July 31, 2007
This article is the second in an ongoing series about the currency of the USA. For the first article please see Penny Lover, by Mildly Piqued Academician.
“The penny is falling, the nickel is falling!” comes the cry of Chicken Little. Chicken Little is not alone in his fear that disaster is looming for the Penny and Nickel, the long time base of US currency. In addition to inflation causing the value of pennies to decrease as discussed by my fellow writer, the rising costs of copper, zinc and nickel have worked in tandem to bring about a situation where the metal in a penny or nickel is now worth more than the face value of the coin itself (though it isn’t clear the prices will remain high). The real kicker came this year when the US Treasury announced that it would be placing limits on the number of these coins that travelers could remove from the nation, and that it was making it illegal to melt the coins down to extract their base metals.
The concern stems from the fact that the metal contained in a penny is now worth around $0.0173, and the metal in a nickel is worth around $0.0834. While it is still possible that the US government is making money from minting pennies and nickels (due to the long life span of a coin amortizing the cost of minting and materials), it has created a damaging black market for the coins themselves. Obviously something must be done to fix this problem beyond toothless legislation. While some call for the elimination of the penny and the nickel, I see a far better answer. Currency debasement.
Debasement of currency occurs when the metal content of a coin is altered such that the total cost of the materials is below the value of the coin itself. As an example, the US penny was debased in 1982 when the Mint switched from pure copper to copper plated zinc. The result was higher profits for the mint per coin struck, and an extended life span for the penny. The penny was debased by an even more dramatic level in 1943 when the US mint struck steel pennies due to the large wartime copper needs. Given that we haven’t been on a gold or silver standard in a long time, but rather a system of fiat currency where value is determined by the faith and credit of our government and not the value of materials, this change is an easy one. Simply begin minting the pennies and nickels out of another compound which is less valuable and our problem is solved.
So why keep the penny around? Some have posited that nuking the penny wouldn’t result in appreciable financial loss for Americans, though it is hard to see why. Even if we take such arguments at face value, they begin to look shakey when one realizes the sheer number of transactions which would be affected by eliminating the penny. Many stores would end up rounding the familiar prices which end in 99 cents to the next highest dollar, resulting in a price bump for consumers. Given the sheer number of consumer transactions each year (7-11 alone reports 2.19 billion transactions at its US stores each year) even a small increase means a big hit to the American consumer as a whole. The total cost of this “rounding tax” to consumers has been estimated at $2 billion in just five years. Given that these figures only take into account the elimination of the penny, and not the nickel, it quickly becomes obvious that we can’t just do away with the coins altogether without paying a steep price (a fact Canada, the EU, and Japan have also realized).
The haters will of course argue long and hard against this scheme, especially the internet crack pots who try and equate fiat currency with theft, but in the long run this sort of plan will be good for our economy, and help to preserve the finer level of resolution the penny and nickel provide to us, saving American consumers quite a bit of money, and helping the Mint continue to profit off of pennies and nickels.
Arbitrage, the Washington way…
. CNN Money, 2007.
July 30, 2007
Last year’s session of the SCOTUS had Chief Justice John Roberts’ fingerprints all over it: carefully constructed and very narrow decisions designed to maximize the number of justices supporting the ruling. As a result, the court had a large number of unanimous or near-unanimous rulings. While the partisan battles raged on Capitol Hill and Pennsylvania Avenue, the SCOTUS was the sole bastion of collegiality left in Washington. And to be honest, last year’s session is something to be proud of: Chief Justice Roberts’ pragmatic judicial philosophy won out over the hard-core ideologues (like Scalia). Unfortunately, the “Collegial Court” of ’06 has been replaced by the “Partisan Court” of ’07. The Chief Justice who prides himself on judicial minimalism has now found himself unable to reconcile the warring camps of Red (Alito/Scalia/Thomas) versus Blue (Ginsberg/Stevens/Breyer), leaving himself, Anthony Kennedy and David Souter to split up into what is invariably a 5-4 decision if the case is at least contentious.
