Ford has record loss | CA budget wars heat up
 

[url=http://money.cnn.com/2008/07/24/news/companies/ford/index.htm]Ford posts largest quarterly loss ever[/url]
[quote]NEW YORK (CNNMoney.com) -- Ford Motor Co. announced plans to transform its vehicle lineup on Thursday and reported the largest quarterly loss in its 105-year history.

"Because of deteriorating economic conditions, demand has declined dramatically, especially in North America," said Ford CEO Alan Mulally, who also blamed rising gas prices for the decline.

Mulally said the company is working toward reducing its salaried workforce by 15%. The company aims to save $5 billion annually, and has managed to reduce costs by $1 billion so far.

He also said the company is now shifting its focus "to bring to the North American market smaller, more fuel-efficient vehicles that people increasingly want."[/quote]
So, that shift in strategy works out to roughly how many years behind the curve, Al?


Mish Shedlock has tough-love advice for California legislators and state employees:

[url=http://globaleconomicanalysis.blogspot.com/2008/07/schwarzenegger-to-slash-state-workers.html]Schwarzenegger To Slash State Workers' Pay Until Budget Passes[/url]

Between a governor who made no effort to put away some of the record tax receipts during the housing-bubble boom economy [and whose first proposal for closing the yawning deficit was to borrow against "future CA lottery revenues"] and entrenched employee unions who all think they are utterly indispensable to state functioning and deserve cushy retire-at-50 lifetime job contracts, I predict some very ugly CA politics in the coming months. Perhaps the one thing in Schwarzenegger's favor is that [due to term limit laws] he is not up for reelection in 2010, so he can take a pretty hard line. Sadly, I suspect the various unions and special interests will fight any cuts in the media and the courts at every turn, which will result in a very real risk of the state having to consider a bankruptcy filing. Let's see how the unions like their post-bankruptcy job contracts, health and retirement benefits.

[quote=ewmayer;138308]a very real risk of the state having to consider a bankruptcy filing.[/quote]How would a California bankruptcy rank on an all-time bankruptcy list? (I mean actual legal filings, not bankruptcy as in "bankrupt national policy".)

Honda 's Record Profit | Eurozone Update | MotWee
 

In Sharp Contrast to yesterday's record loss from Ford:

[url=http://money.cnn.com/2008/07/25/news/international/honda.ap/index.htm]Honda Reports Record Profit[/url]

[b]
Eurozone Update
[/b]
[url=http://globaleconomicanalysis.blogspot.com/2008/07/economic-horror-movie-in-britain-and.html]Economic Horror Movie in UK and Eurozone[/url]
[quote]Britain's economy is tipping headlong into a recession that could last more than a year and cost hundreds of thousands of jobs, warns Professor David Blanchflower, a member of the Bank of England's interest rate committee, in an interview with the Guardian today.[/quote]
While the reading may be correct, Branchfloer then trots out the same old long-discredited Keynesian "Central bank must lower interest rates!" idea embraced by the U.S. federal Reserve, which more recently had finally noticed that price inflation is "a concern", apparently without putting two and two together. Elsewhere in Europe...
[quote]The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.

Industrial production for the EMU bloc fell 1.9pc in May, according to fresh Eurostat data. It is the sharpest one-month decline for the region since the exchange rate crisis in 1992. Officials in Berlin have warned that Germany's economy could contract by as much as 1.5pc in the second quarter as export orders crumble.

Industrial output in both Italy and Greece has slumped 6.6pc over the past year. Portugal is off 6.2pc. "It is a very ugly picture: we're on maximum alert," said Emma Marcegaglia, head of Italy's business federation Confindustria.

Rome is now lobbying for a "New Deal" to revive Italy's economy through massive infrastructure projects.

Jacques Cailloux, Europe economist at the Royal Bank of Scotland, said a "reverse decoupling" is now under way as Europe goes down harder than the US - just as it did after the dotcom bust. "There is loss of momentum across the board. We can't exclude a recession," he said.

