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Wooden Nickels and Steel Pennies
- Text size
Dan McLaughlin
Ludwig von Mises Institute
June 18, 2008
“Don’t take any wooden nickels” was an admonition to be careful in your dealings because someone might try to pay you with worthless money. Wooden coins were actually used in trade in America in certain limited circumstances on a local level. A contemporary equivalent could be “don’t take any steel pennies.” The United States House Of Representatives has already passed a bill, HR 5512, authorizing the Treasury Department to substitute steel for the nickel and copper now used in American pennies and nickels.
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| Devalued coinage is nothing new. Above is a silver plated coin from Nero’s reign. | |
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The rationale is that, by substituting cheaper metals, the government can save many millions of dollars. This is, in fact, a very valid point. Another observation is equally obvious and valid. The dollar has been devalued to such an extent that a penny — as in one hundredth of a dollar — can only buy a fraction of the metal needed to make a physical penny. Each coin takes significantly more than one cent to produce.
This is not the first time in history that the currency of a country has been debased. In centuries past, kings would debase gold and silver coins by reducing metal content, making smaller coins and actually replacing the original metals with cheaper alloys, while holding the legal-tender value the same. This gave rise to Gresham’s Law, a principle in economics that bad money drives out good money. Consumers will use the devalued currency in transactions and take the more valuable money out of circulation. Since the establishment of the Federal Reserve, American coins have been debased numerous times, replacing more valuable metals with less valuable ones. The dollar, which was backed by gold decades ago, is now backed by nothing but legal-tender laws.
Devaluation of the currency gives rise to a general increase in prices, inflation in the popular sense. General price inflation is, everywhere and always, a monetary phenomenon, as stated by various economists, including central bankers. That means that a general increase in prices cannot arise from an increase in the prices of gasoline, food or any other commodity, the mythical “cost-push inflation.” The monetary phenomenon that the money specialists talk about is the increase in the money supply by the bankers.
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Fuel prices are very high right now. Because of that, people adjust their lives to accommodate them. This adjustment results in a lower quantity demanded for many goods and services that rely on travel and energy consumption. The lower quantity demanded should also lead to lower prices of nonenergy items. With a constant supply of money, an increase in prices in one area necessarily has to result in a decrease in prices in other areas. The only way that prices of all things can increase at the same time is if the relative supply of money increases; more dollars chasing after the same amount of goods and services.
Congressional leaders give the appearance of being interested in saving taxpayers money, which would be a very good thing if only it were true. In theory, the less they spend making coins, the less they would have to tax the people. What they don’t reveal is that inflation, which gives rise to the need for devaluing the coins, is in effect a tax. It takes wealth from your pocket and transfers it to the pockets of bankers and government agents who get the money first. The inflation tax is just as much a burden on the population as a direct tax. It is more insidious, however, because it is not seen as a tax. It has become such a normal occurrence that people just factor it into their daily business. People are told that rising prices cause inflation to divert the heat from our elected officials. In reality, it is just the opposite. The rising prices are the effect. The increasing money supply is the cause.
There was another time in the past when pennies were made of steel. I have a steel penny from the World War II era. At that time, copper was in short supply due to military consumption during the war. Copper was expensive because it was scarce. Today it is not scarce. Copper and nickel have a high dollar price because the dollar is rapidly losing its value. With the current inflationary scheme for financing government, there will come a time when even steel will cost too much to use in coins. We may be forced to accept wooden nickels because every metal will be priced out of the market for coinage.
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June 18th, 2008 at 1:19 pm
1ST!!!!
June 18th, 2008 at 1:32 pm
I wish I could figure out how to manipulate the system. Like GI Joe said, “Knowing is half the battle,” well I know the way the system works now, so Im already half way there. Now, I just have to figure out how to get rich off of it…. or something like that.
Alex is the man! One of my idols, I cant wait until he gets his TV network up and running! Transmit over the airwaves Alex! I cant afford cable!
June 18th, 2008 at 1:45 pm
Peso,
Look into the 1099 OID, your remedy is there…there is no money in this country anymore. It is all debt, discharged or charged DEBT, nothing more. You must understand THERE IS NO MONEY!!
