Sunday, January 04, 2015

When Your Money Is Worth More Than Your Money

I came across a funny tidbit of info today: the penny in your pocket could be worth two of them.

This is something that I probably could have guessed, or stumbled across much earlier, but I just wasn't paying attention.

The other day I blogged about cracking open my change jar and sorting through it in the hopes of finding silver-containing coins. Turns out that maybe I should go through it again and look for true copper pennies.

As I sit here typing this, a U.S. penny minted between 1909 and 1982 (except for pennies minted in 1943 - those are steel) is actually worth about 1.9 cents because of the copper and zinc it  contains.

Think about that. The penny you have in your pocket, that you walked past on the street, threw at your kid brother, or used to pay your traffic ticket, it may be worth twice what it says it's worth. 

What's the point? Well, basically, precious metals are most useful as a form of insurance against currency debasement, which is a fancy way of saying that "money" created out of thin air increases the supply of it, driving down demand for the bit that you've got saved up (loss of purchasing power). So other than speculative bubbles, acquiring and owning metals isn't really an investment per se because typically an increase in their value is really just an inverse move to a weakening currency. A simple way of understanding this: if today an egg costs $1, and a gram of a precious metal is valued at $1, and then tomorrow due to inflation the asking price of one egg becomes $2, that gram of precious metal could be worth two eggs. 

So is it worth it to save pennies from the applicable years?

I say, the answer is, yes! There's the obvious reason, that they're worth nearly twice their face value these days, but here's another way to look at the question: if you hang onto a penny because of its melt value, you're only setting aside one cent of legal tender. 

In your day-to-day consumption, how much are you going to miss one cent? You won't.

This is similar to the last time I did some urban prospecting for silver-containing half dollars that I picked up at my bank: if you exchange a few notes for a few rolls of coins at your bank and find precious metals among them, you've scored a risk-free gain. If you don't find precious metals mixed in with the fiat .gov garbage in your hand, you haven't lost anything because it's still legal tender (for now).

To update Ben Franklin: "A penny saved, is two pennies earned."

Save that copper!

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