Spain is now spiralling into the worst crisis since the Franco dictatorship. "The economy is in dire straits," said Dominic Bryant, Spain expert at BNP Paribas.[/quote]
But of course the Spanish government can be forgiven for not doing more to rein in the speculative mania that put the country in its current state - after all, the have [url=http://www.time.com/time/world/article/0,8599,1824206,00.html?imw=Y]much more importnat things[/url] to worry about.

On a more upbeat note, the UK version of the subprime crisis is giving rise to some interesting alternative financing ideas:

[url=http://news.bbc.co.uk/1/hi/business/7516830.stm]BBC: 'Take cash and leave' says lender[/url]: [i]A former sub-prime mortgage lender is offering an 8% discount to its borrowers if they redeem their loans.[/i]
[quote]Edeus, which started up in 2006, is making the cash-back offer to 400 customers and may extend it to thousands more if it proves popular.

The lender wants to get the loans off its books but can no longer find professional investors willing to buy.

A spokesman admitted the idea sounded "bizarre" but it was cheaper than selling the loans in any other fashion.
[b]
'Lesser evil'
[/b]
Alan Cleary, the managing director of Edeus, admitted this would mean making a loss on each mortgage.

"It's the lesser of two evils," he said.

"Over the last 10 months the only way we have been able to raise fresh loans is by offering steep discounts to multi-national banks. So instead of offering that to the bank we are dealing with customers directly," he added.

Mr Cleary said the response from his customers had been very good so far, with 20% already expressing a firm interest in paying off their loans early.[/quote]

[b]
A "tail-ender" comments on the Baby Boomer fiscal legacy
[/b]
Saw this in the reader comments section for one of Mish`s recent articles. While I think the "lavish retirement" scenario it describes may be a bit overblown, I agree with most of it, in particular with the sentiment - which many of my fellow 40somethings seem to have - that we can expect nothing in the way of government retirement benefits for ourselves, as our social security taxes are going to be spent to fund the retirements of the baby boomers.
[quote][i]Chipper
Monday, July 21, 2008
8:36:47 AM[/i]

From time to time posters are harshly criticized for saying that they are looking forward to an economic implosion in this country.

Well, I for one proudly proclaim that it can't possibly come soon enough for me. Here is an example of the reasons why.

I was at a minor-league baseball game Saturday night. There were 3 older couples beside and in front of me. They chatted together the entire game, and they spent a lot of time discussing finances.

Apparently all three couples are receiving full pensions, full social security, and Medicare, plus they benefited from that multi-decades run-up of house and stock prices. It sounded like 2 of the couples still have full or inexpensive health coverage. I gathered that one couple were both retired public school teachers. One of the couples commented that no matter how hard they try, they can't spend the money that is pouring in from every direction (paraphrased).

All I could keep thinking was how the older generations heaped themselves a huge pile of financial benefits at the expense of later generations. The whole system will be bankrupt for future generations. The generations that follow will get absolutely nothing, and will need to work until they die. I for one am sick of being robbed by the over-60 crowd. I am 20 years from retirement, and expect to receive exactly zero from government or pensions. The only thing I will have is what I personally saved, and I expect to have to fight like hell to preserve that.

I freely admit that I am strongly resentful that I am funding the lavish retirements of the over-60 crowd.[/quote]

[b]Moron of the Week Award[/b]

This week's coveted MotWee goes to the U.S. Congress, for essentially giving Henry Paulson a blank check on the taxpayers' dime to bail out the GSEs, which if anything would only serve to artificially propr up housing prices a bit and thus hurt would-be homebuyers, i.e. the very class of folks who didn't indulge themselves during the speculative housing buuble. [The housing bill containing the GSE bailout provision hasn't yet officially passed, but passage looks imminent and president Bush - on perhaps the only issue on which I agreed with him [i.e. no housing-speculator-and-enabler bailout], flip-flopped and indicated he would sign it if it passes both houses of the legislature.]

Why wasn't IndyMac on FDIC problem list?
 

