(Mike Maharrey, Money Metals News Service) When I was a little kid, one of the highlights of a trip out with my grandmother was getting a penny to stick in the gumball machine. Back in the early 1970s, a penny would get me several small gumballs or one giant one – depending on the machine.
Good luck getting a handful of gumballs for a penny today. You’ll need at least a dime, and more likely a quarter, to stick in that gumball machine.
And pretty soon, you won’t even be able to find a penny.
President Donald Trump has announced the demise of the venerable 1-cent coin, saying he has directed the U.S. Treasury to stop minting them.
“For far too long, the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!”
Trump went on to say he is going to rip the waste out of the U.S. budget “even if it’s a penny at a time.”
According to the U.S. Mint, it costs 3.69 cents to mint and distribute one penny.
In 2024, the mint produced 3.2 billion pennies and lost about $85.3 million in the process. That was over half of the new coins minted last year.
Several countries, including Canada, New Zealand, Australia, and the Netherlands, have already ditched their smallest denomination coins.
When Canada phased out its penny about 12 years ago, businesses were urged to round prices up or down to the nearest nickel. Electronic transactions continued to be billed to the penny.
As of 2023, about 16 percent of transactions in the U.S. were made in cash.
What Happened to the Penny?
If you wonder why the penny is going the way of the dodo bird, look no further than the gumball machine.
A penny simply isn’t worth anything anymore.
Back in 1980, Rep. Brad Sherman (D-Calif.) called the penny garbage.
“My guess is that you won’t do it, but I’m going to suggest that you simply abolish the penny. It isn’t currency, it’s litter. If a police officer saw me throw pennies on the ground, I’d get a ticket for littering, and if I tried to pay that ticket in pennies, the judge would be very upset. The penny has been our lowest unit of currency since 1857, since Lincoln. Now, he wouldn’t throw pennies on the ground, and call it litter, because back then a penny was worth more than a dollar is today, I believe. Certainly, well more than 50 cents.”
He’s not wrong.
But why?
Because the government is destroying your money.
Based on the CPI, prices have increased by over 713 percent since 1970. That penny gumball I bought when I was a kid would cost about 8.1 cents today.
Keep in mind that the CPI doesn’t tell the entire story of inflation. The government revised the CPI formula in the 1990s so that it understated the actual rise in prices. Based on the formula used in the 1970s, CPI is closer to double the official numbers.
On the other side of the coin (pun intended), production costs have gone up due to this same inflationary pressure. Put into perspective, it’s no wonder it costs so much more to produce a penny than it’s worth.
The U.S. government has already devalued the penny.
In 1982, the mint removed most of the copper from the penny. Before that year, pennies were composed of 95 percent copper and 5 percent zinc. Due to rising copper costs (a result of inflation), the mint changed the composition to 97.5 percent zinc with 2.5 percent copper plating.
Similarly, the government devalued silver coins nearly two decades earlier.
Under the Coinage Act of 1965 signed by President Lyndon B. Johnson, the U.S. Treasury removed all the silver from dimes, quarters, and half-dollars. Instead, the government mints coins from “composites, with faces of the same alloy used in our 5-cent piece that is bonded to a core of pure copper.”
Today, you will sometimes hear coins minted before 1965 referred to as “junk silver.”
In reality, we should call modern American coins junk.
The demise of the penny is another example of the same phenomenon.
When Johnson signed the Coinage Act, he insisted that removing silver would have no impact on the value of U.S. coinage.
“[The] Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin,” he said.
Just a few years later, President Richard Nixon made a similar claim when he cut the final tie to the gold standard. He said, “Let me lay to rest the bugaboo of what is called devaluation,” and promised, “Your dollar will be worth just as much as it is today.”
Both men were lying.
When you disconnect money from anything of tangible value, it is going to quickly depreciate. It’s as certain as death and taxes.
And that’s exactly what happened.
Seth Lipsky revealed the extent of post-1965 coin debasement in a 2015 Wall Street Journal column.
“When LBJ signed the 1965 act, the value of a dollar was almost exactly the same as it had been in 1792—0.77 ounces of silver. Despite some downs and ups, on average, it had been remarkably steady for the long span…
“The value of the dollar started sinking after the 1965 coinage act, and by 1980 the dollar—so long valued at 0.77 ounces of silver—plunged to 0.02 ounces of silver. Today, it is valued at 0.06 ounces of silver.”
This currency debasement is ongoing. Today, the penny has been deemed worthless. How long until they get rid of the nickel? The dime? The quarter?
The way things are going, it’s only a matter of time.
This is why you want to have real money – gold and silver. It will not be devalued by government action and can hold the value of your wealth over time.
Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
