Inflation Non-Cents : Benson w/ comments

As an Economist: Fed Policy, Velocity of Currency, Inflation, and Globalization (as it relates to economics) are just a few of the things that fascinate me. Yes, I am the life of any party knowing that information now.....but I digress.

This article is a simple illustration of how the world has changed, but even more how drastically it has changed in the past decade with the advances of technology and our global economy.

Personally it means that each of us need to look outside the U.S. "Basket" of investments to other investment options like gold, emerging markets, and foreign currency. We need to have a "responsible" plan in place that includes a global perspective. The threat of a declining dollar is just one example of how our world has changed.

NM

Inflation Non-Cents
Richard Benson

When was the last time you actually bent down and picked up that penny you dropped? The U.S. penny is on its way to extinction so it's time to bid farewell to the basic coin and share with you an inflationary "penny for your thoughts".

The penny's composition has changed over the 219 years it has been in circulation:
From 1787 to 1837 the composition of the penny was pure copper; From 1837 to 1857, the penny was made of bronze (95 percent copper and 5 percent tin and zinc); From 1857, the penny was 88 percent copper and 12 percent nickel; The Cent became bronze again (95 percent copper and 5 percent tin and zinc) in 1864 and stayed that way until 1962; In 1962, the cents zinc content was removed. Then, in 1982, the composition of the penny was changed to 97.5 percent zinc and only 2.5 percent copper. (This information was taken from the United States Mint website)

You may be wondering why the United States had to switch from a penny that consisted of mostly copper, to one that is almost all zinc. Well, before 1982 the old copper coin weighed 3.1 grams. 100 coins - or $1.00 worth - weighed 310 grams. Since a pound is about 453 grams, 100 pennies at 310/453 = .68 pound. Today, at $3.45 a pound for copper, 100 of those 1982 mostly copper pennies are worth about $2.35.

The U.S. government, which is in the business of "making money", has done a fabulous job of profiting on this coin. Since 1982, they've used an inexpensive copper (zinc) as something of greater value (copper) in the minting of the penny. With inflation today, even the zinc in the penny is now worth more than the penny itself. It actually pays to take your paper money to the bank and exchange it for pennies, then sell them for scrap. I guess the time has really come to stop making these coins.

But the real story behind the now-worthless penny is, by far, the surge in inflation. If the core inflation rate is, indeed, only 2.6 percent, and the year-over-year increase in the CPI is 4.3 percent, I wish someone would explain why my household expenses have gone up so much.

This chart doesn't even include the following: the cost of groceries or prescription drugs; take-out food can cost as much as eating out; parking garages in a city like New York are charging $10 more a day to park, reaching $40 a day in some garages; newspapers are shrinking to stay in business because the cost of paper is so high, they need to use less of it. (Circulation is also down as many former subscribers now read the news directly from their computers).
Worse yet, global warming has lead to record heat in the Midwest and pushed up the cost of wheat to a ten-year high. Fruit is also shriveling and nuts are getting burned in their shells. It's so hot, farm workers can sometimes work only half a day. This hasn't helped the cost of food one bit so I'm stocking up before the middle class figures this out and there's a mad rush at Costco to buy groceries cheap, especially cereal.

When the penny is retired and prices for goods and services are subsequently "rounded up"- an item that would ordinarily cost $1.97, may cost $2.00 - expect a little extra pop in inflation. (The Europeans saw a lot of this rounding up when they turned in their local currencies for the euro.)

For as long as I can remember, inflation has been with me, even as a kid when I bought penny candies. In the 1950's, my father actually purchased a brand new modest two-bedroom house in the Midwest for $11,700 and a new car for $2,500. (Some suites at fancy hotels in Las Vegas can charge $2,500 for one night). Inflation also makes planning and saving for retirement a real issue. Unless you know how long you will live, I have to assume that the core cost of goods I need will be going up at least 10 to 15 percent in nominal dollars a year.

So, for the time being, our best recommendation for a long-term inflation hedge is to own real gold and silver and some I-Bonds in a rainy day fund. (Thank you, Federal Reserve, for a "fiat monetary system".)

In years past, Americans would hoard dimes, quarters and silver dollars (before the silver was taken out of them). A silver dollar weighing one ounce would today be worth $11! Therefore, in the long run, stashing away zinc pennies may actually make a lot of cents. Any enterprising boy scout should be able to figure this out.

Education & City Planning

Eagle Valley School Board Second Interview Completed
by Karin L. Nauber

Link to Article: (click here)
http://www.inhnews.com/year06/may/may3/evsboard.html

"I was pleased to meet Mr. Tischer. I heard from him what I've been talking about here for a few years now. The need to PLAN for the short& long term survival of our rural schools and cities. We no longer complete with the city up the road, but we are competing with every city and student around the world. Solid and realistic planning using the resources we have are key. We can continue to be the best in the world if we keep our eye on the "proverbial" ball." - NM

Eagle Valley Superintendent Candidate
Gerald Tischer met with Clarissa Mayor
Nathan McLaughlin as well as other community
and religious leaders in Clarissa and Eagle Bend
on Thursday.

Honorable for a bit

A friend of mine was looking at some mail on my desk and said: "WOW. It must be weird to be addressed as "The Honorable Nathan McLaughlin" during different events.

I said it was, however, I've learned after a few weeks as Mayor people learn to drop "The Honorable" portion of the title pretty fast, and insert other descriptive adjectives and verbs most of which shouldn't by typed or spoken out loud.

The McLaughlin Family 

A Great Place to Live, Protect, & Promote

Happy New Year!

We just finished up the Holiday Season here in Clarissa, MN. The Politically Incorrect way to say the first sentence is that we just finished celebrating Christmas. I know it's controversial, but that is just another day of tough political decision-making that goes on here as A Small City Mayor.

It never ceases to amaze me at the comments people have when visiting an area such as Clarissa. Our Commercial Club in town puts on a Santa Days Event one evening just before Christmas. We do sleigh rides, drawings, with cookies and hot drinks to boot. The people mention that the event in and of itself is very nice for a small city. What gets the best reviews and the people returning year after year is the friendliness of the people in this area towards those who are complete strangers.

Comments more often than not compare our city to the old time television shows of "Leave it to Beaver". I always tell them that I wish I could differ with them, but they are exactly right.......IT IS!

Having moved from the Twin Cities it is still something we have really come to enjoy about Clarissa. Our first day in Clarissa, before anyone knew who we were, resulted in more "hot dishes" than we were capable of eating. We had previously lived in Isanti for three years, and still I couldn't tell you the names of our neighbors. Yet I'd be hard pressed not to be able to recognize or tell you the names of dozens of people I come across on a daily basis.

There are a lot of policies and politics in place today that threaten this way of life and force people by sheer economics to move towards the "Big Cities". Politicians need to understand that by strengthening the Small City's in areas such as Clarissa they are reducing the strains on the major metropolitan areas when it comes to affordable housing, congestion, and overall standard of living. I am convinced that many would leave the metropolitan areas if they only had an OPPORTUNITY, and with the tremendous advances in technology today the time to leverage these advances for Rural America is NOW.

Let's work toward building greater opportunities by leveraging and investing in technologies for Rural America and by holding our politicians accountable.