My Friend believes that

My friend has a thoery that we are NOT going to have nickels too much longer in the future....he says as the price of copper is staggering the govt will not be able to afford to make nickels much longer as they cost much more to make.

I told him this will never happen as they have tried to get rid of the penny for so long and that seems like it is never going to happen, let alone getting rid of the nickel.

He says the if the govt announced they intend to get rid of the nickel...everyone would be hoarding them like crazy and he believes the introduction of the new nickels was the first phase of getting rid of the old nickels.

Here are some of his thoughts....let me know what you think

I hope you caught my view that Nickels, and pennies, will soon be eliminated as we know them today. I strongly suspect this was known and planned by the government and could be the reason for the new issue nickels that came out in 2004. I would call this Phase 1. I believe that banks and the coin machines being used now, where people can just dump all their coins, of any denomination and have the machine seperate and tally them, take a small fee and the person gets dollars. These machines can easily be set to seperate the pre 2004 nickels and slowly remove them from circulation. The government certainly couldn't announce to the Public that they are planning to eliminate the nickel, or penny, as we know them today, and replace them with something new. The nickel is a fascinating coin as-is. Most people didn't know that a nickel is exactly 5 grams. I knew that many years ago, not because I had an interest in coins, but because I would use a nickel to test the accuracy of a scale, for that matter a dollar bill is exactly 1 gram. Placing 5 nickels and five single dollars on a sensitive scale should read-out to 30 grams. Also, and I guess you know this, a nickel is convieniently compsed of 25% Nickel and 75% Copper. This makes for easy calculating. A penny, post 1982, is 97.5% Zinc and only 2.5% Copper, but even after this raising of the Zinc content, the global commodity price for these metals have greatly increased in the past 5 years. Nickel alone has tripeled in cost in the past 6 months to about $15 a pound---and the demand for these metals isn't going to halt or stay status quo. The demand is and will increase for at least the next 5-10 years. These metals are needed to build up the infrastructure of former "poor" countries [China is often reffered to as the major single source of the increased demand, but India too is rising in infrastructure build up and both have populations over 1 billion and the people there are just beginning to buy items that we all take for granted. Their standard of living is and has been increasing steadiy, as we here in the US/West have seen our middle-class' standard of living decrease in real terms. The only reason we don't see the full effects is because of Credit, all the money most everyone had dumped on them since 2001 through things like refinancing their mortage and tapping into a large increase in home prices [ the equity increase we saw in the past 5 years]. But its all on Credit. As a Nation, the average household is in the Red. We have the lowest savings rate of any modern/ western country. All we hear is how low paid a worker in China is, but people don't take into account that its a country with a very different system. They fail to include that these very same low-paid workers save about half their Pay---yes, that's true though hard to belive if you just listen to the part about the low-pay. We live at a critical time and events have already happened, that if really understood by the Average Joe/Jane, they'd be either scared, doing something to prepare of help change what's happening, or all of those combined.

Bottom Line: The Nickel just has to be replaced. We can't keep buying the raw materials for more than 5 cents, mint it, and place a 5 cent value on it. I figure "they" are waiting for either the 2006 mid-term elections to pass, or at the most, the 2008 elections.---------------Now, if I'm not mistaken, didn't we just have one 2006 Nickel issued, instead of the two versions we got in 2004 and 2005. If that's correct, than why ?

 

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Sure, the next time they are going to mint nickels, they are probably going to be nickel plated aluminum coins.

 

No conspiracy here. For the 138 years from 1865 (the original "nickle" was a 3¢ piece), through 2003 - the only exception to the one year-one nickle rule was 1942, when there were both regular and wartime silver coins minted.

Now, we're done with the Lewis & Clark anniversary and reverting from circulating commemoratives back to plain vanilla coins, albeit with the first new regular nickle design in 2/3 of a century.

