Posted on 02/20/2011 11:34:57 AM PST by blam
Why You Need To Own America's Last Honest Currency, Now
Robert Wenzel
Feburary 18, 2011
I have been writing about the great investment opportunity in nickels for some time. Nickels are an inflation hedge. Nickels are a deflation hedge. And you can buy them at a discount to their metal value. What's not to like?
Gary Gibson does a great job of explaining the dynamics of the nickel:
Every single circulating nickel still has 3.75 grams worth of copper each…along with 1.25 grams of nickel. Copper is currently about $4.46/lb. Nickel is currently about $12.97/lb. So if you do the math, each nickel is worth about 7.3 cents.
120 nickels pieces is worth $6.00 at face value. Those 120 coins contain about a pound of copper and 1/3 pound of nickel. That’s about $8.76. You can’t cash in on this arbitrage directly (anti-smelting laws for pennies and nickels were introduced in late 2006). But the bullion market for cupronickel coins will develop, just as it did for silver US coins. This will happen once the government starts minting five-cent pieces made out of cheaper metals.
To those who doubt this will happen, I refer you to the bags of silver coins trading as bullion for over 20 times their face value. You can easily order such a bag right now by going to any of a number of online bullion dealers. These bags of coins sell right alongside silver bars and rounds.
Right now, the government is subsidizing your copper and nickel purchases…and cutting out the middleman. As much as we complain about government, we ought to stop and offer them a little thanks for this one.
What’s even more interesting is that hoarding nickels provides an imbedded hedge against deflation. That’s because a nickel will always be worth a nickel, at least. So if the dollar strengthens and copper, silver, and gold all get cheaper in dollar terms, you can still spend your nickels just like any other money. Your purchasing power stays the same, maybe even increases.
But if the dollar declines, then the value of the cupronickel in the currency will rise against the face value. Eventually – at two or three times face value – these five-cent pieces will trade as bullion just as 90% silver quarters and dimes did and still do.
Again, there is currently no transaction cost to saving in nickels and no risk from plummeting metal prices. There is literally nothing (in case of deflation) to lose and everything (in case of inflation) to gain.
Your only real problem is storage; a few thousand dollars of nickels takes up a lot of space…and it’s heavy. But people had the same problem with silver when it was cheap. I doubt they’re complaining now. [Silver coins trade at 20 times face value]
Having “too much” cupronickel won’t seem like much of a problem if inflation continues to drive the cupronickel in five-cent pieces far in excess of face value. The cupronickel is America’s last piece of honest currency.
How long until we get steel and zing “nickels?”
No longer than another year.
The only amusing part will be hearing their bogus rationales.
so when the SHTF is someone supposed to haul a truck load of nickels to the store to see if they will take it for a loaf of bread. Sorry, I don’t get this.
ditto pre=1982 pennies
Their composition hasn’t changed yet?
Isn’t it illegal to melt down US coinage for the metal content??
Good post, but I’m surprised that the nickel is the last honest currency, I figured it would be nickels AND pennies.
Nope. Still 75% copper and 25% nickel.
Thanks.
Allow an anecdotal example from Weimar Germany's hyperinflation. An old preacher had supposedly tossed his collection-plate copper Pfennigs (sp?) into an unused bathtub. Over the decades he had collected thousands and thousands of the German copper pennies.
During a period when a wheelbarrow load of paper Marks could not purchase a loaf of bread, he could still buy bread with handful of real copper coins. They still had real, intrinsic value.
It’s a matter of their known, quantifiable intrinsic value. That sets the true market price. No need to melt them down.
No, the way I see it, if nasty deflation comes that nickel might buy that loaf of bread; if a nasty inflation comes you can sell that nickel for near intrinsic value (like silver coins today) and buy that loaf of bread with the proceeds.
While a tad bulky, $1,000 in nickels at 10x face returns $5,000. Not a bad return in exchange for tying up some bucks for a year or so.
Read the article again and think about it.
You may not need but a couple nickels to buy the $25.00 loaf of bread.
A $2.00 roll of nickels coulds be worth ,(I don't know), a hundred dollars then.
$10,000 (brain flatulence).
Forget it, I’m investing in America’s future currency: lead! Eat that, socialists!
Yes, pre-1982 pennies too. They are almost 100% copper...I think they're worth about 3.2 cents each.
How would they enforce that?
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