What do you think of this option? The most important benefit of the policy to me is that K-Fed would be happy.
Mr. Velde, in a Chicago Fed Letter issued in February, has come up with a solution that would abolish the penny, solve the excess costs of making nickels, help the poor, keep the Lincoln buffs happy and save hundreds of millions of dollars for taxpayers.
Pennies would then cost a little over 1 cent to make and would be worth a nickel, so the government would again be making a profit on money. We would have plenty of new Lincoln nickels so we could stop minting our current nickels at a heavy loss. The Jefferson nickels would stay in circulation, just as the old wheat pennies do now. Because metal in nickels is valuable, though, they would probably be melted down.
Thursday, February 01, 2007
Pennies Are Evil
Right now, there are two US currency problems: (1) The increasing uselessness of the penny, (2) the government currently loses money of producing nickels (the combined losses from making nickels and pennies is estimated to be $40 million). NY Times columnist Austan Goolsbee discusses a solution offered by an economists at the Chicago Fed: eliminate the nickel and make the penny worth 5 cents.