Debasing the Currency

I hope you’ve already realised that our money has little intrinsic value. Banknotes and coins have very worth since they are ‘token’ money. Once, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK currency contained precious metals, or was backed by gold (the so called gold standard, last ditched in 1931).<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

So what about today’s coins? Recent blog watchers might have read Do we still want the 1p? which briefly covered the declining importance of our loose change. A vast number are lost in circulation: and the pre 1992 bronze coins are well worth looking out for….

Now that the price of copper has risen to just under $8,000 a tonne, driven by demand from countries like China and India, the US Mint says it is now costing as much as 1.7 cents to produce a “penny” (1 cent) and 10 cents to produce a “nickel” (5 cents). Reducing the amount of metal used making these coins could save the US government around $100 million a year.

According to the BBC’s Money Box programme:

In April 2007, the US government finally passed a law to make it illegal to melt down US coins, or export them in any quantity abroad. Anyone doing so now faces a fine of up to $10 000, in conjunction with five years in prison. A spokesman said action was taken after the US Mint started receiving enquiries from the public as to whether it was illegal to melt down US coins.

“It was to safeguard against a potential shortage of these coins in circulation, because any wide-spread withdrawal of pennies and nickels could cause coin shortages, and that would be extremely costly to replenish, given the prevailing metal prices and production costs”.

In India, the government has had to take action after rupee coins were illegally melted down in order to make razor blades and the Australian Royal Mint has warned its citizens it is illegal to melt down Australian dollars.

What about in Britain? Pre-1992 1p and 2p coins were made from bronze (97% copper) before being switched for copper-coated steel. However, anyone trying to melt them down could face a fine or two years in prison…..