According to coinflation, a nickel now has a melt value of $0.062+. The melt value is greater than the legal tender value. Via Gresham's law, when the melt value of a coin is greater than or equal to its legal tender value, then people start hoarding that coin.
This gives the nickel an implied put option. If metal prices continue to rise, keep the nickel or sell it for the melt value. If metal prices drop, you can spend it for the legal tender value.
I expect metal prices to continue to rise, due to inflation. However, after the melt value rose above $0.05 last time, the melt value dropped to $0.03.
My father had been hoarding nickels. When the melt value crashed, he spent them; now he's saving them again. I thought this was silly. My father pointed out that if he had invested the difference in silver or gold, that would have performed better. He didn't actually do this.
I read stories about people going to banks and buying nickels. As the melt value rises, this will become harder. The banks have probably been instructed to not give out nickels. Some may now charge a premium for nickels.
If you can buy a nickel for $0.05, that's a good deal. However, you're also spending time looking for the opportunity. You can also get inflation protection by buying gold or silver coins. Nickels probably won't be as liquid as a simple gold or silver 1 ounce rounds/bars.
During times of hyperinflation, coins are driven from circulation. The melt value rapidly becomes greater than the face amount. This leads to people hoarding them, and using them as barter money based on the melt value instead of the legal tender value.
Congress is going to be forced to change the composition of the nickel soon. They probably will be forced to eliminate the penny soon. Right now, the penny melt value is only worth 2/3 of the legal tender value.
Some countries with hyperinflation revalue their coins, to ensure they continue to circulate. For example, a penny could be declared to be worth $0.10, a nickel worth $0.50, a dime $1.00, a quarter $2.50, etc. (Multiply all values by 10.) However, this would be a public admission of inflation. Also, it would allow people to escape inflation by hoarding coins. That is contrary to the main point of the State monetary system, which is theft via inflation.
If you get a nickel as change, you might as well keep it. It doesn't pay to explicitly seek out nickels, when you include the value of time wasted. (I earn a decent salary in my wage slave job.) You can just as easily get inflation protection by buying gold or silver rounds.
Friday, April 23, 2010
Is It Worth Hoarding Nickels?
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5 comments:
My school has a change machine. I just change my money there for coins
Buying nickel rolls can be time consuming, but I view them as a good way to make change in a possible barter scenario where silver dimes and silver quarters, etc, are being used.
The best thing about nickel rolls is that you are actually buying them UNDER spot melt value. The average person can't get 90% silver coins under spot.
Storage is the biggest drawback I see. $20,000 worth of nickels would weight 882 pounds - almost a half ton! Of course, some might see that as good thing - it would make them harder for someone to steal :)
I don't think those weights are correct. A $100 box of nickles (2000) is 22.05 lbs. $20K would be 200 box = 4410 lbs or 2 LONG tons/ 2.2 tons. Since each box is 10" x 4.5" x 4.25" x 200 = 22 cubic feet or about a pallet load. M-B
PS: I could be mistaken but that is what I found online. Someone could confirm please.
Nickels, conveniently, weigh exactly 5 grams with face value of 5 cents, so 1 cent per gram.
Or, 1000 cents per 1000 grams, in other words, $10 per kilogram, which is 2.205 pounds. $100 is 10 kilograms, or 22.05 pounds. $1000 is 100 kilograms, or 220.5 pounds. $10000 is 1000 kilograms, or 2205 pounds. $20000 is 2000 kilograms, or 4410 pounds
Hope that helps! :)
I went to the bank to withdraw some money yesterday and I asked for a box of nickels and was given said box with no problem. How is that a waste of time looking?
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