The U.S. Treasury Secretary Would Like to Get Rid of Penny Coins

I have previously written about how I have been collecting U.S. nickel and pre-1982 penny coins because their the value of the metals in such coins (i.e., the "melt value") exceed the face values of those coins. [See my posts from February 2006, April 2006, and October 2006.]

Coinflationis an interesting website that I periodically visit because it gives the melt values of a number of coins currently in circulation, as well as the melt values of silver coins no longer in circulation, but which are fairly widely held by collectors. According to Coinflation, as shown in the image below (click on the image for a larger view) a pre-1982 copper penny has a melt value of about 2.55 cents (i.e., 255% of face value), a copper nickel has a face value of about 7.04% (i.e., 140.8% of face value), and a 1982-2008 zinc penny has a face value of about 0.711 cents (i.e., 71.1% of face value).

Given the rapid rise in the price of commodities such as copper and nickel metals, the U.S. Mint has been losing many millions of by making nickels and pennies. Even though zinc pennies currently have a melt value below their face value, when transportation and other miscellaneous manufacturing costs are taken into account, the Mint loses quite a bit of money making some 7-8 billion pennies each year.

Treasury Secretary Henry Paulson was recently interviewed and stated that he personally would like to get rid of the penny due to its minimal value and usefulness. However, Paulson concluded that it would not be politically doable at this time because the penny coin does have its fans.

Even if the penny coin is not eliminated anytime soon, it seems highly likely that the base metal compositions of nickel and penny coins will likely be changed to less expensive metals at some point in the near future, as I have previously speculated. The Bush administration is currently pushing to give the government the authority to change the metal content of all of the country's coins in order to save money.

If the government does pass legislation to change the metal contents of coins, I expect the Mint to quickly change the base metals of at least the U.S. nickel and penny coinage. If that happens, it is likely that collectors will eventually, over time, snap up much of the older coins currently in circulation. I personally don't want to see the penny coins go away, but I do think that changing the base metal content of U.S. coins would be a good idea so that the U.S. Mint doesn't have to lose money simply by making pennies and nickels.