President Trump recently ordered the U.S. Mint to stop producing pennies. This may not seem like a big deal in the big scheme of things, but as Mike Maharrey explains in this episode of the Money Metals' Midweek Memo podcast, the demise of the 1-cent coin is indicative of a much bigger problem.
The government is destroying all of your money.
And not just the penny.
Starting with the January CPI report and the sudden revelation that price inflation isn't dead, Mike explains exactly what the government and the central bank are doing to your money.
!!--Product-Random-Featured-1--!!
Mike kicks off the show remembering a sketch produced by Monty Python.
"A guy comes into a shop to register a complaint about a parrot he just bought. The bird is dead. But the shop owner insists, 'He’s resting.' They go back and forth through the whole skit arguing about whether this bird that’s clearly dead is dead or not. At one point the guy tosses the bird in the air and it plummets to the floor. 'Now, that’s what I call a dead parrot.' 'No, no, no, ‘es stunned.'
"I feel like this skit is a good analogy for the Fed and inflation."
Mike reminds listeners that Jerome Powell and others at the Fed insisted that inflation was "transitory" until finally, rising prices became impossible to ignore, and suddenly, there was a war on inflation, with rate hikes, balance sheet reductions, and all that.
"Well, now they’ve done it again. Remember back last summer, they started hinting that they beat inflation. And to be fair, the CPI was coming down. But if you go back and listen to this show from that time period, you will hear old Mike here saying inflation was beat. You’ll hear me talking about how they never did enough to bury inflation given how much they had created. Even as recently as a month ago, we got a better-than-expected CPI report and everybody was all giddy and I was over here trying to point out that better than expected doesn’t mean good. And then, last week, all of a sudden, the Fed people decided price inflation was still a problem. Apparently, the big victory over price inflation was transitory."
Mike goes on to dig into the January CPI data, revealing the stubborn stickiness of price inflation, and once again emphasizes that the Fed is in a Catch-22 when it comes to interest rates.
"How Powell & Company will navigate this remains to be seen, but they certainly can't simultaneously raise and lower interest rates. Now, my guess is that when it comes time to choose, the central bankers will choose inflation. When the economy cracks, they’ll go back to zero percent interest rates. They’ll go back to QE because that’s what they do. The go-to play is to devalue your money. And that brings me to another subject that may seem unrelated on the surface but is intimately connected."
Mike notes that President Trump has ordered the U.S. Mint to stop producing pennies because they cost more to produce than they're worth.
"A penny simply isn’t worth anything anymore.
"But why?
"Because the government is destroying your money."
Mike points out that the government has already devalued the penny by removing most of the copper back in 1982. It was similar to the government removing the silver from quarters, dimes and half dollars back in 1965.
"When you disconnect money from anything of tangible value, it is going to quickly depreciate. It’s as certain as death and taxes. And that’s exactly what happened. This currency debasement is ongoing. Today, the penny has been deemed worthless. How long until they get rid of the nickel? The dime? The quarter?"
In fact, getting rid of the penny doesn't solve the problem. Nickels cost even more to produce. The Mint will need to produce more 5-cent coins to replace the penny, and that will erase the promised savings.
The reason nickels cost so much to produce is they are still mostly copper. Will the government change the composition of the nickel next in an effort to lower the cost?
"Removing silver and copper from U.S. coinage is the symptom of a bigger problem - government money printing. It’s the same reason we had 'transitory' inflation after the pandemic. The Fed injected like $5 trillion of new money into the economy in QE alone. The government and its central bank constantly expand the money supply. This is, by definition, inflation. More dollars in circulation means each dollar is worth less. We experience this phenomenon in the form of rising prices."
This leads to a call to action - get real money today.
"This is why you want to have real money - gold and silver. It will not be devalued by government action and can hold the value of your wealth over time. Call 800-800-1865 and talk to a Money Metals' precious metals specialist today!"
About the Author
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
