Coin Dealer Responds to the END OF THE PENNY

Key Concepts

• Penny Discontinuation: The US Mint has stopped producing pennies for circulation, marking an end to an era.
• Digitalization of Currency: The move away from physical currency like pennies is seen as a step towards a more digital financial system.
• Silver and Gold Market: Fluctuations in silver and gold prices are influenced by interest rate expectations and Federal Reserve policy.
• Barter and Precious Metals: 90% silver coins, like Mercury dimes, are highlighted as valuable for barter due to their intrinsic silver content.
• Coin Collecting: Discussion of various collectible pennies, including historical errors and key dates, with emphasis on condition and rarity.
• Monetary System Evolution: The discontinuation of the penny raises questions about the future of lower-denomination coins and the potential for rounding in transactions.
• Hoarding and Melting: Speculation on whether the discontinuation of the penny will lead to hoarding and potential legal melting of copper pennies for profit.

Penny Discontinuation and the Shift to Digital

The United States Mint has officially ceased the production of pennies for circulation, with the last ones minted on a Wednesday. While collector versions like proofs and reverse proofs will still be made, the penny will no longer be produced for everyday transactions. Stores will continue to accept them as legal tender, and melting them remains prohibited. This discontinuation is viewed as a significant step towards a more digital financial landscape, potentially leading to the eventual phasing out of physical cash.

Implications for Other Coins and the Monetary System

The elimination of the penny raises concerns about the future of other low-denomination coins, particularly the nickel, which is speculated to be the next on the chopping block. The current economic reality, where very little can be purchased for under a dollar, suggests that coins like the penny and potentially the nickel are becoming more of a marketing tool than a practical medium of exchange. This trend could lead to a monetary system where transactions are rounded to the nearest nickel or even dollar, similar to systems in countries like Mexico or Israel. The historical precedent of the half-cent being discontinued due to inflation further contextualizes the potential evolution of the US monetary system.

Generational Shift in Payment Methods

A notable observation is the generational divide in payment habits. Younger generations, particularly those under 40, are increasingly opting for digital payment methods like cards and mobile devices over cash. This contrasts with older generations, like baby boomers, who are more accustomed to using cash for transactions. The increasing prevalence of contactless payments via phones and watches signifies a rapid move towards a cashless society.

The Silver and Gold Market

The prices of silver and gold experienced a slight dip. This is attributed to two primary factors: normal profit-taking after recent gains and a widespread belief that the Federal Reserve will not lower interest rates further this calendar year. The anticipation of a new Fed chairman early next year, coupled with the current chairman's stance on interest rates, is seen as a driving force behind the downward pressure on precious metals. This dip presents a potential buying opportunity for investors.

Precious Metals for Barter and Storage Solutions

Mercury Dimes as Barter Currency

The discussion highlights the appeal of 90% silver coins, specifically Mercury dimes, for barter. Unlike Roosevelt dimes, which transitioned from 90% silver to clad, Mercury dimes were exclusively minted in 90% silver, making their silver content readily identifiable. While some may express concern about wear on older Mercury dimes, their appeal for barter is strong, with more Mercury dimes being sold than Roosevelt dimes. The preference between Mercury and Roosevelt dimes for barter is posed as a question for viewer engagement.

Stacker Vaults for Silver Storage

Stacker Vaults, manufactured in the USA, are presented as an excellent solution for storing silver coins and rounds. These vaults protect silver from environmental elements like air and water and are portable, making them suitable for emergency preparedness. Their availability is limited, with stock selling out quickly, indicating high demand. They are also suggested as a potential Christmas gift for silver enthusiasts.

Collectible Pennies and Minting History

The conversation delves into various collectible pennies, commemorating the end of the penny's circulation life.

Historical Penny Denominations and Errors

• Two-Cent Piece: Mentioned as a denomination that preceded the penny's discontinuation, highlighting its historical context.
• 1869 Proof Two-Cent Piece: A special proof coin in an old PCGS Rattler holder, noted for its color and condition.
• 1909 S Lincoln Cent (No VDB): A key date in the Lincoln cent series, more affordable than its VDB counterpart. The VDB (Victor David Brenner) initials were initially placed on the reverse but were removed due to public outcry, leading to two varieties of the 1909 S cent.
• 1908 Indian Head Cent: Another variation of the penny, presented in a nice red-brown color.
• 1953 Lincoln Cent Struck on a 10-Cent Planchet (Silver Penny): This is a significant error coin, a "silver penny," which is a rare find. Unlike the 1943 steel cents (zinc-plated copper), this is an actual silver penny, a striking error that would be highly appreciated by coin shop owners. The rarity of such errors is emphasized, with only a handful believed to exist. The value proposition of such a rare error coin is compared to purchasing an ounce of gold.
• 1919 Mint State 65 Red Cent: A well-graded coin, with the "red" designation indicating that the copper has retained its original color and has not oxidized to brown. The grading system for uncirculated copper coins includes red, red-brown, and brown designations, with color potentially changing over time due to oxidation.

The Last Pennies and Public Reaction

The video touches upon the public's reaction to the minting of the last two pennies. Photos of the event showed the coins being handled in a way that was considered "cringeworthy" by collectors, with visible fingerprints on the coins. There are rumors of two of these last minted pennies being auctioned off, with the fate of the other three unknown.

Hoarding and Melting of Pennies

The discontinuation of the penny has sparked discussions about potential hoarding and the legal melting of copper pennies.

Hoarding Potential

With an estimated 300 billion pennies in circulation (though many are likely stored in homes rather than actively circulating), there is speculation that people will begin hoarding them. This hoarding behavior is expected to intensify if the legal melting of copper pennies becomes permissible.

Melting Copper Pennies

The key to profitable melting lies in the copper content. Pennies minted before 1982 are primarily copper, while those from 1982 onwards are zinc with a copper coating. Therefore, pennies from 1981 and earlier would be the target for melting, as their intrinsic copper value is estimated to be around three cents per coin, offering a potential profit.

Historical Precedent of Hoarding

A parallel is drawn to the period leading up to 2011, when a commodity cycle led to significant penny hoarding. However, at that time, the penny was not discontinued, and copper prices did not reach the speculative highs anticipated by some hoarders. The current situation, with the actual discontinuation of the penny, is seen as a more definitive catalyst for hoarding and potential melting. The situation is compared to the realization in 1965 that old silver coins were valuable and should be saved.

Conclusion

The discontinuation of the penny marks a significant shift in the US monetary system, signaling a move towards digitalization and potentially impacting the future of other low-denomination coins. The event also reignites interest in precious metals for barter and investment, while highlighting the enduring appeal of collectible coins, particularly rare errors and historically significant pieces. The potential for hoarding and melting of copper pennies adds another layer of economic speculation to this historic change.