James Rawles
January 18th, 2012
Survival Blog
Editor’s note: The following article comes to us via Lew Rockwell and has been graciously contributed by James Rawles, author of Patriots and Survivors, and editor of one of the most resourceful preparedness web sites on the internet – Survival Blog, a daily web journal for prepared individuals living in uncertain times.
As the economic crisis deepens and the US dollar progressively depreciates until its eventual demise, enterprising minds that act ahead of the masses can come out ahead – sometimes at little or no up front cost. If, for example, you had been aware that US coins like half dollars, quarters and dimes minted before 1965 contained 90% silver, and you had acquired those coins from local banks and business prior to silver’s meteoric rise post-meltdown, you’d have earned nearly 2000% on your investment (Example: 1964 Kennedy Half Dollar acquired for $0.50 for your local bank in 2008 is worth over $11 today!). As the information about these coins spread across the web, it became harder and harder to find pre-’65 coins at local banks. Case in point: Our banker recently told us that in addition to us, there were three other regular “collectors” who come by every week looking for half dollar rolls. With respect to silver coinage, the well seems to be drying up amid lots of new competition.
But what if there was a similar strategy that was available today that could yield massive gains and effectively no cost to you? Would you take the opportunity, invest the time and do the legwork? If so, James Rawles has a suggestion for you.
Save your nickels!
It will cost you nothing, except maybe a little bit of space in your basement or closet, but you can come out a winner if things continue to deteriorate economically. In fact, by trying James Rawles’ strategy today, you would INSTANTLY see growth in your base metal portfolio in excess of 10% – literally the second you take possession of this asset. And if trends continue the way they’ve been going for the last ten years, when the U.S. dollar does finally tank, and prices of base metals like copper and nickel rise against the US dollar, you could see significant increases in the value of your holdings.
Mass Inflation Ahead — Save Your Nickels!
By James Rawles
I’ve often mused about how fun it would be to have a time machine and travel back to the early 1960s, and go on a pre-inflation shopping spree. In that era, most used cars were less than $800, and a new-in-the box Colt .45 Automatic sold for $60. In particular, it would be great to go back and get a huge pile of rolls of then-circulating US silver dimes, quarters, and half dollars at face value. (With silver presently around $30 per ounce, the US 90% silver (1964 and earlier) coinage is selling wholesale at 22 times face value–that is $22,000 for a $1,000 face value bag.)
The disappearance of 90% silver coins from circulation in the US in the mid-1960s beautifully illustrated Gresham’s Law: “Bad Money Drives Out Good.” People quickly realized that the debased copper sandwich coins were bogus, so anyone with half a brain saved every pre-’65 (90% silver) coin that they could find. (This resulted in a coin shortage from 1965 to 1967, while the mint frantically played catch up, producing millions of cupronickel “clad” coins. This production was so hurried that they even skipped putting mint marks on coins from 1965 to 1967.)
Alas, there are no time machines. But what if I were to tell you that there is a similar, albeit smaller-scale opportunity? Consider the lowly US five cent piece–the “nickel.”
Unlike US dimes and quarters, which stopped being made of 90% silver after 1964, the composition of a nickel has essentially been unchanged since the end of World War II. It is still a 5 gram coin that is an alloy of 75% copper and 25% nickel. (An aside: Some 1942 to 1945 five cent coins were made with 35% silver, because nickel was badly-needed for wartime industrial use. Those “War Nickels” have long since been culled from circulation, by collectors.)
According to www.Coinflation.com, the 1946-2011 Nickel (with a 5 cent face value) had a base metal value of $0.0733 in February, 2011. That was 146.7% of its face value. Because of the global recession and the fact that both nickel and copper are primarily industrial metals, the melt value of a nickel declined to just $0.0516 in October, 2011. I predict that as inflation resumes–most likely beginning in 2012–the base metal value of nickels will rise substantially, regardless of the weakness in the industrial economy.
The Root of the Problem
It is inevitable that any country that issues a continually-inflated fiat paper currency will run into the problem of their coinage eventually having its base metal value exceed its face value. When this happens, it is one of those embarrassing “emperor’s new clothes” moments. Unless a government takes the drastic step of lopping off a zero or two from their currency, this coinage problem is inevitable. In essence, we were robbed by our own government when silver coins were replaced with copper sandwich coins in the 1960s. I predict that essentially the same thing will soon to happen with nickels.
