5 ms·

Coins don’t cost what they are worth to make.

by kasey_junk 1y ago

tempestn 1y ago
Pennies do. (More, actually.)
bandofthehawk 1y ago
Pennies and nickels cost more to make than they are worth.
- jameshart 1y ago
  People are quick to state this as if it's a slam dunk case for 'we shouldn't make them any more', but I don't understand the thinking there. An individual coin can be used many many times to facilitate many many transactions before it eventually falls out of circulation through loss or damage. The amount you should spend on making coins of a given denomination has nothing to do with what the total face value of those coins is, but needs to be traded off against the value to the economy of having those coins in circulation. If spending more money on producing higher quality coins enables them to remain in circulation twice as long, it might be worthwhile even if the cost exceeds the face value. It's a different story if the material value of the metal in the coin exceeds its face value - at that point it makes sense to go to a bank, change money into pennies, then scrap them and sell the copper. That would be bad. But the reason pennies are a bad deal isn't because of their manufacturing cost, it's because their handling costs exceed the value of incorporating them in a transaction. Should a store go to the trouble of keeping pennies available, counting them, storing them, transferring them to the bank? Or should they round up change to the nearest five cents and take a 4c hit on each transaction where you'd have been able to use pennies? If your average transaction value is over a hundred dollars or so, like most supermarkets, and you only handle cash on one sale in 50 say, if handling pennies in your cash-management operation takes more than a few thousandths of one percent of your budget, it's costing you too much.
  - Uvix 1y ago
    Stores are going to round amounts in their favor, not customers’. So they will make more money once the penny falls out of circulation.
  - Ferret7446 1y ago
    > It's a different story if the material value of the metal in the coin exceeds its face value - at that point it makes sense to go to a bank, change money into pennies, then scrap them and sell the copper. That would be bad. Well, that is highly illegal and not very profitable vs the amount of risk. You'd be better off doing almost any other crime.
    - sayamqazi 1y ago
      In my countries a decade or so ago we had a copper coin for roughly 1c. People started hoarding and defacing the coins then selling it as copper scraps. It was so rampant that I think it would have been infeasible to punish eveyrone. So the Govt just discountinued it.
eloisant 1y ago
It's only true for the smaller denominations, 1c and 5c for USD. Other than that, coins are cheaper than bills on the long run, because they last longer. It would be cheaper for the US government to stop making $1 bills and have people use the $1 coins, but I guess old habits die hard.
- ciupicri 1y ago
  I guess that's why we have €1 and €2 coins (1 EUR ≈ 1.18 USD).
  - eru 1y ago
    Well that, and Germans need the 1 Euro coin to unlock their shopping trolley. (Or at least they used to; when I visited back recently many supermarkets had free trolleys! Can you imagine my shock?)
    - acatnamedjoe 1y ago
      Unlocking trolleys with a coin is normal in Britain too. I'd never considered that this might be unusual. Is this not a thing in other countries? How do they get people to return their trolleys to the bays?
      - eru 1y ago
        It's not a thing in the US, I think. And did Britain have this before the invasion of Aldi and Lidl?
        jwarren 1y ago
        Yeah, we've had it for at least 30 years, probably longer
      - amenghra 1y ago
        It's not a thing in most US cities. Since there's no incentive for individual people to return their trolleys it ends up being someone's job to collect the carts.
adolph 1y ago
There is an excellent recent "The Answer is Transaction Costs" podcast episode (The Price of Pennies: Make or Buy?) outlining a proposal to save money by buying back coins instead of making new ones. https://taitc.buzzsprout.com/2186249/episodes/17383823-the-price-of-pennies-make-or-buy https://taitc.buzzsprout.com/2186249/episodes/17383823-the-p...

Coins don’t cost what they are worth to make.

tempestn 1y ago

Pennies do. (More, actually.)

bandofthehawk 1y ago

Pennies and nickels cost more to make than they are worth.

jameshart 1y ago
People are quick to state this as if it's a slam dunk case for 'we shouldn't make them any more', but I don't understand the thinking there. An individual coin can be used many many times to facilitate many many transactions before it eventually falls out of circulation through loss or damage. The amount you should spend on making coins of a given denomination has nothing to do with what the total face value of those coins is, but needs to be traded off against the value to the economy of having those coins in circulation. If spending more money on producing higher quality coins enables them to remain in circulation twice as long, it might be worthwhile even if the cost exceeds the face value. It's a different story if the material value of the metal in the coin exceeds its face value - at that point it makes sense to go to a bank, change money into pennies, then scrap them and sell the copper. That would be bad. But the reason pennies are a bad deal isn't because of their manufacturing cost, it's because their handling costs exceed the value of incorporating them in a transaction. Should a store go to the trouble of keeping pennies available, counting them, storing them, transferring them to the bank? Or should they round up change to the nearest five cents and take a 4c hit on each transaction where you'd have been able to use pennies? If your average transaction value is over a hundred dollars or so, like most supermarkets, and you only handle cash on one sale in 50 say, if handling pennies in your cash-management operation takes more than a few thousandths of one percent of your budget, it's costing you too much.
- Uvix 1y ago
  Stores are going to round amounts in their favor, not customers’. So they will make more money once the penny falls out of circulation.
- Ferret7446 1y ago
  > It's a different story if the material value of the metal in the coin exceeds its face value - at that point it makes sense to go to a bank, change money into pennies, then scrap them and sell the copper. That would be bad. Well, that is highly illegal and not very profitable vs the amount of risk. You'd be better off doing almost any other crime.
  - sayamqazi 1y ago
    In my countries a decade or so ago we had a copper coin for roughly 1c. People started hoarding and defacing the coins then selling it as copper scraps. It was so rampant that I think it would have been infeasible to punish eveyrone. So the Govt just discountinued it.

eloisant 1y ago

It's only true for the smaller denominations, 1c and 5c for USD. Other than that, coins are cheaper than bills on the long run, because they last longer. It would be cheaper for the US government to stop making $1 bills and have people use the $1 coins, but I guess old habits die hard.

ciupicri 1y ago
I guess that's why we have €1 and €2 coins (1 EUR ≈ 1.18 USD).
- eru 1y ago
  Well that, and Germans need the 1 Euro coin to unlock their shopping trolley. (Or at least they used to; when I visited back recently many supermarkets had free trolleys! Can you imagine my shock?)
  - acatnamedjoe 1y ago
    Unlocking trolleys with a coin is normal in Britain too. I'd never considered that this might be unusual. Is this not a thing in other countries? How do they get people to return their trolleys to the bays?
    - eru 1y ago
      It's not a thing in the US, I think. And did Britain have this before the invasion of Aldi and Lidl?
      - jwarren 1y ago
        Yeah, we've had it for at least 30 years, probably longer
    - amenghra 1y ago
      It's not a thing in most US cities. Since there's no incentive for individual people to return their trolleys it ends up being someone's job to collect the carts.

adolph 1y ago

There is an excellent recent "The Answer is Transaction Costs" podcast episode (The Price of Pennies: Make or Buy?) outlining a proposal to save money by buying back coins instead of making new ones. https://taitc.buzzsprout.com/2186249/episodes/17383823-the-price-of-pennies-make-or-buy https://taitc.buzzsprout.com/2186249/episodes/17383823-the-p...