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Currency meltdown: U.S. Nickel worth more than 5 cents in metal value


Due to the recent surge in the price of metals, the value of a single United States Nickel is now worth more than itís face value. According to the NYMEX, the largest physical commodity exchange in the world, the threshold was crossed on May 1st.

How could this happen? The answer is short, but not sweet. Rapid inflation in metal prices combined with a devaluing United States dollar, is creating a recipe for currency disaster.

The United States Nickel is composed of 25% nickel and 75% copper and weighs in at 5 grams. With copper soaring to approximately $3.50 a pound, and nickel weighing in at almost $9.00 a pound, the current value of a 1946 to 2006 Nickel is now worth around $0.0535. This is roughly 107% of the face value.

At first sight, this may not seem like a monumental economic issue. Consider the fact that the U.S. Federal Reserve is still minting Nickels even though it costs them 7% above and beyond the salable value, plus the cost to make them. Imagine a company that produced a product and sold it for $100. What if the cost of all the components that went into the product cost them $107, above and beyond the cost of manufacture? It wouldnít take long for the money to run out, and for the business to go under. Not to mention, the product would quickly become in short supply, as it was horded for the value of its components. Now pretend that this product is the U.S. Nickel and the company is the U.S. Federal Reserve.

How can the government deal with this problem? One option is to stop minting Nickels or phase out the United States Nickel completely. Perhaps the Fed could change the composition of the coin to contain cheaper metals, or redesign it to be smaller and lighter. If all else fails, the use of monetary policy to try to increase the value of the U.S. dollar may ease our way through. Regardless of the solution, a public stir is inevitable.

Other coins are also coming close to, or have overtaken, their face value as well. The 1982 to 2006 one Cent coin, primarily composed of zinc, is now worth around $0.009 or 90% of face value according to recent NYMEX metal prices. For those of you who have saved your pennies, the Pre-1982 Cent is now worth over $0.02, or 200% of face value, due to its high copper content. Fortunately for the Fed, other major United States coins in circulation are safe with metal prices ranging from $0.02 for a dime to $0.05 for a quarter.

Senior economic analyst and fund manager Anthony Fleming is available for public appearances and media interviews. For further information or to schedule an interview with Anthony Fleming, call 702-505-4426.


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