A Penny Saved Is 2.5 Pennies Earned

Speaking of monetary policy and seigniorage, we all know that when the government decides to print money, it reduces the real value of money. But what if the value of the money that it prints is worth more than the money itself? If you can’t wrap your minds around that, you should – because it’s happening. And not only do we have pennies that are worth more than a penny, but we also have people who try and exploit this arbitrage opportunity (and why not?). From last week’s New Yorker:

A penny minted before 1982 is ninety-five per cent copper—which, at recent prices, is approximately two and a half cents’ worth. Luhrman, who had previously owned a company that refined gold and silver, devised a method of rapidly separating pre-1982 pennies from more recent ones, which are ninety-seven and a half per cent zinc, a less valuable commodity. [link]

This guy Luhrman (Walter Luhrman, a metallurgist in southern Ohio) is a true entrepreneur-arbitrageur:

His new company, Jackson Metals, bought truckloads of pennies from the Federal Reserve, turned the copper ones into ingots, and returned the zinc ones to circulation in cities where pennies were scarce. “Doing that prevented the U.S. Mint from having to make more pennies,” Luhrman told me recently. “Isn’t that neat?” The Mint didn’t think so; it issued a rule prohibiting the melting or exportation of one-cent and five-cent coins. (Nickels, despite their silvery appearance, are seventy-five per cent copper.)

And that’s not all – just when you’re getting ready to ignore the penny again, you hear of a movement to abolish the penny. Mainly because of the “time wasted from counting pennies.” It’s a jet-setting life when you can’t count your pennies, that’s for sure! From last night’s Colbert Report:

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