I’ve been warning SurvivalBlog readers about the debasement of the nickel for several years. It now costs the U.S. Mint 11.2 cents to produce each nickel, so debasement seems inevitable.
After a two-year study, testing 80 different alloys, the United States Mint’s findings on alternative metals were announced on December 14, 2012. In essence they’ve said: “We need more time.” Here is the key line from the report summary: “The Mint has made significant progress and, at this time, has concluded that additional R&D is necessary before it can recommend any changes to the current coin composition.” Here is a link to the full report.
Based on the biennial R&D report, the U.S. Congress will probably either delay making changes to the penny and nickel, or they may just suspend further production. (Following Canada’s lead, with pennies.)
Hopefully the Mint’s dawdling will give us another year or two to stack up our boxes of nickels. (Once a composition change takes place, we will have to laboriously sort nickels.) If you read the contractor’s report, you’ll see that one of the goals of the planned debasement is that is be “seamless“, meaning: “Differences and abilities to recognize or process incumbent coins and coins produced from alternative material candidates cannot be distinguished through normal coin processing.” That is bureaucratic doublespeak for “Let’s make our new worthless tokens look like real coins, even to vending machines.”
I found the following buried in the contractor’s report:
“Stainless steels, despite the having an electrical conductivity that is about half that of cupronickel, were recommended for testing for the 5-cent coin. The ideal stainless steel for coinage would be non-ferromagnetic (so it would not be mistaken for a steel slug), have low flow stress (i.e., result in low striking loads), have excellent corrosion resistance and be comprised to the greatest extent practical of elements that are not as expensive as nickel. Nickel and molybdenum contents should be low to reduce costs. Austenitic stainless steels (3xx series) are preferred because they are non-ferromagnetic and thereby are more likely to be accepted by a majority of fielded coin-processing equipment.”
So I stand by my assertion that unless this denomination is dropped altogether, the cupronickel five cent piece will be replaced by a stainless steel token. It now appears that the 301, 302, 302HQ, or 304 stainless steel alloys are the most likely choices. Perhaps they’ll lean toward choosing 302HQ or 304, since they both include some nickel for Austenitizing. Hence, the bureaucrats could save face (partially) by being able to claim that the new stainless steel slugs are still “nickels.” But they’ll still be just about worthless, compared to a real cupronickel nickel which contains more than five cents of base metal value. (See the details at the Coinflation web site.) The report cited a fully burden production cost (including base metal, tooling, labor and transportation) of 6.77 cents to produce each nickel out of stainless steel, but that is certainly an improvement over the current cost of 11.2 cents. To the citizenry at large, the real consequence of the debasement is this: The melt value of a stainless steel nickel will be less than half a cent. We will be robbed again folks, just like our parents were, in 1964. Let’s not lose sight of the real underlying crime: general currency inflation. There would be no need to debase coins except for continuing, insidious inflation.
The goal of all government mints is to maintain seigniorage –which is making a profit on the coins that they produce. (Where their cost to produce each coin is less than its face value.) The U.S. Mint’s current champion of positive seigniorage is the much-maligned Sacagawea/Presidential “golden” dollar coin, which is a Manganese-Brass token with a base metal value of just 6.22 cents–just one cent more then the base metal value of a nickel. No wonder people instinctively hate them. (By the way, I consider putting a “gold” finish on those coins the most heinous bit of legerdemain in the history of the U.S. Mint.)
Governments don’t put up with negative seigniorage for very long. Debasement of nickels and pennies is coming, but thankfully the wheels of bureaucracy turn slowly. Let’s just be thankful that we’ll have a some more time to keep stacking up our nickels.