Nice piece in yesterday's [i]San Francisco Chronicle[/i] on the FDIC's actions [or in this case, inactions] in the months prior to IndyMac's collapse. Some really interesting tidbits in there, including the fact that both the FDIC and the Office of Thrift Supervision [OTS] knew that IndyMac was in sufficiently dire straits at the beginning of the year to warrant an emergency multi-month-long full regulatory review, but decided to not put it on the FDIC "problem bank" list until that review had completed 6 months later. Also, the "only 90 problem banks" bullshit FDIC head Sheila Bair has been spouting to the media appears as though it may grossly understate the true number of problem banks. Our tax-dollar supported federal regulatory agencies, asleep at the switch as usual.

[url=http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/24/BU9A11TUKC.DTL]Why wasn't IndyMac on FDIC problem list?[/url]
[quote][i]Kathleen Pender
Thursday, July 24, 2008[/i]

Why wasn't IndyMac Bank, whose problems were well known in the financial community, not on the Federal Deposit Insurance Corp.'s list of troubled institutions until shortly before its failure this month?

And if IndyMac - one of the three largest institutions ever seized by the FDIC - didn't make this list, could it be understating problems in the banking system?[/quote]I think you just answered your own question there in the second case.
[quote]Each quarter, the FDIC discloses how many banks and thrifts are on its problem list. It does not name which institutions make the list because if it did, depositors would yank out their money and they would almost surely fail.

In May, the FDIC reported that for the quarter ended March 31, the list had 90 companies with $26.3 billion in combined assets.[/quote]Note that IndyMac's assets far exceeded the total of the 90 on the end-of-March list [and its liabilities dwarf its assets], so leaving "a mere handful" [to paraphrase Ms. Bair] of large troubled institutions off the list can have a massive distorting effect.
[quote][b]IndyMac, which by itself had $32 billion in assets at the end of March, was obviously not on the list, a fact confirmed by the FDIC after its failure. The FDIC says it was added in June.
[/b]
Independent analysts knew the Pasadena thrift was highly troubled long before that.

"IndyMac started going to hell in the second half of last year," when it lost the ability to sell mortgages it made to investors, says bank consultant Bert Ely.

Highline Financial is one of several companies that rate the safety of banks and thrifts. Its scale ranges from 99 (best) to zero (worst). Its IndyMac rating fell from 55 at the end of 2006 to 1 at the end of last year. In March, it was rated zero.

Bankrate.com gave IndyMac its lowest of five ratings in March.[/quote]
Wow - so these various independent analysts must be using some different measure of failure risk than the FDIC, eh? No...
[quote]Highline and Bankrate both use a rating system similar to the so-called CAMELS system used by federal regulators including the FDIC, which regulates banks, and the Office of Thrift Supervision, which regulates savings and loans. (Although they have separate primary regulators, the FDIC insures deposits in both banks and thrifts and backs up the OTS.)

CAMELS stands for capital, assets, management, earnings, liquidity and sensitivity to interest-rate or market risk. Using these factors, regulators examine institutions every year and assign ratings from 1 (highest) to 5 (lowest). Regulators get some private data that outside agencies don't.

Institutions that get a 4 or 5 go on the FDIC's problem list.

[b]The FDIC says that only 13 percent of companies on the problem list fail.[/b] Those on the list get extra attention from regulators, and many times they can recover or be sold to healthy institutions.
[b]
However, 96 percent of the banks that failed between 1990 and 2002 were first on the problem list[/b], according to an FDIC study.[/quote]
The "only 13 percent" canard is an example of what I refer to as the "O.J. Simpson wife beater defense". Recall that during Simpson's (in)famous murder trial, his defense attorneys argued (correctly) than only a small percentage of wifebeaters go on to murder their spouses, without mentioning the flip-side view, namely that in cases where a victim of serial spousal abuse ends up murdered, in the overwhelming majority of cases [well over 90%, IIRC] where the killer is identified, it turns out to be - ta da! - the abusing spouse. Clearly, this sort of "profiling" - whether criminal or financial - is highly useful.
[quote]Why wasn't IndyMac?

FDIC spokesman David Barr said it wasn't on the list because the Office of Thrift Supervision, IndyMac's primary regulator, didn't put it there.