Helicopter Ben Bernanke will inflate his way out of the current liquidity crisis. through artificial lowering of interest rates, massive injections of liquidity, and monetization of the Federal debt. That can only spell one thing: inflation, and plenty of it. Mass inflation will mean much higher commodities prices (at least from the perspective of the US currency.)
Starting in 2009, I began warning my readers that a nickel debasement was coming. But since then, I’ve pleasantly surprised to see that the government moved at a snail’s pace, in implementing the change. In February, 2010 it was announced that the Obama administration had endorsed a change in the metal composition of pennies and nickels. And then, in November 2010, President Obama signed “The Coin Modernization, Oversight, and Continuity Act of 2010“. Then, in late 2011 came news of the introduction of H.R. 3694 (the Saving Taxpayer Expenditures by Employing Less Imported Nickel ACT — aka the “STEEL Nickel Act”. It now appears likely that the STEEL Nickel Act the will be signed into law in 2012 and the U.S. mint will begin producing debased steel nickels in 2013.
In January, 2012 this was reported: Mint begins trial strikes in composition tests. The good news is that the trials strikes are part of a two year study. (The contract runs through June 30, 2013.) So we may have some extra time to stockpile nickels before the debasement. Once this change is implemented, you will then have to manually sort the “old” from the “new” debased nickels! But for now, there is still an open window of opportunity, during which time SurvivalBlog readers can salt away countless rolls, bags, and boxes of nickels. I am grateful for the delay in the niclel debasement, but this window of opportunity is likely to close in 2013. Act accordingly.
Within just a few years, the base metal value of a nickel is likely to exceed two times (“2X”) its face value. (10 cents each.) The nickel will then begin to disappear from circulation. (Gresham’s Law is unavoidable.) Unlike the mid-1960s experience, the missing nickels will not cause a crisis, since pennies will suffice for making small change, and most vending machines now use dimes as their smallest purchase increment. Meanwhile, most bridge tolls and toll roads have inflated so that tolls are in 10 or 25 cent increments. The demise of the nickel will hardly cause a ripple in the news.
Unless the Treasury decides to drop the issuance of nickels entirely, the US Mint will within the next three years be forced to introduce a “new” nickel with a debased composition. It will possibly be stainless steel, zinc (flashed with silver) or possibly even aluminum.
Why Not Pennies?
You may ask, why not accumulate 95% copper (pre-1982 mint date) pennies? They already seen a spike in their base metal value to 2.2 cents each. But unfortunately, pennies have two problems: confusion and bulk. They are confusing, because 95% copper pennies are now circulating side-by-side with 97.5% zinc pennies. They are also about four times as bulky (per dollar of face value) as nickels.
With nickels you won’t have to spend time sorting out pre-1982 varieties. At present, visually date sorting pennies simply isn’t worth your time. Although Ryedale Coin makes an automated density-measuring penny sorting machine, it is still very time consuming, and unless you have a lot of pennies to sort, it would take a long time for the machine to pay for itself. As background: The pre-1982 pennies recently had a base metal value of about $0.0295 each.) Starting in mid-1982, the mint switched to 97.5% zinc pennies that are just flashed with copper. Those presently have a base metal value of only about $0.0067 each.
Pennies are absurdly bulky and heavy to store. Nickels are also quite bulky, but are at least more manageable than pennies for a small investor’s storage. (Storing pennies would take a tremendous amount of space and constitute a huge weight per dollar invested.)
The biggest advantage of nickels over pennies is that there is no date/composition confusion. At least for now, a nickel is a nickel. Even the newly-minted “large portrait” nickels have the same 75/25 cupronickel composition. But that is likely to change within just a couple of years. The US Mint cannot go on minting nickels at a loss much longer. My advice: start filling military surplus ammo cans with $2 (40 coin) rolls of nickels.
The standard U.S. military surplus .30 caliber size can is the perfect size for rolls of nickels. They will hold $188 of rolled nickels per can. Any larger containers would be difficult to move easily. (Avoid back strain!) Cardboard boxes are fragile, and lack a carry handle. But ammo cans are very sturdy, have an integral handle, and they are relatively cheap and plentiful. They are available at military surplus stores and gun shows. The current difference between a nickel’s base metal value and its face value is fairly small, but trust me, it will grow! Someday, when nickels are worth 4X to 8X their face value, your children will thank you for it. Consider it an investment in your children’s future.
