Tom Mazanec wrote:An interesting question is whether we will have pennies much longer. There is already heavy negative seignorage on them (and a little on nickels),
MnMark wrote:While there's some emotional satisfaction in saving pennies for their copper content, I don't think that realistically it will ever really be worth your time. As our currency's value falls to zero, copper pennies will nominally be worth a lot more than a penny but their buying power will probably never be more than the buying power of that amount of copper in normal times. That's just not very much copper. My opinion is that it's fine to do as a sort of symbolic activity but in terms of how much possibility it has for actually protecting you it's kind of a waste of time.
I understand and agree with the "deflationistas" to the extent that we are indeed in a credit contraction and a lot of money is disappearing from the system. And if we were still operating on a gold standard, the case of deflation would be a slam dunk. However the government, as is being demonstrated this week, can and will bring into existence as much new money as they want as quickly as they want. Yes, there is a modest time lag between when the contraction in money supply from the credit crunch is apparent and when the government's bailouts and handouts and stimulus plans kick in.
But every government in history that operated on a fiat money basis drove the value of the money to zero, and ours will be no exception. They simply can't resist. They don't WANT to drive it to zero, but the time for fiscal restraint never quite seems to arrive and the "emergencies" of the minute always seem to warrant even more government spending. And the government WILL spend.
We are approaching the time when the interest due on the government debt will be greater than the total amount of tax money collected. We're still a ways off from that, but by the time the national debt has been doubled or more by the latest bailouts and the crash in tax receipts and the skyrocketing interest rates that are coming, we will reach a point where the government has to borrow money just to pay the interest on the money it borrows. Soon after that the mathematics of compounding interest rates will ensure that we have a hyperinflation. We have never had a hyperinflation in memory, so we are vulnerable to it.
Users browsing this forum: Google [Bot] and 0 guests