity prices (in terms of the debased currency) to the actual state of the money relation. Moreover, the effects appeared which Gresham's law describes.
The Philippine government recognizes of the growing disparity between coin content and face value which they suspect has led to “hoarding”. Thus, like the warnings of Mises, the government reacted by resorting to compulsion and coercion: A bill has recently been introduced to ban coin hoarding in the Senate.
Apparently, taxing people hasn't been enough, politicians want to forcibly acquire more of people’s savings through inflation, and this is why a local representative recently urged the domestic central bank to impose stiffer fine for coin hoarding.
The bias against coins can be seen even in the BSP commemorative offering. Of the coins and notes available for sale at the BSP website, the only coin is the Nickel commemorative coin: 1998 People Power Revolution P10 BUS is offered, the rest are notes.
Funny how times have changed. Do you know that coin debasement was punishable by death in the US in 1792? Today, preserving your savings via coins has been seen as crime. Or may I say inflation was evil then, today inflation has been seen as the moral order.