The San Francisco OTS office was the direct supervisor.
[b]
OTS spokesman William Ruberry says his agency was aware of IndyMac's problems and started its regular exam in January, four months ahead of schedule.[/b]

"We called in the FDIC to join the exam with us early on in the process," he says. Both regulators "were fully aware of everything to do with IndyMac's situation. It was not a surprise."

Ruberry says the OTS could not issue a final rating until it finished the exam, which took about six months. At that point, it went on the problem list.[/quote]
Nice attempt at misdirection - in fact there is no requirement to wait until the OTS regulatory exam is finished before putting a known-to-be-troubled bank on the FDIC problem list. The exam might turn out better-than-expected and give grounds to *remove* a bank from the list, but if the bank is troubled enough that the regular exam gets moved up 4 months, it's surely a good candidate for the list.
[quote]"We thought IndyMac had the opportunity to work through its problems," Ruberry adds.[/quote]
Again, the fact that a troubled bank "still might be able to work through its problems" has *nothing* to do with whether it deserves to be on the FDIC list. By definition, a bank which no longer "might be able to work through its problems" has ALREADY FAILED. The whole idea of such a list is to encourage *proactive* regulatory action, not to confirm-the-blatantly-obvious-and-way-too-late-to-anything-about.
[quote]But on June 26, New York Sen. Chuck Schumer disclosed a letter he had written to regulators questioning IndyMac's solvency. Over the next 11 days, depositors withdrew $1.3 billion, forcing the shutdown.

Ely says the FDIC could have issued its own rating on IndyMac. "The FDIC has backup authority if the primary authority is asleep at the switch," he says.[/quote]
That's of course only helpful if the FDIC itself is not asleep at the switch.
[quote]Christopher Whalen, managing director of Institutional Risk Analytics, says "everyone expects regulators to be ahead of the curve, but they never are. It's hard for regulators to be proactive. If the FDIC was beating the hell out of IndyMac a year ago, the congressmen that represent IndyMac would have been all over them."[/quote]
So much for the alleged independence of the regulatory bodies.
[quote]Whalen says the problem list understates the number of troubled banks. Of about 9,000 institutions, "we have identified about 10 percent that are in significant distress and another 10 to 15 percent headed in that direction," he says.
[b]
Whalen says the problem list should be closer to 900 companies instead of 90.
[/b]
Ely predicts that the second-quarter list "will be a lot bigger. But I have a feeling [b]they don't want to put a real big one on there[/b]. It starts a guessing game: Who went on, who went off."[/quote]
That means the list is worse than useless, since who's on and who's not is completely up to the whims of the FDIC, and their whims are apparently anything but apolitical. Another example of FDIC failing utterly in its role. Hello? You're chartered as a *regulator*, not a bank-industry shill.
[quote]Although it has been growing for five straight quarters, [b]regulators say the problem list is much smaller than it was during the savings and loan crisis.[/b][/quote]
Very clever - hoping the listener will confuse "smaller problem list" with "smaller problem".
[quote]At the end of 1989, 1990 and 1991, there were about 1,500 institutions on the list, the FDIC shows. Between 1987 and 1992, a total of 2,100 institutions failed.[/quote]
And we've already seen that the failure of just one big bank can equate to that of hundreds of small fry, and small fry aptly describes most of the S&Ls. So what's your point?
[quote]This year, there have been only five failures, Barr says.[/quote]
...And "only five" IndyMac-sized failures will suffice to wipe out the FDIC's regulatory capital of roughly $50 Billion. So I ask again, what's your point? That "only five really big ones" is somehow better than "thousands of tiny ones"? Is this some kind of special "FDIC New Math?" This is like one kid arguing to another that "I have a thousand pieces of money in my pocket, but you only have five", when in fact the first kid has a stash of pennies and the second kid has five 20-dollar bills.
[i]
[Come to think of it, that last analogy may now be obsolescent ... due to dollar debasement and the resulting commodity price inflation, the metal in a penny is now worth far more than 1 cent. If the trend continues, the first kid could sell his pennies to a scrap-metal dealer for more money than the second kid has. Hmmm...][/i]

[QUOTE=ewmayer;138350] the metal in a penny is now worth far more than 1 cent. If the trend continues, the first kid could sell his pennies to a scrap-metal dealer [/QUOTE]

We don't want to encourage illegal activity. You can no longer melt down pennies and nickels. See [url]http://www.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm[/url]

Now don't get me started on why the inept U.S. Congress insists on minting these coins at a loss. These two coins should have been scheduled for elimination years ago. And so should the paper dollar bill - metal dollar coins last 20 times as long as the paper dollar bill.

