Reading time: 830 words, 2 to 3 minutes.
The last Canadian penny rolled off the presses today; a testament to the demise of our money and the insidious effects of inflation and the magic of compound interest that you’re not supposed to know about. CBS radio breathlessly reported on some empty-suited politico attending the last pennies being made at the Royal Canadian Mint in Winnipeg. The very last one will be carefully transported to the museum to remind Canadians of the role the penny once played in Canada’s economy for more than 100 years.
Regular readers will detect the strain as I refrain from disdain not to mention sarcasm. Oh, lest I forget, the CBC is urging us to donate our remaining pennies to charity. I notice United Way – there may be others, as well – with collection boxes located around the community. I dumped off seven pounds of pennies last week that I’d collected over the last two years (I missed turning them in last spring).
The CBC is also urging listeners to tweet them fond memories of our pennies. Much more was said but I was too busy trying not to roll my eyes and get into a car accident. In fact, the only thing not said was why they’ve stopped making the penny.
One cent coins will be discontinued because it costs the guvamint (pun intended) more than a cent to make a cent if that makes sense. Pennies used to be called coppers because of their high copper content. The mint long ago increased the zinc content because zinc is cheaper and greatly reduced the copper content to just enough to keep the color. Even at that, it still costs more than a cent to make a penny.
Such is the insidious effect of inflation and the magic of compound interest on the inflation rate. For a more detailed discussion on the effect of inflation and an examination of real money such as gold and silver click Gas is Going Down in Price
In the meantime, hang on to a few pennies to show your children later and remind them that a hundred pennies once upon a time could buy a dollar’s worth of stuff. It won’t be long when even a dollar will be discontinued. In Canada, they’re making them out of zinc too.
Here’s another perspective on the difference between real money like gold and silver and phony paper money. Eighty years ago it took twenty-two paper dollars to buy an ounce of gold. Twelve years ago it took 250 paper dollars to buy an ounce of gold. Today it takes sixteen hundred dollars to buy the same ounce of gold. It takes 640% more paper money to buy the same amount of gold today that it did a short twelve years ago and 7,200% more than eighty years ago. Yet, an ounce of gold buys the same amount of stuff. That’s the insidious effect of inflation and the magic of compound interest.
So, you would think that gold mines would be making money hand over fist. They aren’t. The stocks (equities) of producing gold mines are about where they were twelve years ago. Adjusted for inflation, they’re less. Adjusted for the REAL rate of inflation, they’re a lot less. Why is that? That’s because the REAL cost of producing an ounce of gold has kept pace with the REAL value of gold. However, priced in paper dollars the inputs to production such as labor, machinery, materials and energy have all increased in price. What price? The price of worthless paper money. It simply takes more worthless paper money to produce an ounce of gold. That’s the insidious effect … oh, you know the rest.
There’s still only 24 hours in a day and 365 ¼ days in a year. People still gotta eat. A miner isn’t going to work for nothing – I know; I used to work in the mines. It was as dark, damp, dirty, dusty and dangerous then as it is today. Except today, you’d have to pay me about a 1,000% more paper money than that I earned forty years ago. Why? Because that’s the insidious effect … rinse, repeat.
And, the really sad part is so many so-called economists are telling us this is a deflationary recession. And, that’s the ones brave enough to admit we’re in a recession. The things we own are going down in value but the things we OWE are affected by the insidious effect… etc. etc.
My next post will cover the continuing danger of the Fukushima nuclear disaster that no one is telling you about, but the one after that will cover in much greater detail the slow motion collapse of western civilization and, did I mention the insidious effect of inflation … ? Of course, I did and there’ll be more on that too. And, the perspective will knock your socks off.
So, stay tuned. It just gets stupider and stupider. Be thankful they aren’t charging admission yet.
May 4, 2012
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