Since elimination of the nickle as a circulating denomination would take an act of Congress - 435 Representatives, 100 Senators, and a half-dozen or so non-voting territorial representatives; none of whom blow their noses without consulting their large staffs - there are just too many people to hide a conspiracy to secretly take away our five-cent pieces. Can you say "leaks"? :secret:

 

Something people miss about eliminating the nickel is that we cannot eliminate the nickel without eliminating the dime too. The reason being that without the nickel, the dime and quarter would incompatible with each other since there is no way to make 1 quarter using just dimes. Unless your friend means that they are planning to phase in a new five cent coin that is cheaper to make, I don't see the nickel going anywhere any time soon.

 

You are right on this one and I agree with you, the nickel, cent, and dime will be here for a long time. If politicians wont to save money then they need to cut back on there perks and yearly raises.

 

As already mentioned, using a different mix of materials that are cheaper is one option, if the cost of copper is an issue.

Secondly, if a cheaper and superior alternative to copper for industrial uses comes on the scene (and I'm sure many candidates are either here or in the wings), the issue might resolve.

I cannot believe that either the cent or nickel will actually cease to be produced, though.

Well, that is, until we go to a completely cash-free society...

 

Aluminum and nickel don't mix. You can't easily plate aluminum with metals such as nickel or copper.
In addition, the aluminum version would be too light for vending machines.

A nickel-plated steel coin would be possible, however.

 

Very interesting. I had never thought about that. I've never even heard it brought up before either.

 

I'm sure what you say is true, but why does the mint have to design coins that work in vending machines, when it should be the other way around. They can make their machines accept aluminum coins. Seems simple to me.

 

Aluminum feels so light that I don't think it'll be used for coinage because it'll be such a change for people. But, as has been mentioned, nickel plated steel would work. Look at Canada, they've already replaced their cents and nickels with such plated steel varieties and it seems to work fine. This is the most likely scenario, in my opinion.

Edit: Just thought about the fact that no US coins (except 1943 cent) has ever been magnetic... not sure if this is an absolute policy by the mint or just a coincidence, but plated steel would no longer follow this rule.

 

You're right that the dime and quarter are incompatible, but the dime isn't the coin to go, the quarter is. When (NOT if) the Congress finally acts and eliminates the cent and nickel, then the obvious solution is to drop the quarter and reinstitute the 20 cent piece. Then all prices will be rounded off to the nearest tenth of a dollar and we will have 1-, 2-, 5-, and 10-tenths coins. With such a major overhaul of circulating coinage the sizes could be restructured so that those 4 coins (dime, 20¢, half, and dollar) would be easier to carry like the 4 current circulation coins now are (cent, nickel, dime, quarter).

I like the cent and hope they put it into mint and proof cents for the rest of my lifetime, but it is no longer efficient in commerce and along with the nickel's exhorbinent cost, they are doomed.

 

Ok that sounds good, now what happens to tax. Sales tax here = 5%.
How do the states work out their various sales taxes?
Do they just eliminate them? Highly unlikely.
Do they just always round the tax to the nearest .10? Imagining public outcry here.
Not sure how that would work out.

 

One solution would be the return of tax tokens. In the early-middle 20th Century many states produced tax tokens in both metallic and paper forms, which merchants passed out, and accepted, as fractional cents to reduce the effect of rounding. As I recall, Ohio had the exhorbitant sales tax rate of 2% around the beginning of WW II, and we had little square yellow certificates which were valid only for paying sales tax and making change for sales tax payments. When we moved to California in '43 I recall my great shock at discovering that prices were rounded to the nearest whole cent and there were to tax tokens in use.

I'm not really sure, but I think the practice ended when the feds decided that tax tokens were being used as a form of money, not authorized by Congress, and were therefore illegal. However, there's nothing in the Constitution to prevent Congress from either having the mint produce some form of tax token, or authorizing the states to do so. Of course that would defeat the object of getting rid of the smallest coin denominations. :whistle:

In any event, the Troll's prediction can't possibly materialize for the simple reason that it is far too logical for any American legislative body to seriously consider, let alone adopt. . It it were adopted, the greatest probability is that we would round to the nearest dime instead of the nearest cent or nickle. Oh well.