The 5-4 ruling on the Federal Partial Birth Abortion Ban was the beginning of the end for the Roberts Court. As noted in the annals of the 12 Angry Men Blog, Roberts managed to pull together a narrow majority which rested on Justice Kennedy practically begging for another plaintiff to sue to invalidate the law. Justice Ginsberg’s dissent was loud, angry and shrill, full of the partisan rancor which had finally bled into the last branch of government.
From abortion, the “third rail” of American partisanship, the Partisan Court moved to racial discrimination with a 5-4 opinion (exact same lineup, go figure) ruling that school districts in Seattle and Louisville are illegally discriminating based on race. Here the plans which largely rely on race as a tiebreaker to try to insure a diverse student body at each school are struck down by the Partisan Court. Justice Roberts was caught uttering the vacuous tautology, “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race,” which the majority appeared to take as a condemnation of the school policies. The left-leaning justices were (as one might be expect) quite displeased. Justice Breyer, in his minority opinion, notes that the ruling will “substitute for present calm a disruptive round of race-related litigation.” No doubt Justice Breyer isn’t looking forward to the new wave of racial litigation which will inevitably arrive on the docket of the SCOTUS courtesy of Meredith v. Jefferson County Board of Education and Parents Involved in Community Schools v. Seattle School District No. 1. Justice Stevens is even more pointed, noting that, “It is my firm conviction that no member of the court that I joined in 1975 would have agreed with today’s decision.”
Next up we have another 5-4 ruling (same cast… is this a surprise to anyone at this point?) in Leegin Creative Leather Products v. PSK Inc. Here the majority of the Partisan Court decided to pitch a 96-year-old ban on retail price maintenance agreements under the Sherman Antitrust Act. The law basically set that any agreement between the manufacturer and the retailer to fix a minimum resale price was a prima facie violation of Sherman. Seeing as these agreements were often use by producers to hamstring un-cooperative retailers (by only selling to those willing to adhere to the manufacturer’s price), the SCOTUS ruled that such agreements were unconstitutional. But the Partisan Court, prodded by the Bush Junta and Milton Friedman’s economic love children decided that what was bad for producers was bad for America (nevermind the consumers and retailers who are getting the shaft) and pitched 96 years of settled law. So much for judicial minimalism, Justice Roberts.
In the field of capital punishment the Partisan Court issued another 5-4 (Kennedy switching sides, but otherwise the same teams), blocking the execution of Scott Louis Panetti by the state of Texas (I mean, where else would this happen?). Despite being (a) bat-shit insane, (b) convinced that he was healed by the hand of the Almighty, (c) off his meds and (d) representing himself in court (having fired his lawyers), the jury of the “kill ’em all and let God sort ’em out” convicted him in 90 minutes and sentenced him to death. I mean, I can’t even get my insurance company to give me the time of day in 90 minutes, but in Texas, that’s enough time to legally decide to kill a man who’s a complete kook. Justice Thomas, dissenting, called the ruling “a half-baked holding that leaves the details of the insanity standard for the district court to work out.” Justice Thomas, of course, failed to note that the SCOTUS never bothered to work out that standard either (beyond some vague outline in Ford v. Wainwright). I believe that the NYT summarizes Mr. Panetti the best with the quote, “A schizophrenic who served as his own lawyer in court and mounted an often incoherent defense, Mr. Panetti claimed that his body had been taken over by an alter ego he called Sarge Ironhorse and that demons were bent on killing him for his Christian beliefs.”
I could go on about union cards or pay discrimination, also brutal Red vs. Blue fights, but I’ve made my point. The SCOTUS has become the Partisan Court. And now that it’s partisan, it’s time to follow in the footsteps of Adams, Jefferson, Jackson, Lincoln, Grant and Roosevelt and stack the court. After all, if the SCOTUS is now just a political toy, it’s time again to treat it as such.
Simply put, Chief Justice Roberts has failed. And it’s America that loses out.
