Posted on 09/25/2024 8:26:15 PM PDT by Red Badger
A recent comment by Chicago Federal Reserve President Austan Goolsbee gives you a glimpse into how Fed people think and helps to explain exactly why you’re paying more for everything.
It’s almost as if inflating was hardwired into Fed members’ brains.
Goolsbee recently sat down with Illinois Treasurer Mike Frerichs during the National Association of State Treasurers conference in Chicago. In the course of the conversation, the subject of pennies came up.
There are a lot of people who think the U.S. Treasury should do away with the penny. This would make sense financially. It costs about 3 cents to mint the 1-cent coin.
“How stupid do you need to be to mint money at a loss?” Goolsbee asked.
But there are about 250 billion pennies in circulation. That’s about $2.5 billion in pennies.
So, if we’re doing away with pennies, what happens to all those coins?
Goolsbee thinks we should wave a magic wand and declare pennies are all worth 5 cents.
“Pennies just become nickels,” Goolsbee said.
Well, OK then!
While we’re at it, can we declare dollar bills are worth a hundred?
This (bizarre) plan is apparently based on an idea presented by a Chicago Fed economist. He said there should be a “voluntary, universal declaration” that pennies are worth 5 cents.
I’m not even sure what that means, much less how it would work. It seems to imply there would be no government edict. Everybody would just agree, and voila.
Logistics aside, this idea shows you exactly how Fed people think. Money is created on a whim. It exists by decree. If we need more money, well, just say the word and “poof” — we have more money.
This is just a scaled-down version of the $1 trillion coin.
It’s also pretty much how quantitative easing works.
In a QE operation, the Federal Reserve buys securities (primarily U.S. Treasuries and mortgage-backed securities) on the open market with money created out of thin air. This is sometimes referred to as “money printing.” Of course, the Fed isn’t running off $100 bills in the basement of the Eccles Building. It’s more like using a debit card when no money is in the account. With a few keystrokes, the central bankers at the Fed transfer money that never existed until that moment to a bank or financial institution in return for securities.
Money creation is, by definition, inflation. One symptom of monetary inflation is rising consumer prices – price inflation.
This is what the Fed does.
And this is how Fed people think.
This thought process is a natural byproduct of a fiat money system. Money can be created on a whim. Governments love this kind of system because it enables government borrowing and spending far beyond anything possible in a sound money system. Fiat money drives big government!
As I talked about recently, inflation is the Fed’s stated policy. It’s on purpose. So, I suppose it’s not surprising that a Fed president would think declaring pennies are nickels is a great idea.
But from a normal person’s perspective, think about the inflationary impact of the move. Instead of $2.5 billion in pennies, we would suddenly have $12.5 billion in pennies.
Now, if you have a bunch of pennies lying around, this might seem like a good idea on the surface. You could buy more with your pennies. But so could everybody else. The bidding war would drive up prices, and you wouldn’t be any better off.
This is exactly how monetary inflation works, but on a much larger scale.
Of course, the penny plan pales in comparison to the $5 trillion the Federal Reserve created out of thin air running QE during the pandemic. But Goolsbee’s flippant attitude about creating more money is indicative of the root of the problem.
And it is exactly why you should never expect price inflation to go away. They don’t want it to go away. They just hope you don’t notice.
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
For the rate to be honest for the value lost in the dollar in the last 100 years... a penny would have to be declared to be a dollar.
Are they going to put bumblebees on them?
There’s an interesting story behind the nickel. In 1967, I remember it was, I got up in the morning and made myself a piece of toast. I set the toaster to three: medium brown.
?.....................
Sounds like a monetary ‘solution’ implemented in some far flung province of a disintegrating empire, not modern fiscal policy.
We can't bust heads like we used to. But we have our ways. One trick is to tell stories that don't go anywhere. Like the time I caught the ferry to Shelbyville. I needed a new heel for m'shoe. So I decided to go to Morganville, which is what they called Shelbyville in those days. So I tied an onion to my belt. Which was the style at the time. Now, to take the ferry cost a nickel, and in those days, nickels had pictures of bumblebees on 'em. Gimme five bees for a quarter, you'd say. Now where was I... oh yeah. The important thing was that I had an onion tied to my belt, which was the style at the time. You couldn't get white onions, because of the war. The only thing you could get was those big yellow ones...
(and no, you don't get paragraphs for Grandpa Simpson rambling)
In this roaring economy, I finally found my first 2024 pennies. And I’d been looking. Every year since the early ‘70s, I’d find the new coins in April. Still haven’t seen a ‘24 nickel or dime. Two of the quarters, but not many of those.
The Babylon Bee got outflanked again!
I was shocked recently to find out the cost of a physical newspaper of my local liberal rag is now $4 for the regular daily edition. Not that I would ever get one but the price did shock me. When I was a kid they were a dime.
Irish coin art is the most beautiful in the world
Well, why not.
They have already made dollars to be pennies in buying power.
A centsless act
And then? Come on, man! Don't leave us hangin'!
Regards,
Pennies used to be made out of copper. Then the copper in them became worth more than a penny so they became copper coated Zinc. What is next? Copper coated steel? (By the way try and find a 1943 penny that is not steel, if it is copper it’s worth a lot)
I remember reading something about the 1-lira coin being used by clothing manufacturers as button backs. Pennies here became useless when they started making them out of copper plated zinc.
Might as well do it...1904-1982 pennies are already worth 2.9 cents (melt value):
https://www.coinflation.com/coins/1909-1982-Lincoln-Cent-Penny-Value.html
Other coins (i.e. pre-2014 nickels):
That’s about $2.5 billion in pennies.
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That would instantly create 4 x 2.5 billion = $10 billion of money out of nowhere. Stupid idea.
Tools bee needed to preface his response with, “I was born in a middle class family, and people were proud of their lawns.”
Make the penny out of pure copper. Then it will be worth a lot more than one cent. Say...maybe we could mint larger denominations out of silver. Gold even! Now that money would be worth something.
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