Question for economics gurus

[KrazyHorse]

Yes, and most importantly, only one very restrictive measure of money supply.

In fact, one reason that Milton Friedman's "money supply rule" is no longer favoured by serious macro policy people is that it's become apparent that broader measures of money supply have actually become less anchored to the money supply that the Fed controls.

Glenn Beck, in this case, does have a point; there has been monetary stimulus, and that will need to be withdrawn. However, there is no reason to believe that withdrawing it will be near as painful as the early 80s were under Volcker. Simply looking at the monetary base as a predictor of inflation is retarded.

[Krill]

Dude, I don;t think anyone cares.

[ZEE]

tuberski time?

[Ben Kenobi]

Wow, so they've doubled the money supply? That's insane. FWIW, I'd like to see higher interest rates right now, for the same reason, as they need to control inflation. Short term it would be difficult, but they would avoid a 'lost decade' as in Japan.

[Saras]

This brings up the idea of one reason why deflation is a more troubling effect than inflation; there is a lower bound to interest rates, namely 0% (if you attempt to reduce it below that people simply move into cash, which returns 0%). The fed is impotent, using standard open market operations, to counter deflation when inflation rates are at 0%. There is no such problem on the upside.

Temporary legalisation of robbery of cash would help.

[Dale]

I heard once that it cost more than $1 to print a $1 bill. Weird huh?

[Lorizael]

Yes, it is pretty weird that you've heard that.

[Felch]

Pennies and nickels were being produced at a loss (not sure if this is still true, since commodity prices took a dive). Dollar bills are still profitable to print.

[Imran Siddiqui]

I heard once that it cost more than $1 to print a $1 bill. Weird huh?

How much do pandas cost?

[Blaupanzer]

Pennies and nickels were being produced at a loss (not sure if this is still true, since commodity prices took a dive). Dollar bills are still profitable to print.

For pennies, this has been true since the earky seventies. The BEP changed the composition of nickles and quarters in that same era, to prevent their following. Recently, pennies and nickles both at deficit, as much from OH/handling costs as materials. The paper dollar gets lots of handling and is worn enough to be pulled from circulation in 18 months on average. The other bills last 3 to 5 years in circulation. So there have been suggestions to use only dollar coins. To do that, most cash registers would need to open a slot, thus the rumors that pennies and paper dollars are headed into history. So far, Congress remains unconvinced and won't authorize or fund a switchover.

Side note, the back of the penny changed again this year, guarenteeing high demand. Not a good way to convince Congress to allow the penny to go obsolete creating a space in registers for $1 coins.

[KrazyHorse]

I ****ing hate the penny.

When the half-penny coin was abolished in the US in 1857 its purchasing power in today's currency was ~10 cents

Both the penny and the nickel should be abolished. I'm ambivalent as to the dime.

[Blaupanzer]

Ordinary folk, when asked by their Congressman or pollsters, say they think they will be "cheated" on the rounding if the penny and nickle go away. The fact that this view seems silly to some of us is not what the Congress is responding in keeping the penny.

[KrazyHorse]

I can't remember the source, but somebody once calculated the savings to the US annually from abolishing the penny simply in terms of reduced waiting time at sales counters...

[rah]

Agreed that the penny should have been eliminated ages ago.
The nickel probably should also but doing them both at the same time would probably not be a good idea, due to some possible perceptions problems that have been eluded to already.

[snoopy369]

Freakonomics did (or linked to?) an interesting piece on what would the optimal coinage be in terms of fewest coins needed to make change. The result:

The penny, 3-cent piece, 11-cent piece, 37-cent piece

would be the optimal 4 coin solution, makes every combination from .01-.99 with on average 4.10 coins per transaction.

What's more interesting is that, if you're aiming for efficiency, dropping the dime is the best bet - you end up with nearly as efficient of a solution with .01, .05, .25 as with the dime (.8 coins less efficient than the current setup). Exponential sets or nearly exponential sets (.01, .05, .25, 1, 5, 20 ...) tend towards being the most efficient.

I think eliminating both the penny and the nickel would be best, because then people can just see $150.9 and not think they're being cheated. Seeing $150.95 will remind you that it might be a few cents plus or minus...