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A Plastic Penny?

by Elaine Schwartz    •    May 12, 2010    •    TIME TO READ: 1 minute

How do you feel about the penny and the nickel? If you care about the federal budget, you might want to mint them more inexpensively. But, if you own a laundromat, you disagree.   

Pennies are actually copper coated pieces of zinc while nickels are nickel (but mostly copper). It costs close to two cents to mint a penny and sometmes as much as nine cents for a nickel. Making them more cheaply could mean replacing the copper in a penny with an aluminum alloy. The nickel and the penny could both be made of plastic.

However, just switching from copper to zinc in the penny was controversial when President Reagan proposed it in 1981. A recent WSJ article described the uproar.  Some said we should not become dependent on foreign zinc suppliers (Canadian). Others said tradition was crucial. Vendors wanted to avoid retooling their coin machines. Plastic coins stir up even more emotion.

Do care if your penny is plastic?

The Economic Lesson

Anything can be money, a piece of paper, a circle of zinc, or a seashell, if it has three basic attributes:

  1. It is accepted as a medium of exchange. For example, you and I are willing to use the commodity in a supermarket. A peso or a tie is not a medium of exchange in the United States. The nickel is a medium of exchange.
  2. It is a unit of value. We all know how much purchasing power a nickel represents but not necessarily the yen.
  3. It is a store of value. We all like our money to retain its purchasing power if we do not spend it immediately.

 

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