1099 OID and zero your account, it is the remedy.
June 18th, 2008 at 2:03 pm
Just write visit infowars.com and this dollar is worth 1/1000th of a cent thanks to your slave masters on every dollar you use.
June 18th, 2008 at 2:08 pm
The Peso Says: I cant wait until he gets his TV network up and running! Transmit over the airwaves Alex! I cant afford cable!
Alex is going on the dish network, so you still have to pay to decrypt the sat microwaves.
But I wonder with the DTV transition if there is room on the airwaves… idk
June 18th, 2008 at 2:48 pm
“substitute steel for the nickel and copper now used in American pennies and nickels.”
Not exactly — for years now pennies are copper plated zinc. That’s why they rot in your automobile change cup if any salt spills on them (zinc is a sacrificial anode)
June 18th, 2008 at 3:24 pm
the devaluing of the dollar is just another way they can control us. See.. if gas is extremely high b/c of inflation and the devalued dollar.. it’s hard to buy gas.. then it’s hard to travel. That’s exactly what they want! They want us staying put! (just as long as we sit at home like pathetic slaves!
Wake up.. omg. wake uupp! It’s so freakin’ obvious.. Those of you who deny all this have just bought into what the maintream/corporate media tells you.. WAKE UP!
June 18th, 2008 at 6:05 pm
LA-LI-LU-LE-LO
“1ST!!!!”- Gayness in the third degree, knock it off.
June 18th, 2008 at 6:13 pm
I’m just gonna grow vegetables. I’ll trade squash and beans for soap and dairy. I’m gonna make my own whiskey out of sweet corn. I’m gonna sit in my garden patch with a shotgun. I’m gonna eat rabbit and venison. The NWO can eat my lead.
June 18th, 2008 at 6:31 pm
Congressional leaders give the appearance of being interested in saving taxpayers money, which would be a very good thing if only it were true. In theory, the less they spend making coins, the less they would have to tax the people. What they don’t reveal is that inflation, which gives rise to the need for devaluing the coins, is in effect a tax. It takes wealth from your pocket and transfers it to the pockets of bankers and government agents who get the money first. The inflation tax is just as much a burden on the population as a direct tax.
(So where is this insidious taxation on Americans going to end, when our consumers resort back to bartering which made this country the wealthiest and once the most prosperous on earth?
Merchant: “I’ll sell you my goods but I don’t give you a receipt so that no taxes are paid to demean you under the will of the outlaws who don’t respect you for being capable and productive these who want to enslaved you instead into a beast of burden worked to death to provide for the ursurping totally non-productive criminals which they truthfully are!” -Al Koppel.
June 19th, 2008 at 5:04 am
what happen to that 3 wheel bike that can do 70mph without riding to hard? I seen it somewhere, somehow, it disappear, I think NASA brought them out?
June 19th, 2008 at 5:58 am
In Australia, we used to have 1 and 2 cent coins but they were discontinued when the currency was devalued and they were no longer cheap to make. There has been talk that the 5 cent piece may not be cost effective to produce and should also be discontinued. We may have to create new coins as the currency continues to lose value!
June 19th, 2008 at 8:09 am
We have had the steel pennies and 2pennies in the UK for several years now. They are still too shiney and are magnetic. Vending machines needed to be adjusted to accept them. It seems that most people just accepted them because they look the same, but they feel different.
I am not sure I agree that devaluing money is the only cause of inflation. Producers are forced to pass on their costs. They hold back price rises to maintain market share but when they see they are working for nothing, or even a loss, they will put the prices up.
Alex says the rising fuel prices are do do with the devaluing of the dollar, would this also affect the UK? As far as I can tell the dollar value of oil has gone up 100% where as petrol in the UK has gone up 40%. We are paying what would be $10 per gallon in us money at the moment. It’s true in a smaller country we only drive half as far but it’s having a noticable affect. The fuel protests seem to make the price go up further.
June 19th, 2008 at 6:27 pm
#13 Wayland Says:
“I am not sure I agree that devaluing money is the only cause of inflation.”
You’re right it might not be the ONLY cause. However it’s the MAJOR cause, and has been since most of the world left the gold/silver standard.