July 27, 2007
Recently, Congressman Henry Waxman sent a letter to United States Trade Representative Susan Schwab suggesting that Thailand be taken off of the intellectual property watch list. The USTR reinstituted Thailand on their watch list after Thailand decided to violate patents on AIDS medicine (Abbott’s Kaletra and Merck’s Stocrin) and manufacture the medicine as a generic using its own resources. While this was a motivating factor, video, audio, and software piracy provided additional impetus. Waxman suggests that this action is retalitory even though Thailand has been listed since 1994. In point of fact, Schwab is acting as specified in US Law, performing her function as a member of the executive branch of the government. Congressman Waxman’s letter is another example of Congress attempting to usurp executive power.
This is one of a long list of continuing incursions into other branches Congress has made in its belief that it has the right and mandate to intrude in all facets of American life, executive authority, and judicial review. We are witnessing the evolution of the Imperial Senate, as depicted by the new flag shown below.
The firing of the Attorneys General — political positions in the executive branch, serving at the pleasure of the President — are outside the purview of Congress (even if done in a ham-handed and arguably idiotic manner). If a political appointee does not toe the party line and support the agenda of the person who hired him, then his job is forfeit. Sad, perhaps but understandable. Certainly President Clinton knew this — he fired all the Attorneys. In an incessant attempt to usurp this power, Congress has subpoenaed records from the executive branch which are privileged documents.
In a related missive I discuss the intrusion of Congress into a labeling controversy on suntan lotions. While I have little respect for some of the excesses of the FDA, this is clearly an executive issue. There are other things for Congress to do.
The concept of 535 generals dictating battle plans, coordinating air strikes and ground maneuvers is even harder to swallow. If Congress doesn’t want to support the war, it has a Constitutional right to defund the military. It has no Constitutional right to dictate strategy and tactics to the commander in chief. The very political nature of the body insures that command decisions would be untimely, inappropriate, unexecutable and frequently wrong.
With July 4th long past, we the people of the United States of America need to take a hard look at our Constitution. This remarkable document provides for three branches of government, not one.
The Constitution of the United States tells the government what it can do. Everything else is reserved to the States and the people. Congress has stretched the elastic clause as if it were the costume of Mr. Fantastic. We need to cut Congress’s activities back to size somehow. Perhaps we should send each and every member a copy of the Constitution with yellow highlights over its duties. After we get Congress out of everyone else’s business, we can concentrate on the bloated Federal executive agencies. Flame on.
July 26, 2007
Posted by The 12 Angry Men under Troll of the Week
This is a special section of the 12 Angry Men Blog where we celebrate the best Troll to be found anywhere during the past week. While there are many varieties of troll, ranging from the fuzzy-haired dashboard decorations to the waylayer of the Billy Goats Gruff, we enjoy a well-executed jabbing that leaves an adversary stammering for a response. Any moron can produce a flame—mere sewage dumped upon the city square—but to produce a good Troll is a work worthy of the celebration of men.
The Troll of the Week segment will be written frequently enough to be termed “periodic”, but the actual label “of the week” is merely idealistic ambition, and it is not to be taken seriously.
This week’s winner of Troll of the Week bears special recognition, as it recognizes an individual not only for a wonderfully executed and technically beautiful troll, but for a lifetime of trollish achievements. So let us all raise a glass, and without further ado, celebrate the life and trolls of Mr. John Bambenek.
Context of the Troll:
To many people, John Bambenek is a familiar name. Whether you know him from his noted career as a columnist for the Daily Illini, his popular political blog, television appearances, his work in the field of computer security, or efforts as a philanthropist, chances are you’ve come across his love of trolling. It seems that Mr. Bambenek loves a good hot flame war more than your average person, and loves starting them even more. But his latest “accomplishment” has even impressed his regular fans. John has managed to create quite a storm and trolled the living daylights out of the ultra-left-wing blog The Daily Kos who awarded him the title “Wanker of the Year” for his efforts.
