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Currency Arbitrage July 21, 2006

Posted by federalist in Finance.

Ending penny production has been a topic of debate since as early as 1990.  Now that it costs more than face value to mint pennies and nickels there has been enough written on the subject that I don’t need to revisit the arguments here.

I have kept a stash of pennies in my hardware organizer for years.  Metal washers cost at least a nickel, so it’s generally cheaper and easier to drill a hole in a penny and use that.

But this is just funny: Apparently pennies minted prior to 1960 are worth 3-6 cents to collectors, and any penny minted prior to 1982 contains 2.5 cents of copper at current rates.

Brings back a whole other meaning to “currency arbitrage.”



1. federalist - November 17, 2006

A very good and detailed analysis of the costs and benefits of pennies is provided by Robert Whaples.

2. federalist - December 14, 2006

Asset Freeze: Mint to Bar Coin Melting
December 14, 2006

WASHINGTON — Given rising metal prices, the pennies and nickels in your pocket are worth more melted down than their face value — and that has the government worried.

U.S. Mint officials said they were putting into place rules prohibiting the melting down of one-cent and five-cent coins. The rules also limit the number of coins that can be shipped out of the country. Officials said they had received a number of inquiries from the public in recent months concerning the value of the metal in the coins and whether it was legal to melt them.

Because of the prevailing prices of copper, zinc and nickel, the cost of producing pennies and nickels exceeds the face value of the coins.

A nickel is 25% nickel and 75% copper. The metal in one nickel costs 6.99 cents. When the Mint’s cost of producing the coins is added, the total cost for each nickel is 8.34 cents.

Modern pennies have 2.5% copper content with zinc making up the rest of the coin. The copper and zinc in a penny are worth 1.12 cents.

3. federalist - April 18, 2007
4. federalist - July 13, 2007

Sometimes this problem goes the other way: Poor countries require denominations for very small values, but the value of raw materials in durable low-denomination currency makes it hard to preserve. India is facing a shortage of single-rupee coins and notes because of this.

5. federalist - October 13, 2009
6. federalist - January 16, 2012

Carrying the flame: Citizens for Retiring the Penny.

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