US five cent coins contain over 7 cents worth of raw material as of this afternoon, mostly copper and of course, nickel. If there is inflation, the prices of metal will increase, and the coin will have 8, 9, 10 cents worth of metal. Pre-1965 dimes contain over $2.42 of metal today, while pre-1965 quarters have over $6 worth of metal.I wonder what they did to dimes and quarters after 1965, and whether the same is in store for the nickel. (While the penny, of course, should just be abolished.)
Showing posts with label inflation. Show all posts
Showing posts with label inflation. Show all posts
Coinflation
I vaguely remember when pennies became worth less than the copper they contained; via MR, the same condition has spread to the nickel and beyond:
Surging commodities ≠ inflation?
Paul Krugman doesn't think surging commodity prices will drive high inflation (and Michael Roberts agrees). I think they're probably right on balance, but I wish Krugman had plotted year-on-year commodity price and CPI changes on different axes in this graph:
Yes, the magnitude of year-on-year changes as drastically different, but eye-balling it, the directional correlation looks pretty high to me. Granted commodities are a small fraction of the our rich-world expenditures (not the case in poor countries where people spend 50+% of their income on food!); they are mostly wages and rent as Michael correctly points out. But it would also be worth looking back to before 1993, in particular the late 70s (a time of high commodity prices and high inflation), rather than acting as if 15 years of data from a single country proves the point beyond a shadow of a doubt.
Yes, the magnitude of year-on-year changes as drastically different, but eye-balling it, the directional correlation looks pretty high to me. Granted commodities are a small fraction of the our rich-world expenditures (not the case in poor countries where people spend 50+% of their income on food!); they are mostly wages and rent as Michael correctly points out. But it would also be worth looking back to before 1993, in particular the late 70s (a time of high commodity prices and high inflation), rather than acting as if 15 years of data from a single country proves the point beyond a shadow of a doubt.
Dollar driving commodity prices - for now
Via MR, James Hamilton at Econbrowser shows that the falling dollar - probably driven by quantitative easing - seems to be the main driver of commodity price increases over the last two months. The good news is that monetary policy seems to be working. The bad news is that I don't think we can expect this pure relationship to last for long - too many other drivers on the supply and demand sides are in play - so its value as a barometer for the Fed is probably short-lived.
Update: Dollar is driving metal and hydrocarbon prices, that is - agricultural commodities have more volatile supply.
Update: Dollar is driving metal and hydrocarbon prices, that is - agricultural commodities have more volatile supply.
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