Dick Johnson submitted these thoughts inspired by the new reverse design of the Lincoln Cent.
"Goodbye, Lincoln cents." That is what the U.S. Mint should have said this week, rather than "See our new Shield Reverse on the cent!"
And not for the reason it is costing 1.8 cents to manufacture each new one cent coin -- although that is a very strong reason. Nor for the reason the zinc industry is bearing down on the Treasury with their lobbying efforts to retain the contract to supply copper-coated zinc blanks to the Mint. Nor for the reason the polls say Americans wish the cent coin should be retained.
Oh! If only cooler heads could prevail in Washington! The reason the cent should be abolished is this: It is no longer viable as a circulating denomination. It is not needed any longer. It no longer serves an economic function.
The U.S. Treasury, while it is dealing in trillions of dollars in payments and taxes, is actually doing a disservice to American citizens by forcing them to use a coin valued at one-hundred-trillionth of that value in millions of transactions every day by every citizen.
By eliminating the cent -- and I propose the five-cent nickel as well -- and rounding off every transaction to the nearest 10-cent amount, thousands of dollars would be saved by banks and large retail establishments for not having to acquire, inventory and handle low value coins. The efficiency would be enormous, as well as saving millions of dollars. I have spoken previously in The E-Sylum refuting every argument in favor of retaining the cent. Such nostalgic action is costing Americans dearly.
Admittedly, a problem does exist with abolishing a coin. What to do with them? And by so doing, you create a coin shortage for the newly important dime. Chicago Federal Reserve Bank Chief Economist Francois Velde came up with a brilliant solution. Velde suggests "rebasing" the cent. He wants each cent coin to be revalued to the value of five cents. This can be easily done by Treasury fiat proclamation.
The coins stay in circulation. There is no coin shortage. There is no mass melting of coins. There is no hoarding of coins. There is no interruption in commerce. There is no problem, other than, perhaps, informing the public every cent coin is now worth five cents and can circulate side-by-side with the nickel. There is a windfall profit for Americans who have a stash of pennies in jars and piggy banks around the house. Each hundred pennies suddenly are worth five dollars in spending power.
Velde's solution is brilliant, but is falling on deaf ears in Washington. Where Velde wants to do this for the cent only, I want it to happen for both the cent and the nickel at the same time. If we did it only for the cent, we would be facing a similar action shortly in the future for the nickel. Best to do it all at once. Make both cents and nickels revalued to 10 cents.
Last week in The E-Sylum I suggested creating a new U.S. Mint for the single purpose of striking new dimes. I estimated this would take 10 years. I see at the end of that time -- when sufficient dimes and half dollars become available -- the cents and nickels could be recalled and scrapped. "But that is going to cost the government 10 cents each for those coins!" you might exclaim. The metal from those coins would provide the metal for new coins whose compositions I outlined in that article.
The metal would provide part of the alloy or cladding for 50-cent through $5 coins. The seignorage would be enormous and cover the cost of buying back all those minor coins at ten cents each.
Velde's proposal was brilliant!
Joe Boling writes:
Regarding Dick Johnson's proposals, I have no problems with rebasing the cent and nickel, and dropping the quarter. But I look on the whole scheme as being no more likely to happen than having the current metallic dollars enter the mainstream. I carry and use them all the time, and have never had one refused, but we all know that as long as paper is around, coins in parallel denominations are not going to fly. Now that the senior senator from Massachusetts is gone, maybe there's a slim hope of getting the dollar note dropped - but I doubt it.
To read the earlier E-Sylum article, see:
COMMENTS ON DICK JOHNSON'S OPEN LETTER ON COINAGE
Wayne Homren, Editor
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