Stop Whining - It's All In Your Head!
 

[QUOTE=Prime95;138351]We don't want to encourage illegal activity. You can no longer melt down pennies and nickels. See [url]http://www.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm[/url][/QUOTE]

Did I say anything about melting them down? I meant of course that the scrap metal dealer would assemble the coins into long tubes which could be used in place of normal extruded power-conducting cables, without damaging the coins. Sad that they banned melting down of coinage, though - that would fit in so nicely with the "meltdown" theme of this thread.

Hard to believe that as little as 10 years ago one could still buy large lots of [high-mintage-year] *silver* WW2 "nickels" for only 2-3x face value - I have a box of around 10lbs of 'em gathering dust somewhere in a closet. Assuming I paid around 25 cents per silver nickel in inflation-adjusted terms, do you think I got a good deal?

Interesting reader comment to the above SF Chronicle article: The reader oversimplifies by not giving Alan Greenspan any "credit" for the "credit crisis", but we've already ragged on Big Al quite a lot, and neglected some of his co-conspirators. I admit I added a few hyperlinks to the quote in what seemed to me to be appropriate locations:
[quote][i]shibahusky 7/24/2008 8:05:15 AM[/i]

The credit crisis was due to several pieces of legislation sponsored by Phil Gramm. The first was the Gramm-Leach-Billey Act in 1999. This act allowed investment banks to get into the lending business. Then, Gramm slipped in an amendment into the Commodities Futures Modernization Act of 2000 (CFMA). The CFMA deregulated derivatives trading and allowed lenders to securitize loan portfolios without regs. The CFMA also brought us the Enron energy crises and todays high gas prices. Finally, Gramm, while working for [url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4264146.ece]UBS[/url], lobbied for the passage of the Responsible Lending Act (RLA) in 2003. Consumer activists call the RLA the Loan Shark Protection Act because it preempted states from passing stricter laws against predatory lending." Phil Gramm is McCain's pick for Treasury Secretary should he be elected. He's McCain's main campaign advisor. [url=http://www.washtimes.com/news/2008/jul/09/mccain-adviser-addresses-mental-recession/]Stop whining[/url].[/quote]
The deepness of the hypocrisy - it is beyond the power of words to do it justice.

[quote=Prime95;138351]We don't want to encourage illegal activity. You can no longer melt down pennies and nickels. See [URL]http://www.usatoday.com/money/2006-12-14-melting-ban-usat_x.htm[/URL]

Now don't get me started on why the inept U.S. Congress insists on minting these coins at a loss. These two coins should have been scheduled for elimination years ago. And so should the paper dollar bill - metal dollar coins last 20 times as long as the paper dollar bill.[/quote]
What I think they should do is find a cheaper metal to mint pennies out of--in fact, I could have sworn I heard somewhere that during World War II they minted pennies out of aluminum to conserve copper. Whether that's a myth, I'm not sure, but regardless it might not be a half-bad idea nowadays. :smile: (I don't think they should phase out the $0.01 and $0.05 denominations entirely; then what would we do with all those prices that end in .99? :wink:)

As for the paper $1.00 bill, I agree there too. I think they've finally found a potential winner with the new (well, they've been around for a couple of years now) presidential dollar coins--if only they'd actually cancel the paper bill and thus force the coins into active circulation! Granted, there's a handful of them floating around, but not too many--I rarely ever see them treated as anything more than a collector's item.

Once I did actually see an example of a product designed with the furtherance of the dollar coin in mind--namely, an automated car wash's select-your-wash machine. It had, right next to the slot for quarters/nickels/dimes, a slot for dollar coins. Alas, that's just about the only place I've ever seen such a thing. :sad:

June durable goods: "War, what is it good for?"
 

