Farewell. (Photo by Lambert/Getty Images)
In 2013, I wrote a Forbes column that became one of my most-read and most-cited, “Don’t You Dare Eliminate the Penny.” In it I considered the views of elite opinionators who wanted the United States to scotch its lowest-denomination monetary unit, the penny. They said it would save money to get rid of the thing, because copper costs more than one cent now.
Remember copper thieves? They would lurk around construction sites and pull wire out of the frame of a building and then resell the stuff on the black market for big bucks. Wonder why copper got so expensive. Wonder why gold did. In the 2000s, it has absolutely kicked the tush of stocks. Gold was selling at $266 in 2001. Now it’s at $3300. That is about exactly how well Microsoft stock, Mister Softee itself of $3 trillion market cap fame, has done over that interval. The indexes? Forgetaboutit. Gold is up twelve-fold since 2001. The Dow industrials are up fourfold.
Back when the United States had a great economy, in the nineteenth century, in the roaring 1920s, in postwar prosperity after World War II, the dollar itself was redeemable not merely in copper (100 pieces to a dollar) but in gold (1/35th of an ounce of it). Again, how did we do, as an economy, when like old-fashioned cranks we had currency redeemable in precious metal? We grew and prospered like crazy. How have we done with modern, serious, professionally managed fiat money? Slow-growth, inequality-wracked 2000s! But we are so sophisticated it makes me blush.
Yes, we are now eliminating the penny. This appears to be the gist of news reports last week. The feds are going to strop striking the old bird. This will make pennies in circulation too scarce and valuable from a numismatic and copper perspective, and they will all flee from circulation. Vendors, in turn, will have to round prices to multiples of five cents. This is because we still strike half-dimes, which by the Coinage Act of 1792 Congress still must mint, in silver.
Oops, we don’t have half dimes anymore. In the civil war Congress nixed those for the nickel, because nickel was cheaper. The United States in that war started printing paper money not redeemable in gold, and everybody hoarded silver. Just like today!
The decline of the penny is yet another further attenuation of the classical monetary systems of the past—read about it in Free Money—above all the gold standard that we had with us as recently as 1971. You can kid yourself—Washington and academia do—that the gold standard is crankery and so forth, or you can get real and note that classical monetary systems accompanied the industrial revolution. The canard that gold caused the Great Depression is a joke. We had the most comprehensive tax system ever suddenly by the early 1930s and people say something else—capitalism! gold! the rich!—caused the disaster.
If we had serious economic growth, nobody would hoard the penny, and copper would fall in price. What did gold do when Reagan got serious about economic growth? It fell from $840 all the way down eventually to the $260s. Nobody wants precious metals—copper included—when the real investment environment is excellent. We are getting rid of the penny because we have not gotten fully serious about having a great economy again. If we did have a great economy, or expected to have one, there would be no reason to think people would hoard money.
The penny costs too much to make? Then make it cost less by having people want to get rid of inert metal for real growth projects.
The shame of getting rid of the penny is that the venerable copper, “found a penny at my feet,” as Joni Mitchell warbled, is yet another hacking away of links to the hard-money systems that really delivered growth. Yes, we still have other pocket change, but you know the inflation in the wings is coming for the rest of it. Hoard your quarters, weird-looking as they have become with all the bizarre new “artwork” that is making Augustus St. Gaudens (not to mention TR) roll in his grave. Quarters look bad now because they want to soften us up for getting rid of them altogether.
Bing Crosby used to sing the old carol, redolent of times of prosperity when “the goose is getting fat” about poor folk who had nothing. ‘If you haven’t got a haypenny”—remember half-pennies?—“then God bless you.” Well the United States has now neither a half-penny nor a penny. That means it’s poor folk. Then God bless it, I guess.
