June 19, 2007
A Nickel for Your Thoughts
Alec Nevalainen of Alaska has created a site, www.coinflation.com, which tracks the daily metallic value of all coins. Nickels aren't the only good deal. Even some pennies -- those made before 1982 -- are worth more than two cents each. Admittedly, in order to get the eight cents for a nickel, you would have to melt down the coins, which (a) is now illegal and (b) increases dramatically your chance of having an unfortunate smelting accident. NickelMember isn't a particularly catchy nickname either, so the upside here is really minimal.
I was surprised to discover that until recently it wasn't illegal to melt coins. I always thought melting coins counted as defacing currency, but apparently the law didn't explicitly say that you couldn't melt coins. Aside from a few coins on train tracks, there wasn't a major coin defacing problem, so nobody bothered with a law -- that is, until the U.S. Mint realized that people could possibly make some serious money from their money. Understandably, the Mint doesn't want to go to all the trouble of losing three cents on every nickel only to have all the nickels they do make melted out of circulation.
The new law from this past December makes melting pennies and nickels punishable by up to five years in jail – unless you're a celebrity in which case you just get probation -- and as much as $10,000 in fines. (That's only 200,000 nickels, people! I hope you didn't melt them all.) Apparently, the war on terror must be slowing down enough so that law enforcement officials now have some spare time to go after nickel melting, which is clearly unpatriotic. It's also illegal to export more than $5 of nickels, so there's no sense setting your furnace up just over the Canadian border either.
Of course, if many people were melting and exporting coins, this would be what is called a trend-piece, but there are very few people hoarding nickels. After all, with all the work involved, to do so, you would clearly either have to be insane or be my Dad, who does seem to be the one person who is collecting nickels. He's not quite sure what he'll do with them -- or even where to get them. (Do people even use nickels much anymore?) Still, just in case a market develops, he wants to be ready.
Some argue that it makes sense just to get rid of all pennies and nickels, but the nickel does deserve some love. As Tim Harford pointed out recently in Slate, the nickel is one of the reasons that the price of Coca-Cola didn't change for 73 years. A Coke cost five cents in 1886, and the price didn't go up to ten cents until 1959. The reason is simple. To change the price of a Coke to a dime would have resulted in 100% inflation. Apparently, Coca-Cola even tried briefly to convince President Eisenhower to create a 7 ½ cent coin. (Smart man, he held out for the dollar coin.)
I don't think we have to worry about this today. Getting rid of the nickel probably wouldn't cause much inflation, since it's pretty difficult now to find a product that actually costs five cents. Nickel and dime stores have already turned into dollar stores, and even then it's difficult to find anything in them that sells for only a dollar.
Meanwhile, as long as nickels are still around, my father continues to collect them, at least when he can find them. There are benefits to this. For example, as long as the price of nickel and copper remain high, my father is happy to go through all my pennies and nickels and give me face value for them. Admittedly, I might have given him the coins for free, except that he insists on counting them and giving me full value for them, because he thinks he's getting a deal. In fact, I can tell that he feels kind of guilty because he may even believe that he's swindling his poor naive son.
It's essentially a win-win situation. My father theoretically makes a 60% profit, and I don't have to go to all the trouble of installing a melting furnace in my two-bedroom apartment. The landlords upstairs might not approve.
©2007 Joe Lavin