- Personal Finance
The Cost In Making Money
Think about making money. The recent founder and creator of Alibaba, a man in China, 15-20 years ago in his apartment, began with a website selling products. Today, he is a billionaire. His costs to start were nominal but as he made money he reinvested the money and made more money!
Ah, but that is not what this about. It is about the costs in making money, American currency, and is there a point to it anymore because it is not cheap. Well, it is necessary because there is no cashless society and probably never will be. But, the one coin that is a nuisance and one that most will just toss away is the penny. So far, in 2014, the US government has made over 7 billion of them. That is more than all other American coins combined. The U.S, Mint makes them not because people want them but because banks demand to have them. For some bizarre reason, 25% of all pennies simply vanish from the currency. But there is more, the U.S. government spent $114 million in making this most annoying coin. It spent $83 million in making nickels, $72 million in dimes and $133 million in quarters..
But it is not cost effective to make the penny. It actually costs 2.5 cents to make 1 cent, while to make a nickel, it costs 11 cents. For an odd reason, a quarter (25 cents) can be made for a dime (10 cents). Does ANY of this make economic sense? Nope. However, the average coin made stays in circulation for 30 years. hmm, so maybe the investment IS worth it? Think of many times a quarter made in in 1980 has exchanged hands and it is still working!
Congress insisted that the U.S. Mint make a penny for less than it is worth. After a lot trying using different alloys and compositions, they gave up. The cheapest a penny could be made for was for 1.5 cents. Most pennies made now are comprised of zinc not copper. But getting rid of the penny from the US currency is a serious issue that the American government has debated, I kid you not. Back in the 1800's, the US made some odd denominations, such as, three and 2.5 cent coins. Can you imagine dealing with 2.5 cent coins?
If America ever gets enough nerve to get rid of the penny, it will join other countries that did so, like New Zealand, Australia. Heck, the Zealanders even got rid of their 5 cent coin.
I am not bashing the penny, but it is such a useless coin and the cost to make it is simply not worth it.