When investors and traders lose confidence in a country whether it’s in their economy or government, the country’s currency usually gets dumped.
Here’s something I found today that makes me want to shake my head sometimes about some of the decisions the US government makes.
It’s an interesting article from AOL Money & Finance discuss the United States Mint possibly ridding of the penny. Why?
"…"the US Mint estimates the cost of producing and distributing a penny at about 1.23 cents…"
The US government is basically losing 23 cents for every penny they make. Ben Franklin’s famous saying, "“a penny saved is a penny earned” should be changed to "four pennies made is a penny loss".
The reason the penny costs more than its worth or more accurately speaking…worth more than it can buy is due to the increasing costs of materials to make it. Believe or not, the penny is mostly made of out of zinc, and not copper.
Before 1982, the penny was made out of 95% copper, but due to rising cost of copper, the US Mint had to make changes to its penny recipe because they were starting to lose money. Today, this "old school" penny would cost about two pennies to make. Would you make pay two pennies to make one penny???
Benjamin Franklin would have to change his quote yet again to, "A penny made is a penny loss."
So after some tinkering with penny recipe, the pennymakers at the US Mint decided to substitute most of the copper for zinc. Zinc was dirt cheap those days so them pennymakers thought they were geniuses.
Unfortunately, the price of zinc has been rising like a hot air balloon.
Source: London Mercantile Exchange
So now we’re back to where we started. The US government loses money on every penny made. What business in their right mind would create a product and sell it at a loss?
That’s like Microsoft selling their original Xbox for $300 when it costs $450 to make or Sony losing $100 on each PS3 they sell.
Oh wait…that really happened. And what happened to their stocks?
It got dumped.
Get the picture?
By the way, did you know the nickel currently costs 6.32 cents to make?