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[jonathankaplan]

I've been thinking a lot lately about the Richard Nixon entry I promised to make, but seriously, it is too bleak and ugly (and not done yet) so now for something completely different.

Comments

[madwriter]

I was about to take this poll, but I realized a lot will depend on just how bad this Great Recession gets. Or more to the point, whether we get hit with serious deflation or inflation. I could definitely see, for example, a $500 bill coming back into circulation if hyperinflation is in our future. But I also seeing pennies being a lot more tenacious than people believe.

[jonathankaplan]

Part of the reason for the poll was to get a sense from you guys whether you're expecting inflation or deflation, so, you deftly avoided that one...smile....

Cents (the mint doesn't want to call them pennies) are becoming (and have been) a commodity cost issue, though. It isn't generally known, but pennies from before 1982 (composed of almost all copper, with a bit of (usually) zinc) are worth more than 2 cents a piece, just for the copper melt value. Even today's pennies (almost all zinc, with a thin copper plating) are worth about 7/10s of a cent. Those numbers are too valuable relative to the nominal coin value, and foreshadow the potential of illegal melting. But I just read some talking head congressman on the minting committee pointing out that the higher coins (dimes and up) all make much larger profits than the cent loses, so he doubts if anything changes soon.
So, those pre-82 pennies are leaving circulation as we speak.

www.coinflation.com is a great site to learn more (and keep up) on this specific.

[madwriter]

Yeah, hypothetically speaking I might know someone who collects pre-
82 copper cents. :)

I read awhile back that sometime recently...maybe December 2007?...that the Treasury came out with a rule that you couldn't melt copper cents. Where they get the authority to make any rule applied to the general public I don't know, since they're not Congress. Or am I being too much of a Constitutional literalist?

As for the hyperinflation vs. deflation issue, I've read good arguments predicting both, articles in equal measure. I think the stronger probability is inflation, but that's my gut talking rather than anything I can pinpoint.

[jonathankaplan]

Technically, if it came down to a US Supreme Court argument, I think the government loses the melting down issue. The Mint makes the coin, then sells it to the Fed for face value. The Fed then distributes it as needed to Federal reserve banks, which sell them to customers as each of them needs it. The coins aren't owned by the government, they are owned by the individual, or, on stronger footing, the populace as a whole, distinct from the government itself. If the individual wants to melt his butter he can, same thing with cents (almost).
That would be a big battle though.

I'm more and more thinking deflation. Been a long time since we have experienced it here, so it is harder for the gut to grab that feeling than it is to grab hold of inflation. Lot easier to know what that is generally like.

Thanks!

[nokomisjeff]

Being one who likes to quantify things, this is not a 'Great Recession." It was a lot worse in 1977-80. Problem is that we have a 24/7 media telling us how bad things are.

[jonathankaplan]

I disagree big guy. It is too early to quantify as if the event is more than partially done. Besides, you live in NYC, an international gateway somewhat insulated from "this time" issues. In the heartland, with 10%+ unemployment, mass empty storefronts and housing, banks unwilling to lend and small businesses closely daily, it is clear to see we aren't done yet.

[nokomisjeff]

Actually, things are pretty tough in Manhattan right now. In fact, I went by one of my favorite restaurants on Madison, to find it closed. I would speculate that Manhattan is experiencing a net decrease in population right now. There's a lot of empty storefronts on Madison and even 5th ave. I know in my hometown in Florida, things have picked up considerably, except for construction. The county has reported a huge increase in sales tax, which indicates more business activity. Still, it is a buyers market out there and I'm in the process of getting a coop at the Carlyle for 40% of what it sold for 5 years ago.

[jonathankaplan]

They are pretty tough in Manhattan, and you are insulated (imo) so it should be easy enough to see they might be even tougher where foreigners don't visit (and spend and tour, purchasing property, etc.).
Down more than half in 5 years sounds like a nice solid deflation to me.
Congrats!

[corwyn_ap]

1. My understanding is that the thing standing in the way of getting rid of the penny is state sales tax. Will that be gone or simplified across all states? I doubt it.

2. The Mint is loathe to revoke money as it leads to an appearance of insecurity. If people are willing to bury the stuff (or use it in basically out of circulation (illegal) deals), the country gets basically free loans for that amount, yes?

3. Seems unlikely without massive inflation. Most people don't see a lot of 100's as it is. And again, the DEA likes money to be 1/3 the value of drugs by volume.

4. Currently (I believe) they got something which can be read from a distance, at the last big redesign. GPS wouldn't get you much more than this since it would tell _the bill_ where it was, but not anyone looking for it. You would need a transmitter to get appreciable distance, with its attendant power requirements. It would never pass the stress test they put bills through. A much easier solution would getting rid of bills and coins altogether.

[corwyn_ap]

I didn't mean to imply that it would be hard to fix sales tax, just that it would require either coordination on the part of 48(?) states, or heavy handed federal pushing. Both of which seem unlikely without more motivation.

Sure, they _could_ invalidate the currency. But then they lose the benefit of those uncounted billions in 'not in circulation' transactions, one way or the other. The US has historically (with possible (depending on your outlook) exception of the civil war) gone out of its way to ensure that people always believe that their greenbacks will be good forever. If you run your bills through a shredder, they are still valid.

[jonathankaplan]

I think the US is headed for more heavy handed federal pushing. A sales tax increase of rounding up to the dime is something I could see happening, more easily than you see it, perhaps. We have the motivation, this next couple of years will be very telling for the state of US finance

[zeakk]

I strongly dislike that your poll's answers support my theory of all the reasons why I could be dead in the 2020s.

[jonathankaplan]

Naw, you won't be dead.
But as an American, your life will be harder than those of the two generations before you, in many ways. Sorry about that, I didn't do it.

[zeakk]

As a megalomaniac I presume that I will be a part of the catalyst which leads to my own death. I understand politics, people, and mobs better than average. I understand political thought, nationalism, and working governments. Add to this mix the knowledge of what achieves a diplomatic or military victory, and how they support each other and can achieve the same goals.

In short, I go looking for trouble. I have big ideas and ambitious that would suffocate most men.

[jonathankaplan]

After reading that, I'm just hoping you're not in Afghanistan.
Look for trouble here, without guns, and you'll make it.
I'm rooting for you, unless your ambitions are TOO political, then oops, I'm rooting against you. If there were some way to only fill offices with (generally) less ambitious people, we might be better off.

Re: RFID

[jonathankaplan]

I agree with all of that. Who says I didn't factor it in, just more subtly, obliquely.

If you don't know already, I am sure you'd like the website www.coinflation.com