Sic Semper Tyrannis

The big news for today is that a new crime has been created -- by the US Mint of all places. It is now illegal to melt those pennies and nickels in your pocket, which, thanks to inflation, are now worth more as their constituent base metals than as legal tender.

The new rules allow for fines of up to $10,000 and five years in prison.

You may ship at most $100 of the coins outside of the country -- and only for "legitimate numismatic purposes".

More distressingly, you may now only take up to $5 of these coins out of the country with you.

Having my reservations about the ability of the US Mint to seemingly introduce new jailable offenses, I checked up on the legality of this -- it's unfortunately in the US Code. So the ability to have these rules enacted upon us hangs perpetually over the heads of US citizens.

Follow up:

Why the need for such Draconian measures? The relevant government apparatchik says:

"We are taking this action because the Nation needs its coinage for commerce," said Director Ed Moy. "We don't want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers."

This is a fantastic example of distraction and official deception.

First of all, the Mint's continuance of issuing these coins at a loss to the taxypayer is it's own decision. That is where the "original sin" lies -- not in the actions of any individuals who might be clever enough to realize they can buy and monetize something freely, on the open market, that is being sold below it's inherent value.

Secondly, it is a pretty damn questionable assertion that the nation "needs" pennies and nickels for commerce. The bulk of commerce now is electronic. Pennies (or their equivalents), at least, have even been eliminated in most other developed countries, and they seem to be doing just fine.

Perhaps most importantly, this whole ordeal is a distraction from the fact that government itself is at fault as it has persistently allowed inflation to happen; indeed, it is the root cause of inflation by issuing too much money and allowing too many "money equivalents" to be created.

So there are plenty of non-Draconian alternatives the Mint could pursue, which don't criminalize Americans for the government's own irresponsibility: they could simply discontinue or refactor the offending coinage, as they have done repeatedly in the past. But they want you to believe that they are the innocent victims of circumstance, and that the real criminals are the "bad people" out there who would dare to use these coins in the ways they are most inherently valuable.

As is so often the case, the heavy hand of the law is being used as a substitute for responsible government, at our peril.

There are two important things concerned and outraged citizens can do:

1. Write to the Mint. Make sure to mention that the crime starts with them issuing coins at a loss to you, the taxpayer. (Follow the second link in this article to do this).

2. Start hoarding pennies and nickels. You're effectively giving away free money every time you spend them. At some point in the near future a secondary market will likely develop for these coins, which trades them closer to their inherent value (in fact I've already heard of people assembling and selling 20 lb bags of the worth-2x-face-value pre-1983 pennies). This does not require melting and so is not effected by the law.

Further, hoarding the coins quickly drains them from circulation, forcing the Mint to act sanely and refactor or discontinue the coins, and finally, suspending the criminal penalties. History is once again repeating itself; the government cannot escape the iron laws of the market.

Finally, a few technical points:

• All modern nickels are 75% copper and 25% nickel, and worth upwards of 130% of their face value.
• All pennies are worth more than face value, but pre-1982 through mid-1982 pennies are worth the most, as they are 95% copper (the "new" pennies are 97.5% zinc and only clad in copper; you can scrape the copper off in a few seconds with a steel instrument).
• You can sort the two kinds of 1982 pennies by weight; the copper pennies feel noticeably heavier (try comparing a 1983 or later penny with a 1982 penny in question).
• "Old" pennies are worth more than 200% of their face value; "new" pennies are worth over 110%.
• The inherent value premium of these coins promises only to increase over time, as we have no reason to believe inflation will do anything other than continue (if not accelerate), as will commodities prices due to scarcity relative to global growth.

Update, 1:37pm: This article has a little more. Did you know that, adding production costs, the Mint spends $173 for every $100 of new (zinc) pennies it makes? Your tax dollars at work!

Update, 4:27pm: Here's another fun fact (thanks to Neal for posing this question): if base metal values continue to increase by 5% per year on average, and the dollar continues to depreciate by about the same, then in about 26 and a half years, a nickel will be worth a dollar in inherent value. If the rates are 10% per year, then in a bit over 13 years this milestone will be reached. None of this, of course, takes into account a dramatic, sudden drop in value of the dollar or increase in base metals values.