Those of us who know him (and many of us here at the 12 Angry Men have been blessed with the opportunity to share a beer with this troll among men) know that for all of the vehemence and righteous anger that Mr. Bambenek so often writes with, he also knows how to laugh at his own articles and enjoys the arguments both for the sake of the argument as well as the points he is trying to make. As such, it makes all of us here chuckle even more when the wackos from both the right wing side of the aisle as well as the left demonstrate that they simply don’t get John at all. In their efforts to be furious and clever, they never notice that the joke is on them. We’re all laughing at you, and with Mr. Bambenek.
Execution of the Troll:
While John has stirred up quite a few hornet’s nests in the past, few of his previous attempts garnered the sort of press and recognition as his current pièce de résistance. On Monday, July 23rd, 2007, Mr. Bambenek filed an FEC complaint against Kos Media, LLC, alledging that they operate as a political committee, and not just a blog. He points out that the Daily Kos admits this fact on their own website, in their own words many times.
Forseeing cries that his action is an attack against free speech, Mr. Bambenek rebutts these claims up front saying:
Some will argue that this is a slippery slope that will snare all bloggers. First, most bloggers aren’t organizations. Second, most bloggers are read by like 3 people and their posts are certainly not worth $1,000. Third, most bloggers don’t exist for the primary purpose of electing certain people to federal office.
While the results of Mr. Bambenek’s complaint to the FEC are still unknown, the results of this troll on the Blogo-Sphere are already quite obvious.
For his efforts at trolling not just one side of the political spectrum, but both the rightys and the leftys, and the enormous uproar his actions have caused and are still causing, we happily award John Bambenek Troll of the Week and an honorary beer at The Man Lunch, which we sincerely hope he will join us for as for once a recipient of this reward is within driving distance. Mr. Bambenek, we look forward to seeing you on Thursday and can’t wait for Part II of this exciting troll.
– The Staff of the 12 Angry Men
Update: Mr. Bambenek has posted an excellent response to his naysayer’s here. Keep fighting the good fight John. We love your work and applaud you.
July 25, 2007
The first time I saw you
Oh, you looked so fine
And I had a feeling
One day you’d be mine
Penny lover, don’t you walk on by
Penny lover, don’t you make me cry
–Lionel Richie, “Penny Lover”
Back in 1976, my five year old self—doubtless dressed in a velour shirt with a big zipper ring and a collar, Toughskin jeans and tennis shoes, all from the Sears catalog—was given a giant cookie tin of pennies by some relative (about $3 worth) and it was love at first sight, just like the song. It seemed like a fortune to me and I concocted grandiose “kid mind” plans for what I planned to do with it, which of course went nowhere. I have no idea what I spent it on, but it was probably Legos (this was pre-Star Wars). In today’s dollars it is about $11. Roughly speaking every fifteen years, inflation makes a dollar worth about half as much in terms of buying power. 1976 was thirty-one years ago so now my cookie tin of pennies would buy about 25% of what it did back then.
Penny and I have long since fallen out of love. It’s really very simple: Due to inflation, pennies really don’t buy anything anymore and are more of a nuisance than anything else. The last thing I recall them buying was Tootsie Rolls and other “penny candy”, an item many small grocery stores used to have on their counters by the register to tempt Junior into whinging until Mom gave in and Junior got a Tootsie Roll. At least the horribly sticky things kept Junior’s mouth shut until the groceries were stowed in the station wagon, though they did make for higher dental bills down the line. Still, the tradeoff was worth it. These seemed to have disappeared sometime in the mid ’80s, but I admit to having ceased looking around then. I’m sure it’s nickel candy now.
