Keep the Penny, Ditch the Fed
by Walter Block
For some people, benighted souls, the passing of the copper-colored penny coin is long overdue. "Good riddance to bad rubbish," they might say. After all, this bit of metal hardly buys anything, nowadays. Ubiquitous on the counters of shops around he country are cups holding pennies, there for the use of customers in order to help them make change. But a coin given away for free, these people might argue, can hardly be counted upon to conduct the nation's business. To a great extent pennies just weigh down pockets and pocket books, and the sooner they are gone, the fewer tailor bills and pocketbook repair costs will be required.
There is no doubt that these people are correct. Using the penny to conduct today's business is like a car with a rumble seat (don't know what that is youngster? go look it up) or riding around in a horse and buggy. Strictly of antiquarian interest.
And yet, and yet…
‘Twas not so long ago that the penny could pull its full financial weight. When I was a youngster in the 1940s, no one dared condescend to this coin. For a very few of them, one could purchase an ice cream cone, a comic book, a candy bar, or even a ticket to a matinee movie. Some restaurants featured menus from the early days of the turn of the last century (for those who have been Rip Van Winkling it for the last few years, I'm referring to 1899) when a penny was a robust coin indeed. A corporal's guard of them would entitle someone to pretty much an entire meal.
What has happened? Why is it that the penny, to say nothing of the nickel, dime, quarter, fifty cent piece, and even, truth be told, the dollar (which will soon follow into oblivion), don't seem to amount to very much in terms of purchasing power? In a word, it is all due to inflation. And who, in turn, is responsible for this reprehensible state of affairs? It is the government, specifically the Treasury Department and the Federal Reserve System (since 1913), which have together conspired against the public interest. They have done so in effect by creating more money, at a faster rate of increase than that enjoyed by the goods and services we create. Too much money chasing too few products yields higher prices, the opposite side of the coin (excuse the pun) of inflation.
There used to be a TV series featuring the "T" men. Every week they would walk down a set of stairs, and attempt to bring to justice the counterfeiters who were responsible for inflating the currency. Had there been better (well, more accurate writers) they would have turned around, marched back up those steps, and arrested their bosses.
For before the advent of statist money, when people were free to choose the means to intermediate their financial affairs, they had typically resorted to gold (sometimes silver). There has been no inflation at all in terms of gold. Centuries ago one could purchase an expensive suit of clothes for an ounce or two of this metal, and the same applies today.
The only reason governments horned in on this essentially free enterprise industry was to disguise their insatiable, greedy, and excessive demands for our money. They have only three ways of raising funds: taxes, borrowing, and inflating the currency. But they are widely and properly reviled when they resort to the first two to excess. The third alternative is embraced by them because the causes of inflation are so well hidden from the public that the blame for it can be readily placed on businessmen and workers.
Yes, the penny is now obsolete. But rather than getting rid of it, we should instead throw out those rascals in Washington who have so debased it. Then we should return to the gold standard (three decades ago the evil Nixon tore asunder our last ties to this system), and once again allow the penny to take its rightful place as the conductor of small scale — but important — commerce. Don't throw out this coin! Toss out Alan Greenspan and his Fed instead.
August 29, 2001
Copyright © 2001 LewRockwell.com