Penny-Ante Inflation?

Quoted in The New York Sun:

That’s because under a fiat money regime, currency loses any relation to the value of the circulating medium. The cost of the metals that now comprise a penny — mostly zinc, with a dash of copper — now exceeds the face value of the coin. “The demise of the penny,” a former Treasury official, Alex Pollock, a Sun contributor, tells Mr. Grant’s newsletter, “is a pointed reminder of the Federal Reserve’s unrelenting depreciation of the U.S. currency.”

Mr. Pollock takes 1950 as a point of comparison to explain the penny’s fate. In the 75 years since then, he says, “the purchasing power of a penny has dropped by 93 percent,” meaning that today’s coin “is worth about 1/13 of a 1950 penny.” He traces the penny’s doom to the fact that “nobody in 1950 thought they needed a coin worth 1/13th of a cent and we don’t need a coin of such little value, either.”

Following this logic, Mr. Pollock adds that “a nickel in 2025 is worth about 3/8 of a 1950 penny, and a current dime is worth 25 percent less than the former penny.” Is the writing on the wall for these coins, too? “With the Fed’s earnest promise of perpetual inflation, we soon won’t need nickels and dimes,” Mr. Pollock reckons. “Meantime, the current quarter is worth 1.8 pennies of 1950,” he adds.

So it is that, in Mr. Pollock’s telling, “the Fed has transformed two bits into less than two cents.” He marvels that “continuous inflation has remarkable shrinking power.” It marks the vindication, too, of a warning in 1966, in the twilight years of honest money, by National Review’s William Rickenbacker. He lamented how America had just removed the silver from its coinage, “practically unchanged from the birth of the republic.”