Now pennies are almost completely worthless. One of my favorite op-ed writers, Sebastian Mallaby, currently of the Washington Post and formerly of The Economist, in The Penny Stops Here provides a nice analysis of why pennies aren’t worth it and that, in fact, getting rid of nickels makes good economic sense too. Dimes are on the edge. Let me go down the reasons:
- They cost the government more to produce then they are worth. Pennies ceased being made of copper in the early 80s when copper ended up being worth markedly more becoming wire rather than being pocket change. Copper-coated zinc was substituted and all the copper pennies were melted down. While this leads to a cool DIY chemistry experiment, it also lead to much less pennies-on-railroad-tracks copper jewelry. Now the zinc in a penny has become more expensive. This means that pennies cost us more money since we pay for the currency in circulation through taxes. To understand just what this means, here’s a story about the rampant smuggling of rupees from India to Bangladesh to turn them into razor blades, which sell for way more than the rupee coin’s face value. That’s right, you could be shaving with former rupees….
- The main advantage of coins is the fact that they last a long time, something you can see easily by looking at the dates on the coins in your pocket. So even if a coin costs somewhat more than its face value (so long as it’s not too much more), it might be a net gain. Unfortunately pennies are frequently out of circulation sitting in garbage dumps, penny jars, on the floor of the car, in furniture, etc., so there’s little hope to recoup the cost via savings over the lifespan of the coin.
- Transaction costs due to handling pennies are not huge but certainly not chump change. For instance, stores pay about $.60 for a roll of 50 pennies due to rolling costs and just guess who this cost gets passed on to? Due to inane managerial policies, many stores won’t allow the nearly ubiquitous penny jar. This leads to pointless fumbling during transactions, which takes up yet more time.
- In addition to making small change, the big advantage of coins is the fact that they work in vending machines, parking meters, etc. These machines will happily take nickels, dimes and quarters… but no pennies. Why? Because pennies would take up too much room in the coin collection hopper. Vending machine operators would love to see the dollar coin gain acceptance and I bet would be happy with a two dollar coin like they have in Canada, too (which, by the way, are a fantastic idea, but that is for another day), because bill changers are notorious for breaking.
- Removing the penny would also make room for a dollar coin, which would save the Treasury, well, a mint. Dollar bills get the absolute crap kicked out of them in circulation and are replaced constantly.
- Pennies are even more worthless these days because so many transactions are electronic, in which case the rounding necessary in a system without them—which averages out to not cost us anything anyway—doesn’t matter at all. There are some worries, of course: I worry about prices and sales taxes getting futzed with, but honestly, so long as that doesn’t happen much, it should be fine.
There’s predictable opposition from the zinc industry, of course, but screw them deep and hard. They can find corporate welfare elsewhere or, better yet, not at all—the price of their commodity is going up after all. There’s opposition from the State of Illinois because Lincoln is on the penny and as we are constantly reminded, Illinois is… Land of Lincoln. Now I admire Abraham Lincoln probably way more than the next guy ever since I spent a lot of time reading about the Civil War several years back, but he’s safe on the five dollar bill. (Take the time to read American history as an adult. It’s worth it.) It would take some serious inflation indeed to nuke the five spot. I worry more about George Washington—someone I also admire a lot more than the next guy—on the quarter and dollar bill, but at historic rates of inflation which has a halving of current money value for every fifteen years, give or take, quarters won’t be worth essentially nothing for a few decades yet. The Mint has shown that they can strike coins of different types, for instance the “states” quarters and the “dead presidents” dollar coins, which will give luminaries like Franklin Pierce, James Buchanan, Warren G. Harding and Calvin Coolidge their sole opportunity to be on money. So they can make sure to put plenty of dead politicians on our money, or maybe they could go back to the old days before politicians’—no matter how worthy—were on the money entirely. The first presidential head on coins was in 1909… Lincoln, on the penny. It was controversial.
Penny lover, walk on by….
Mildly Piqued Academician
(First in a series about the currency of the USA.)