Wow, this "Ben Tagon" dude sure likes to shop for appliances:

[url=http://www.washingtonpost.com/wp-dyn/content/article/2008/07/25/AR2008072501000.html]AP | Defense spending helps lift durable goods orders[/url]
[quote]The Commerce Department also reported Friday that orders to factories for big-ticket manufactured goods such as cars, appliances and machinery increased by 0.8 percent in June, the strongest gain in four months and much better than had been expected. But excluding demand for defense equipment, total orders would have been up a much more modest 0.1 percent.

Analysts said that the June performance for durable goods was being propped up by sizable military spending for equipment, reflecting the ongoing wars in Iraq and Afghanistan, and this was offsetting widespread weakness in the rest of the economy. Orders for defense capital goods shot up 15.8 percent in June following a sizable 14.1 percent increase in May.

"With orders excluding defense falling at a 4 percent annualized rate in the second quarter, it is pretty clear manufacturing is hardly thriving," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.[/quote]
Sounds not-so-horrible, doesn't it? One might almost say "better than expected". Oh wait, they did say that - my bad. Now look at the key snippet from the actual report:
[quote][i]Nondefense [/i]

Nondefense new orders for capital goods in June decreased $2.3 billion or 3.2 percent to $71.4 billion.
[i]
Defense
[/i]
Defense new orders for capital goods in June increased $1.5 billion or 15.8 percent to $11.3 billion.[/quote]
Whoops ... without the massive jump in military expenditures, capital goods orders are dropping like a rock. In other words, like so much "economic activity" of the past few decades, any increase is based on deficit spending, i.e. debt expansion. What's wrong with this picture?

[QUOTE=Anonymous;138354]What I think they should do is find a cheaper metal to mint pennies out of--in fact, I could have sworn I heard somewhere that during World War II they minted pennies out of aluminum to conserve copper.[/QUOTE]

Actually they used [url=http://en.wikipedia.org/wiki/1943_steel_cent]steel[/url] for the WW2 pennies. Also note that mostly-copper pennies were discontinued back in [url=http://en.wikipedia.org/wiki/Cent_%28U.S._coin%29]1982[/url] and replaced with the current copper-plated zinc variety [The wikipage says that the mint experiment with aluminum amiong other metals at that time, so maybe that's what you were thinking of]. If pennies were still 95% copper like in the "old days", the metal content would be worth over 2 cents at [url=http://en.wikipedia.org/wiki/Cent_%28U.S._coin%29#Metal_Content]today's copper prices[/url], compared to roughly a half-cent for the copper-clad-zinc coin. [The cost of producing them is what raises the [url=http://en.wikipedia.org/wiki/Efforts_to_eliminate_the_penny_in_the_United_States#Arguments_for_elimination]total cost[/url] of mintage over 1 cent].

The wartime metals shortage is also what drive the [url=http://en.wikipedia.org/wiki/Nickel_%28U.S._coin%29#Wartime_nickels]use of silver[/url] in the 5-cent coin, as nickel has far more wartime-industry uses than does silver.

Given the miniscule buying power of a penny today, I see no rational argument for continuing its use - if the powers that be are that weeded to the "historical" aspects of the 1-cent coin and/or Lincoln's visage, then better they should officially revalue the dollar by perhaps 10x, so that the resulting "new penny" would be of not-completely negligible worth. The above wikipage states it nicely:
[quote] * Historical precedents — There has never been a coin in circulation in the US worth as little as the penny is worth today. Due to inflation, as of 2007, a nickel is worth approximately what a penny was worth in 1972.[10] When the United States discontinued the half-cent coin in 1857, it had a 2008-equivalent buying power of 13¢.[11] After 1857, the new smallest coin was the cent, which had a 2008-equivalent buying power of 26¢. The nickel fell below that value in 1974; the dime fell below that value in 1980;[10] the quarter fell below that value in 2007.[12][/quote]
Contrast that with the list of pathetic arguments for keeping the penny:
[quote] * May affect some charitable causes — Some organizations rely on donations from the collection of pennies.

