2.4 Cents for Your Thoughts?
The gold mine in your pocket might be made of copper.
In 1974 the price of copper led the U.S. mint to strike some pennies from aluminum. In the days when a gumball could still be had for one cent, vending machine operators objected that the lighter pennies would jam their machines. Pediatricians warned that the radiodensity of aluminum and the tissue inside the respiratory and gastrointestinal tracts were very similar, and the new coins would be difficult to detect with X-Rays when dunces swallowed them. Coin collectors howled. One of the pennies was given to the Smithsonian Institution and the rest were melted down. Meanwhile, the price of the metal dropped and the mint continued minting coins of 95% copper.
In 1982 prices were on the rise again. Stung by the reaction its junk-metal pennies received in 1974, the mint quietly started making pennies of copper-coated zinc with no fanfare or advance warning, and it still does.
The long overdue run up in gold prices has deflected attention away from the cost of the lowlier metals. As of Sept. 29, 2010, gold is trading at $1,307 per troy ounce, a 290% increase in five years. Copper is trading at $3.62 per pound, up 189% over the same period. The 95% copper pennies in your pocket or the jar in your kitchen now have a melt value of almost 2.4 cents. Its zinc successor’s melt value is less than three-fifths of a cent.
Nicholas Copernicus (1473 – 1543) wrote that bad money drives good money out of circulation, although this statement of the obvious is for some reason generally credited to Thomas Gresham (1519 – 1579), who had the same inspiration 40 years later, and it is commonly known as Gresham’s Law. Henry VIII encountered this principle when he tried to cover a shortage in the royal treasury and compensate for inflation by minting “silver” pennies from silver-plated lead. The high point of the obverse was his nose. The silver there wore through first, revealing his “lead nose,” which is how the coins became known. But 16th-century Britons were a harder sell than we are. In the days when the populace was accustomed to carrying something of real value in their purses, unlike the fiat money circulating today, the lead pennies were scorned and rejected in commerce while silver pennies were hoarded.
The validity of Gresham’s — or Copernicus’ — Law is obvious. When was the last time you encountered a 90% silver dime (current melt value $1.57), quarter ($3.93), or half-dollar ($7.86) in circulation? It might also be time to start hoarding our five-cent pieces, the composition of which (25% nickel, 75% copper) has not changed since 1946. Its current melt value is almost 5.9 cents.
I have some experience in coin collecting and usually notice my pocket change. I estimate that about 8% of the pennies in circulation are of the 95% copper variety, and the percentage is dropping fast. Yes, you’ll have to accumulate quite a hoard to cover your child’s college education, but how else can you reach into your pocket and make a profit of 240%?
Beware the 1982 cents. Some are copper, some zinc. The difference is not obvious, but the genuine article weighs 3.1 grams; the zinc version weighs 2.5.
Just a word to the penny-wise.
Joseph A. Rehyansky is retired from the United States Army and the Chattanooga, Tennessee, District Attorney’s Office. He is a former contributor to National Review whose writings have also appeared in Human Events Online, The American Spectator, and other publications.