How George Brett taught me a valuable lesson about money

I have had an almost unhealthy obsession with coins, off and on, since I was 9 years old. By the time I was 13 I learned a hard lesson in the difference between the numismatic and melt value of coins. The numismatic value of a coin is its value to a collector for its rarity or condition. The melt value is what the metal content of the coin is worth.

I had traded a friend of mine a George Brett rookie baseball card for a Liberty dollar.



At the time, way before the Internet, all we had to go on for research were catalogs and pricing books that were updated monthly. The book I was using valued the Liberty dollar at well over $30, while the George Brett rookie card was worth half that.

It turns out that the guide I was using for coin values was at the height of the Hunt brothers' attempt to corner the silver market and printed just before "Silver Thursday." By the time I went to cash in, silver markets had collapsed and my $30 coin was only worth $5. The following year I went to go see the movie [amazon_link id="B0035LMTVE" target="_blank" ]Trading Places[/amazon_link]. I think the movie was partly based on the Hunt brothers' financial fiasco.

Fast forward to today. One of the topics I regularly read about is the precious metals commodity market. By doing so, I learn all kinds of fascinating things about how central banks operate and how the silver and gold markets work, or don't work. So in my daily reading I come across this article, PENNY AND NICKEL COINS TO BE PHASED OUT IN 2013. I want to believe the content of the article because of  the central bank interference I've seen in the silver and gold markets. But I have a guiding philosophy:

Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders. Do not believe in traditions because they have been handed down for many generations. But after observation and analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it. - The Buddha

So I sought to verify.

The original news source was a satire piece from SkewNews.com.

But in my research I came across the following news article that was legit, and had begun to spread across the Interwebs, Congress looks at doing away with the $1 bill. 

Although the news piece was about the phasing out of the $1 bill, deep into the story, we learn something fascinating about the future of the penny and the nickel.

Several lawmakers were more intrigued with the idea of using different metal combinations in producing coins.

Rep. Steve Stivers, R-Ohio, said a penny costs more than 2 cents to make and a nickel costs more than 11 cents to make. Moving to multiplated steel for coins would save the government nearly $200 million a year, he said.

The Mint's report, which is due in mid-December, will detail the results of nearly 18 months of work exploring a variety of new metal compositions and evaluating test coins for attributes as hardness, resistance to wear, availability of raw materials and costs.

Richard Peterson, the Mint's acting director, declined to give lawmakers a summary of what will be in the report, but he said "several promising alternatives" were found.

The last time the metal composition of a coin was changed was in 1982 when the copper content of a penny was reduced from 95% to 2.5%. The "melt value" of the 1981 penny is about 2.4¢, and the melt value for a post 1982 penny is about 0.5¢.  Now Congress wants to explore this option again for both the nickel and the penny.

Now is the time to start saving your nickels and pennies. The dollar has been devalued over 95% since the Federal Reserve Bank was formed and with the amount of money it is creating every month (currently about $85 billion) the purchasing power of the nickel will continue to go down, but the melt value will go up. Saving your nickels and pennies is a great way to store value. There is no downside  because if the Federal Reserve bank suddenly reverses course, for every dollar I invest in nickels or older pennies, I still have a dollar in legal currency.

Happy saving.

Additional Sources: CoinInflation.com