One of the side effects of a rising CPI is that the value of our money falls. (Duh!)
No, really. The Dollar today can buy what it would have cost 2 cents for in 1913, when the US FED was created. A Penny today can buy… just about nothing. Go into many supermarkets and other stores, and you’ll see a little container with words like, “Leave a penny, take a penny.”
The Penny costs almost double its face value to produce. The metal alone costs about a cent and a third. And, that’s even after the copper
stopped being used (replaced mostly with zinc). Making money somehow is unprofitable for our government.
There have been several attempts to discontinue making Pennies, but the Illinois delegation in Congress (Illinois is known as the “Land of Lincoln” who’s on the Penny) always raises a big stink.
Nickels also are a loss leader for the Mint, costing about 9½ cents each. Is this any way to run a business? (I guess they make it up on volume.)
You might expect that each of the denominations of Federal Reserve Notes would cost the same to make, but you’d be wrong. I was surprised to find that, the larger the denomination, the greater the cost. A $1 and $2 Bill each cost about 5.4 cents each to make, while a $100 Bill costs 13.1 cents. That doesn’t make cents sense to me.
With the FED continuing its century long policy of debasing the currency, and even saying that, “Inflation is too low,” we can expect the value of each of our monetary units to go down, as the cost to produce each one goes up.
Zimbabwe handled their more costly money production problems by adding more zeroes:
I suggest we try a different approach, which has been used successfully in other countries. Let’s revalue the Dollar. There are three logistical steps:
- Print new Bills for each paper money denominations
- Call in and replace the old Bills with the new ones through banks
- Declare that coins will continue to be interchangeable with the new Bills at the same rate as the old ones (100 Pennies = 1 new Dollar)
To make the process as easy as possible for Americans to understand, I suggest either a 10 for 1 revaluation (back to the value of 35 years ago) or a 100 for 1 revaluation (around the value 100 years ago). Either rate will work just as well, but either way Americans will get a clear message of the losses they have suffered at the hands of the FED.
Since the money printing of the FED caused the debauchery of the Dollar, the revaluation ought to be tied to the abolition of the FED, which I already have called for.
To prevent future episodes of paper money printing, we need to re-institute a hard money system in the US. Many observers have suggested a Gold Standard, but I prefer a mixed Silver & Gold Standard.
The US now mints “Legal Tender” Silver and Gold Coins. A 1oz Silver Eagle has a face value of $1, while a 1oz Gold Eagle is $50 face value. Rather than printing new Bills, we should use coins of the following weights and denominations:
1 oz Silver = $ 1
2 oz Silver = $ 2.50
1/5 oz Gold = $10
½ oz Gold = $25
1 oz Gold = $50
2 oz Gold = $100
These Coins, in quantities sufficient to replace existing paper Bills, would require the US to purchase Silver and Gold bullion on world markets for several years (to be added to Gold already owned). These purchases will push up the prices, so I expect a scheme such as this would require the 100 for 1 revaluation.
A revaluation is not something that can be planned for and implemented all at once. A 100 for 1 plan which I favor would take many years. Either way, it would be beneficial for our country.
A Final Note: A beneficial side effect of the revaluation of the Dollar is that the cost to make each Coin and Bill will decrease greatly as a percent of the face value compared to today.