Bye-bye to Canadian Penny coin! US Penny to follow suit too?

A story from 2 weeks ago which probably did not get as much publicity as it should have, considering the amount of concerns it raises:

Canada stops distribution of penny coin

The Canadian penny is being withdrawn from circulation because production costs have exceeded its monetary value.

The Royal Canadian Mint will no longer distribute the coin to financial institutions around the country, but it will remain legal tender.

This coin, most of which was composed of a steel-nickel alloy with copper plating dropped in value compared to the cost of the metal itself! The Royal Mint of Canada has authority over coinage in Canada. This is not an authority which falls in the jurisdiction of the "Bank of Canada" central bank issuing fiat paper currency.

The situation is remarkably parallel in the US. The US Mint which is a legitimate government entity, being a child organization of The US Treasury has authority over all coinage in the US. It has absolutely no relationship with the private Federal Reserve central bank, apart from distribution of coins from the mint. In hazy terms, all metal coins in the US represent something more genuinely representing "money", as opposed to the fiat paper currency.

• Issuance of coins is actually under jurisdiction of a legitimate government body of US Treasury, as opposed to fiat paper notes.

• As authorized by US Constitution, the US Congress does in fact have authority over issuance of coins. The US Congress has absolutely no authority over issuance of fiat paper currency, ever since the fateful Federal Reserve Act of 1913. The fact that the coins don't conform to the "Only gold and silver as legal tender" part of US Constitution is a separate and far bigger topic. This is the reason for my use of the word "hazy" above.

• The coins actually are backed by some physical resource of tangible value; the metal out of which they're coined. The fact that the value of these metals fluctuates and most of the times is supposed to be negligible compared to the coin face value is besides the point. As the Canadian penny example illustrates, metal value fluctuations or inflation can actually make the backing resource more valuable than coin face value itself. In comparison, the fiat paper currency notes have practically no physical resource backing them. That is exactly the definition of the word 'fiat' in the first place.

• And by the way, yes, in a past life I did in fact work as a Chemical Engineer in the paper industry. Nobody with a straight face can tell me that the physical resource of paper "backing" US paper notes amounts anywhere close to their face value. At least we haven't yet reached that Zimbabwe or Argentina level of hyperinflation yet. But you never know, which is one of the reasons this blog came into existence in the first place!

To come back to the point, all US metal coins are something far more genuinely representing "money", as opposed to the fiat paper notes. If every single person holding any paper assets in American currency were to go to a bank tomorrow, and request conversion of such assets into coins, overnight it would bring the American economy tumbling down like the deck of cards it is. By corollary, it would also take down the entire global economy tumbling down with it. Of course, such a scenario will not ever take place; but you get the point about importance of coins in American currency system.

Considering these facts, if the retirement of Canadian penny ever has a parallel in the US (retirement of American penny), it would be an extremely worrying sign. At an elementary level, proportionality of something genuinely representing "money" compared to fiat currency would drop.

I say, the American public better watch out for signs of any such moves of removing metal coins out of circulation in the US. And especially not be hoodwinked by any propaganda of "equal conversion between coins and paper currency to be guaranteed by Federal Reserve central bank", under any circumstances.