Is Abe getting a raise?

William Schertz

The penny’s decreasing worth has led to talk of increasing its value. What could this mean for your wallet?

You can’t buy anything with a penny anymore, but you might eventually be able to trade one for a nickel.

The idea of a five-cent penny may seem a bit odd, but that’s exactly what Francois Velde, senior economist at the Chicago Federal Reserve, is suggesting.

In a Chicago Fed letter that came out last week, Velde noted that with rising metal prices it costs the government more to make pennies and nickels than what the coins are worth at face value. Because of this trend, the government is worried about a possible shortage of small change brought on by speculators who melt the coins down to sell raw materials for profit.

Velde said rebasing the penny at five cents would debase the value of the nickel, saving both from their “melting point.”

Gina Teti, junior German translation major, is a penny saver, so she said she was excited at the idea that pennies could be turned into five-cent pieces in the future.

“Ooh, that would be nice because my grandpa just gave me a huge jar of pennies,” she said. “That would be pretty awesome, actually. Maybe I could finally use them for parking meters.”

Recently the United States mint created legislation banning the melting of coins, but Velde said this type of action will not be a huge deterrence for those with the means and the desire.

“The prohibition on melting is a stopgap measure that, at best, increases the cost of melting by a small amount,” Velde wrote. “History shows that when coins are worth melting, they disappear.”

Most college students don’t have access to the equipment one would need to melt coins, but a lot of them have grown accustomed to tossing the relatively worthless pennies.

“They’re just in the way really,” said sophomore English major Kevin Lloyd. “More and more people are just throwing them away. Guys don’t really carry around a pocket book, I mean, so where the hell are we going to put all these damn pennies?”

Michael Ellis, associate professor of economics, said the purchasing power of pennies has decreased significantly through the years, mostly because of inflation.

“The fact that they’re not that valuable can be seen in the penny trays you see in places,” Ellis said. “Their usefulness has decreased.”

If pennies were turned into five-cent pieces, Americans with full piggy banks everywhere could suddenly find themselves a little bit richer, but Ellis said it probably would not make a difference for the average person.

Ellis said if anything, people could expect to see increased prices for goods and services and possibly higher sales tax rates, as everything would have to be in increments of five.

“If firms have the option to round prices up or down, they’re probably going to go up,” Ellis said.

Contact features reporter William Schertz at [email protected].