 

What I find interesting is the total mess that the government made of the whole coinage system by defining our money in terms of arbitrary fiat values instead of weights. Rather than completely overhaul the coinage, I think it would be easier to eliminate the cent and turn what is now a cent into a nickel. The general public will not be likely to resist the "gift" of turning all of their cents into 5 cents, and the cost and disruption would be minimal. Over time, about all that would be needed is to put the number "5" on what is now the cent until the current nickels and cents can be removed from circulation the way they did with silver coins.

 

Now here's an awesome idea, I have thousands of cents here that I'd gladly take 4 cents profit on each 1.

 

You realize, of course, that it was the general public which obeyed Gresham's Law and removed the worth-more-than-face-value silver from circulation, not any governmental program.

In typical bureaucratic idiocy the Mint kept on churning out new silver (dated 1964) for well over a year, alongside the new clad coins - all of which was promptly pulled from circulation. :goofer:

 

I really doubt that they will pull the quarter as it's a popular demonination, and the quarter really is the workhorse of the 6 coins that are minted for circulation. It's also the one that actually circulates the most in the sense that people spend them rather than let them pile up for the eventual trip to the bank.

I heard that adjusted for inflation, when the 1/2 cent was discontinued, it was worth about 11 of today's cents. That would make the cent back then worth about 22 of today's cents. Really, the quarter is today's penny, and the $20 bill is the new dollar. Maybe we should just discontiue the cent, nickel, and dime, and re-introduce the various eagle coins instead.

 

I don't see 'them' being able to eliminate both the cent and the nickle at the same time. I think that would be too much of an emotional shock to the people.

Eliminating the 1 cent and the 5 cent coins does not mean you are eliminating the 1 and 5 cent denominations.

Eliminating the coins would not effect any transactions that are done by personal check, debit card, credit card, on-line payments, money orders, direct deposit, automatic withdraw, etc. All of those would continue to be carried out to the 1/100 of a dollar.
On that note - what percentage of transactions acutally involve cash? All of my bills (house, utilities, trash, phone, car payments, insurance, credit card bills, cable, property tax - everything!) are non cash. Gasoline is non cash. Anything I buy in a retail store is non cash. The only thing I use cash for is to buy rolls of halves.

So what percentage of transactions would this even effect?

Another point - we don't seem to have any problems with rounding now. My tax rate is 74/1000 of a dollar. They always round that up to the nearest cent. I've never heard anyone raise a fit about that. Come to think of it, whenever they ask the folks who live here to vote on a tax, its always a mil - which by definition means its going to get rounded.

Today I paid $1.979 per gallon of gas. When my bill came to $20.1858 do you think I even noticed when my debit card was charged for $20.19? How often does any of this come out to an even cent? If half the transactions are rounded up to a nickle (or dime) and half are rounded down - its going to be a wash.

I don't get the dime/quarter compatibility argument. Lets say we did get rid of the nickle. Everything is now rounded off to the nearest tenth of a dollar. Using dimes and quarters I can come up with a combination that equals everything. If I need to pay thirty cents, I use three dimes. If I need to pay forty cents I use four dimes. For fifty cents I can use either 5 dimes or 2 quarters, or a half dollar for that matter. For sixty cents I can use 6 dimes or 2 quarters and a dime. Am I missing the point?

 

That's might be ok if everyone priced everything in tenths of a cent, and everyone went along with the idea that two quarters is a half dollar and nothing else. But, what if something cost $x.60 or $x.70 and you had 3 quarters? There is no way for you to get those combinations from just quarters, and without a 5 cent coin, no way to make change either. Same if someone priced something at $x.25 and all you had were 3 dimes. Ditto for combinations such as $x.35 and $x.45 which you would have to have the exact combination of dimes and quarters to reach.

 

The government received a lesson in economics on that one.

I assume that some similar hoarding of nickels will occur again, especially if they replace it with cheaper composition coin. But I still think the cent is doomed while the nickel will survive in some form. It's just a matter of when.