How to Beat Inflation with Pennies and Nickels
Inflation and time. What if you knew what you could invest in cheaply today that would be 2000% more valuable in 10, 20, 50 years from now? Unfortunately we don’t have a time machine or psychic powers, so we’ll have to work with a logical working knowledge of history. After all, the old adage is that history repeats itself.
Let’s first look at history.
Inflation and Silver
Remember when U.S. coins were made of silver? If you don’t, you may do well to ask someone who is old enough to remember the 1960s quite well. After all, in 1964, you could have paid ten cents to buy a dime. That dime was made of 90% silver. Today, on January 7th, 2012, that silver dime is worth $2.07 in silver metal. $2.07 may not seem like a lot of money at first, but that silver metal value over its face value means the silver dime is worth 2070% of its face value. The key here is to think big. Picking up $1,000 face value coin bag of dimes in the early 1960s would equate to 10,000 individual silver dimes each worth $2.07 based on today’s silver price. This means there would be a total silver metal value of $20,700 for a one-time trip to pick up some coin and doing no additional work. Inflation has a funny way of making little value items become huge value investments.
Now let’s look at today.
Save Your Nickels
Copper price is quite an intriguing metal to graph. Today, a nickel is worth approximately 103% of its value, about .05174 cents per .05 cent (a nickel is made of 75% copper and 25% nickel). That doesn’t make nickels look so great, now does it? Yet if we were having this same discussion a year ago about nickels in February 2011, that same five cent nickel would be worth about 7.3 cents or over 140% of its value value.
Copper has a habit of exaggerated pricing drops during economic bear markets and extreme booms during bull markets. However, over time, one can see the heavily increased demand for copper and rising copper price. Even the U.S. government recognizes the rising costs of copper because legislation has been introduced to Congress to change the metal composition of the nickel to steel. Proof of nickel value is right in front of our eyes.
Save Your Pennies
Just as described in saving nickels, you can save your pennies too. The catch is not all pennies are valuable. Only the 1982 copper pennies and pre-1982 copper pennies have the distinct advantage of copper pricing benefits of the commodity industry (copper pennies are 95% copper and 5% zinc). The newer pennies are made of zinc (zinc pennies are 97.5% zinc and 2.5% copper), which hasn’t quite risen in metal demand or inflationary price rising to offset the face value. If you want the cheapest investment possible with lowest risk, buy nickels. If you want to get a bigger bang for your buck, so to speak, copper pennies are the way to go. Their floor face value is five times less than the nickel, but their copper metal value is significantly higher when compared to nickels (read about pennies versus nickels).
Be safe with investments. Your investment needs to not only make you money, but outpace inflation. Sticking to facts makes the most sense by using coins to make the most cents. This may sound corny, but the truth is that commodities that are useful in society have the greatest inflation curbing effects. The more the metal is used, the greater the demand and higher the price. If you keep an investment as something physical and useful, you have a real asset that holds value. And that’s a truth that we can all share and prosper from.