* Historical sentiment — The cent was one of the first coins authorized to be minted by the American government, and the first to be put into production.

* Regional sentiment — Because the Penny depicts former President Abraham Lincoln, representatives of the State of Illinois (official nickname is "Land of Lincoln") have been vocal in their opposition to the elimination of the penny.

* The zinc suppliers profits — The penny is 97.5% zinc and the removal of the penny would decrease profits of zinc suppliers.
[/quote]

[i][p.s.: Perusing the Wikipedia nickel page answers my "did I get a good deal on my WW2 nickels? question - disappointingly these have "only" 35% silver content, plus 56% copper and 9% manganese. Worth just shy of a dollar at today's metal prices. Still not a bad investment, speaking retrospectively.][/i]

[quote=ewmayer;138356]Actually they used [URL="http://en.wikipedia.org/wiki/1943_steel_cent"]steel[/URL] for the WW2 pennies. Also note that mostly-copper pennies were discontinued back in [URL="http://en.wikipedia.org/wiki/Cent_%28U.S._coin%29"]1982[/URL] and replaced with the current copper-plated zinc variety [The wikipage says that the mint experiment with aluminum amiong other metals at that time, so maybe that's what you were thinking of]. If pennies were still 95% copper like in the "old days", the metal content would be worth over 2 cents at [URL="http://en.wikipedia.org/wiki/Cent_%28U.S._coin%29#Metal_Content"]today's copper prices[/URL], compared to roughly a half-cent for the copper-clad-zinc coin. [The cost of producing them is what raises the [URL="http://en.wikipedia.org/wiki/Efforts_to_eliminate_the_penny_in_the_United_States#Arguments_for_elimination"]total cost[/URL] of mintage over 1 cent].

The wartime metals shortage is also what drive the [URL="http://en.wikipedia.org/wiki/Nickel_%28U.S._coin%29#Wartime_nickels"]use of silver[/URL] in the 5-cent coin, as nickel has far more wartime-industry uses than does silver.[/quote]
Ah, I see. Thanks for the background! :smile:

[quote]Given the miniscule buying power of a penny today, I see no rational argument for continuing its use - if the powers that be are that weeded to the "historical" aspects of the 1-cent coin and/or Lincoln's visage, then better they should officially revalue the dollar by perhaps 10x, so that the resulting "new penny" would be of not-completely negligible worth. The above wikipage states it nicely:

Contrast that with the list of pathetic arguments for keeping the penny:


[I][p.s.: Perusing the Wikipedia nickel page answers my "did I get a good deal on my WW2 nickels? question - disappointingly these have "only" 35% silver content, plus 56% copper and 9% manganese. Worth just shy of a dollar at today's metal prices. Still not a bad investment, speaking retrospectively.][/I][/quote]
Well, even if it had no other advantages, getting rid of the penny would have one (somewhat) major advantage: it would hopefully make an end of all those annoying prices that end in $0.99! :smile: I know it's just a psychological marketing thing, but it would still be nice to have round-amount prices instead. :smile: (No, wait--if they got rid of the penny, then we'd just see prices ending in $0.95 instead! Arrrrgh! Hey, at least you're saving four cents. :wink:)

[QUOTE=Anonymous;138364]Well, even if it had no other advantages, getting rid of the penny would have one (somewhat) major advantage: it would hopefully make an end of all those annoying prices that end in $0.99! :smile: I know it's just a psychological marketing thing, but it would still be nice to have round-amount prices instead. :smile: (No, wait--if they got rid of the penny, then we'd just see prices ending in $0.95 instead! Arrrrgh! Hey, at least you're saving four cents. :wink:)[/QUOTE](Straight response - ignoring your smilies.) Here in Australia the one cent and two cent coins were removed from circulation some years ago. The total cost is rounded - ie up or down - to the nearest five cents when paying with real, physical cash. It made no difference to prices ending in .99 - surprise, surprise.

As for the supposed argument about the effect on charities, they were much more likely to have been helped by the change. :groan: