Lindemann Chimney Supply: Newsletter May 2007

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Lindemann Chimney Supply sells wholesale only to the chimney and hearth industry.

May 2007

A Penny Saved?

If the cost of assembling a Big Mac were higher than its selling price, McDonald's would soon drop it from the menu. Capitalists know that when you're losing money on each unit of production, you can't make it up in volume. The lesson is now dawning on the United States Mint, which reports that because of the high price of zinc and copper, manufacturing a penny now costs 1.23 cents.

This development brings to mind economist Ludwig von Mises' observation about the causes of inflation. "Government," he said,

"is the only agency which can take

a useful commodity like paper,

slap some ink on it, and make it

totally worthless."

The penny, which long ago lost any practical utility-when was the last time you saw anything selling for 1 cent? - has now become nearly synonymous with a complete absence of value. Since 197l, it has surrendered 80 percent of its purchasing power. Today, you'd need a nickel to buy what a penny would buy then.

No one this side of Bill Gates

considers nickels too much trouble to bother with. Cashiers don't keep little "take-a nickel-leave-a-nickel" cups

next to the register. People don't throw nickels in the garbage, as some people do the little brown coins.

Nickels retain some value as a medium of exchange, while pennies are mostly a pain in the neck. Even some banks refuse to accept them for conversion into currency, unless the customer first wraps them in little paper rolls.

So why not get rid of the penny and let

the nickels assume its destiny as our smallest unit of exchange?

Rep. Jim Kolbe (R-Ariz.) plans to reintroduce a bill intended to spare Americans from ever again having to root around in their pockets for

pennies to make exact change, or find a container to stash a form of legal tender that is worth less than its weight in copper. He has the support of a small group called Citizens for

Retiring the Penny, which says that messing with 1-cent coins adds a couple of seconds to the typical retail transaction, wasting $15 billion worth of our time every year.

Supporters of the penny, however,

say people still like it and consider it useful. But the poll they cite, which found 66 percent of Americans in favor of keeping it around, may be

slightly biased. You see, it was

commissioned by Coinstar, operator

of the coin-counting machines

you see at the grocery. The company would obviously suffer if we no

longer had coins of such trivial

value that many people can't be bothered to count them.

Coinstar is not alone in opposing

the change. Americans for Common

Cents a coalition representing coin collectors, organizations that raise

funds through penny drives and a StateTennessee company that fabricates blank coins that the Mint turns into pennies-has several arguments against scrapping the placeCityLincoln heads.

Among them: It would raise prices, hurt charities and "erode consumer confidence in the economy."

It's no surprise that people get

nervous when you mess with their

money. But it's hard to work up serious alarm about these concerns. Some prices would no doubt be rounded up to the next nickel, but

others would be rounded down. A

product now advertised at $5.99- because it sounds better than an even $6 - would have to be priced at $5.95. What keeps prices in check

is not coinage but competition.

Charities, of course, could replace

penny drives with nickel drives. Do they really think people would resist

a kid collecting for a good cause because they would have to give

more than 1 cent?

As for consumer confidence - assuming consumers are truly pessimistic that the economy

would go south after a nuisance

is phased out, reality would soon revive their spirits.

If the concerns raised by supporters of the penny were truly valid, they would argue for not only keeping the penny but also bringing back the half-cent coin, which the government made until 1857. Why should we all pay an extra half-cent when prices are rounded up to the next penny? Wouldn't halfpenny drives be even better fund-raising engines, pulling donations out of all the people unwilling to part with an entire cent? Come to think of it, why not create a quarter-cent coin?

But that's absurd.

No one would want to clutter up her purse or his pockets with little pieces of metal holding an approximate monetary value of zero.

Would they?

BACK ISSUES OF OUR NEWSLETTERS

May 2007

A Penny Saved?

April 2007

White Gold

March 2007

Health Insurance

Jan/Feb 2007

Ben was right