Within days of each other, two announcements concerning the future of the US currency appeared in the popular press, and each avoided any mention whatsoever of the primary driver of the changes.
First was the announcement on November 26th from Secretary of the Treasury Timothy Geithner that the U.S. Mint will begin removing pennies and nickels from circulation starting the first of the year, allegedly that they’re too expensive to make. It costs the mint nearly 5 cents to make each penny while it costs more than 16 cents to make a nickel. This is costing the mint a lot of money, an estimated $187 million last year alone.
Two days later CNN reported that the Government Accountability Office (GAO) has called on the Congress to stop printing one-dollar bills and switch instead to one-dollar coins. The GAO claimed that such a move could actually make the government some money:
A $1 coin typically costs about 30 cents for the U.S. Mint to produce, but then the government can sell them to Americans for a dollar each. That financial gain is called seigniorage, and over a period of 30 years, it could [make] the U.S. government about $4.4 billion, the GAO said.
Avoiding the real issue, the GAO said that although the coins cost more to make, they would last longer, thus turning a profit to the government:
We continue to believe that replacing the note with a coin is likely to provide a financial benefit to the government if the note is eliminated and negative public reaction is effectively managed through stakeholder outreach and public education.
Unfortunately there is little likelihood that any of that “outreach” and “education” will include any attempt at explaining why the change is necessary.
The real issue is the declining purchasing power of the currency. And that goes back to the year 1913 when the Federal Reserve System was successfully foisted upon the American public as a result of the central bank’s antipathy towards the gold standard. No one understood that antipathy better than former Chairman of the Federal System itself, Alan Greenspan. Writing in The Objectivist in 1966 Greenspan said: