The power of III

Summum ius summa iniuria--More law, less justice

14 February 2012

Currency debasement continues apace -- now pennies and nickels

The effects of decades of government policy:

Constitutionally mandated silver and gold gives way to worthless paper money.  The founders knew the difference between sound money and "legal tender".  One is always money. The other is an IOU based on the faith of the IOU holder--lose faith, the IOU is worthless.

Pocket change changes from silver to copper, steel, nickel, and now zinc.

Obama's new budget as of yesterday:

Obama wants to change the composition of nickels and pennies to save money. The president’s budget would give the Treasury Department the ability to “change the composition of coins to more cost-effective materials,” pointing out the current cost of making the penny is 2.4 cents and the nickel is 11.2 cents. Of course, the value of the U.S. dollar isn’t pegged to the materials that it’s composed of, but it’s still a compelling argument on its face. The composition of U.S. coins hasn’t changed since 1981, the Wall Street Journal notes, while major components like zinc have become more expensive. Industry lobbyists stalled the proposal when Obama brought it up in 2010, but it may have new appeal to the frugally-minded.


I had previously posted on saving nickels for this reason.

Gresham's Law: Gresham's law is an economic principle "which states that when government compulsorily overvalues one money and undervalues another, the undervalued money will leave the country or disappear into hoards, while the overvalued money will flood into circulation." It is commonly stated as: "Bad money drives out good", but is more accurately stated: "Bad money drives out good if their exchange rate is set by law."

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