Change
Czalewski, Dreamstime.com

Politics aside, or perhaps because of it, the economy is on fire. Anyone with a retirement plan or other financial investments has seen an unprecedented rise in personal wealth, and let’s hope that’s continuing as you read.

However, our wealth — like that of most of the world — is based on our fiat currency, which, not being tied to a commodity like gold or silver, carries a value determined by government. (Wait, don’t start throwing economic textbooks at me yet.)

Let’s say you are fortunate enough to have the nearly $5,000 in savings that the Congressional Budget Office says the average family has. But let’s also say that you now need that money in cash, and you go to the bank to make your withdrawal.

When you leave the bank with those 50 C-notes, you have the purchasing power they can deliver on that day. But you also have, intrinsically, 50 small pieces of relatively expensive paper with fancily printed ink and a delicate security strip added for good measure.

For intrinsic value, you might be better off with ones, or 5,000 similar pieces of paper. (The fire would last longer if you were stuck with them after an economic collapse, something that happens occasionally, as it is now in Venezuela.)

By the way, good luck trying to recover anything from those C-notes, which cost the government about 12.5 cents each to produce.

Well, let’s say you’re even more sagacious and decide to take your money in dollar coins should the economy implode minutes later.

U.S. coins are composed of varying amounts of metal: copper, manganese, nickel and zinc.

The melt value (talk about substance) of a dollar coin, Sacagawea or Presidential, as of Jan. 5, 2018, is $0.0548. So, that $5,000 in one-dollar coins, has a melt value of $273.91.

Pennies, of course, are 97.5 percent zinc, and if we don’t discard them, we drop them — to be forever forgotten — in a jar in the basement. However, depending on the source, they cost 1.4 to 1.7 cents to produce. (My thoughts are likely the same as yours here.)

So, let’s skip over dimes and quarters, neither of which has much value, and move to half dollars. Had you taken your five Gs in those, you’d have $426.18 in base metal value alone. They have the same metal composition of quarters, but they’re also larger, and contain higher percentages of copper and nickel than do dollar coins, which are mixed with zinc and manganese to produce the brass. (Paper just doesn’t compare). That might explain why we so rarely see fifty-cent pieces in circulation.

Now consider the lowly nickel, which has the only one-tenth the purchasing power of that half-dollar. Nickels are made of 75 percent copper and 25 percent nickel, the most precious metals in U.S. coins, though they aren’t silver or gold (although during World War II, nickel was so important for armaments, that the Treasury subbed silver and manganese for the nickel content).

The value of nickel and copper rises and falls with industrial supply and demand. Just a few years ago, nickels were worth more than their face value, which meant that you were losing money every time you spent one.

Today, copper is on the rise, mainly because increasing demand for it from China. You can read all about that in your favorite business newspaper. But had you collected your $5,000 in nickels (good luck doing that in reality), you’d have $210.70 in base metal value.

That’s a $4.78 difference in intrinsic value favoring the half dollar five Gs. But with copper prices rising, it won’t be long again before two nickels really will be worth a half a dollar.

OK, let now let loose with those textbooks. Wait, let me duck behind a few stacks of cryptocurrency.

David Alan Coia is a freelance editor, writer and educator based in Arlington, Virginia.

4
4
1
0
0