July 24, 2007
For some time, opponents of President Bush have been crowing about his terrible approval ratings. Meanwhile, almost unnoticed, Congress’s approval ratings have sunk to levels that make the President’s approval rating look positively sunny. If the President’s ratings are an indictment of his leadership, the Congressional leadership probably deserves a quick trip to Gitmo! A quick summary of some recent ratings:
- The President: 39% approval (Rasmussen 7/2007)
- The Supreme Court: 40% approval (Rasmussen 7/2007)
- The Congress: 16% approval (Rasmussen 7/2007)
- Among Democrats: 26% approval
- Among Republicans: 13% approval
- Among unaffiliated voters: 9% approval
Given the traditional reverence for the Court, that 40% is probably nothing to be overjoyed about, but the people who have to really worried are the Democrats in charge of Congress. Considering that Congress’s approval rating has done nothing but decline since the Democrats won power from the Republicans, such abysmal ratings are a terrible indictment of Pelosi, Reid, and their cronies in the leadership. So far, Pelosi herself has managed to avoid the full measure of dislike, holding on to an approval rating rivaling the President’s. Still, considering that the President is holding steady or making slight gains, while Pelosi has watched her approval plummit from earlier in the year, she may not be drawing a lot of consolation.
But is this any surprise? Poll after poll made it clear that the economy, immigration, corruption, and pork trumped Iraq as key reasons for voters in the 2006 election. And what has the Congress done since then? Prattle on about Iraq, push through stupid and meaningless non-binding resolutions, studiously ignore health insurance, Social Security, and Medicare, and attempt to pass an immigration bill viewed by a huge majority as ignoring border security and offering blanket amnesty. What haven’t they done? Make any progress whatsoever on ending corruption or “earmarks” (as they like to term pork these days).
At the same time, voters who elected Democrats believing their promises to move away from the divisive and partisan politics of the 2000 and 2004 elections can’t help but be disappointed. The only areas in which the Democrats have made bipartisan efforts have been immigration (where the effort was viewed negatively by a huge majority) and earmarks (once again, doing precisely what the public doesn’t want). Meanwhile, on issue after issue, Pelosi, Reid, and the rest have issued scathing denunciations of the Administration and the Republicans in Congress. Rather than build bridges, they’ve been burning them in record numbers.
So voters who voted for change in 2006 have every right to be upset. They voted for a move away from the culture of corruption, pork, and partisanship and they got more of the same in every case. In many cases, those Democrats elected as reform candidates in 2006 are honestly trying to keep their promises, but their leadership is proving to be no more eager for reform than the Republicans they replaced. The country is starting to realize that the problem wasn’t the Republican leadership, it was the Congressional leadership.
Which means it’s unlikely that Congress will improve in either reality or ratings any time soon. Fortunately, Democrats (and others) interested in real reform do have a clear path forward: vote the entire Democratic leadership out of office as soon as possible! Hey, if we keep doing that every election cycle, maybe someday somebody will get the message: you work for us, so start doing your damn job!
July 23, 2007
In a move of extreme brilliance, US Officials removed the ban on lighters for commercial flights. When asked why this move was made, Kip Hawley, the Assistant Secretary for the Transportation Security Administration said,
Taking lighters away is security theater. It trivializes the security process… The No. 1 threat for us is someone trying to bring bomb components through the security check point. We don’t want anything that distracts concentration from searching for that.
While I applaud the general idea of getting rid of the obscene clutter of useless security theatrics, I have to question the logic of someone who thinks that passengers should be allowed to bring pressurized explosives on a flight, but not toothpaste, mouth wash, or Diet Coke. Furthermore, unlike common toiletries, there is absolutely no need for someone to bring tiny frangible containers of butane on a flight, given that all flights have been non-smoking since 1989.
I applaud the savings this move will bring to US tax payers (an alleged $4 million annually), I think we would all be safer and more secure if the US Gov’t would cut the entire $6 billion waste it is currently funneling into the Theatre of Security Administration every year. I mean, it isn’t as if our bags weren’t x-rayed prior to the creation of TSA, after 9/11, and I can think of plenty of safety features which could be purchased for $6 billion a year that would be far more productive than the current stage production.
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