Hasta La Ideas

It makes such little cents

You probably know that the U.S. penny used to be made out of copper, which was once inexpensive. As the cost of copper began to rise, it would have cost more per penny than the penny’s own value, so the U.S. Mint switched over to a zinc alloy.

But the price of zinc has been steadily rising since 2005. Which is why U.S. currency is in the absurd situation it is now: A one-cent piece costs about 2.4 cents to make. A penny is 97.5% zinc and 2.5% copper, and that zinc ain’t cheap.

The nickel’s got it even worse. This five-cent coin costs 11.2 cents to manufacture. That’s because 75% of it is zinc and 25% is, well, nickel, another expensive metal. Which means that a nickel costs more to produce than every U.S. bill from a one-dollar bill (5.2 cents) all the way up to a C-note (7.7 cents).

The money math starts to make a little more sense when we get to the smaller dime (92% copper, 8% nickel), which rings in at a production cost of 5.7 cents. The quarter, which has the same ingredients as the dime, is only a slighly better bargain at 11.1 cents.

Clearly the U.S. Mint needs to start researching cheaper alloys or phasing out the penny and the nickel. It’s true that the math is a little more complicated than it would be for pure product manufacturing; for example, while you’d quickly go broke selling a product for $100 that cost $240 to make, currency is a little trickier. The government has an obligation to produce and circulate currency because it enables commerce, so it’s okay if they lose a little in manufacturing costs, as its citizens will theoretically make it back up by creating wealth. But if we don’t do that fuzzy math and look at it in terms of straight production, in 2012 alone the U.S. government lost $58 million dollars just by making pennies.

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