Let’s make some money…or at least read something about money. The latter, of course, always free at Everett Public Library.
All e-magazines are readily available through OverDrive/Libby via your Library account. For assistance, call the Reference Desk @ 425-257-8000.
EPL, a long-time Coin World print subscriber, now boasts even more numismatic titles in e-magazine format – a doubling down if you will:
- Banknote Reporter
- Coin Collector
- Numismatic News
- World Coin News
We also have numerous titles on finance, business, and economics with many in both print and digital formats, for example:
- Inc (print & dig)
- Fast Company (print & dig)
- Kiplinger (print & dig)
- Entrepreneur (print & dig)
- The Economist (print & dig)
With all this print & digital money talk, one might be forgiven for making the leap, however ponderous, to the difference between traditional metal coins , e.g. gold specie standard , vs digital currency , e.g. Bitcoin .
From a recent Numismatic News, there is a fascinating article about the minting of the 1857 one cent piece. Due to increasing copper prices (attributable to the discovery of gold in California and the subsequent impact on other precious metals, namely silver) pennies were, suddenly, too expensive…
“…The weight of the copper cent had remained unchanged since 1795, when it had been fixed at 168 grains (10.89 grams), but on several occasions in the early 1850s the cost of making a cent piece had come close to face value…In the spring of 1852, the cost of prepared planchets [the respective metal discs struck into coins]…actually hit the 42-cent level…an absolute loss even if other expenses were not added…” “From Copper to Copper-Nickel”, Numismatic News, 06/22/2021, R.W. Julian
The new one cent would be very different…
“…The proposed coin also marked a radical departure from the past. From 1793 it had been government policy to make the cent in such a way as to contain nearly full value in copper but still light enough to show a profit. In 1856, however, the Mint was suggesting that the intrinsic value be lowered drastically…” “From Copper to Copper-Nickel”, Numismatic News, 06/22/2021, R.W. Julian
This phenomenon has terms, brassage and seigniorage…
“…By the late 13th century, all mints within a given political entity were under direct control of the sovereign. The mints were run as businesses by private entrepreneurs, who leased the physical plant and capital equipment for fixed terms. Individuals…could…deliver their metal…and they would be paid back, within a few weeks, in newly minted coins of the same metal they brought in. They always received back less fine metal than they brought in. Part of what was withheld by the mint paid for production costs and was called brassage. The rest was sent to the sovereign as profit, or tax, and was called seigniorage. For convenience, we will use gross seigniorage for the sum of brassage and seigniorage…” “The Debasement Puzzle: An Essay on Medieval Monetary History”, Quarterly Review of the Federal Reserve Back of Minneapolis, Vol 21, No 4, Fall 1997, Arthur Rolnick, et al
In the case of the U.S. Mint, gross seigniorage for the copper penny was trending toward loss, as opposed to profit, unless the amount of copper per coin was substantially reduced.
Now to Bitcoin and its minting or, more accurately, Bitcoin Mining…
“For years, Chinese [Bitcoin] miners…were enabled by the glut of cheap…electricity in China….At their height in 2018, China’s bitcoin prospectors accounted for 74% of the world’s bitcoin production.” “Bitcoin Miners Exit China, Beat A Path to The U.S. As Crypto Climate Shifts”, The Washington Post / Seattle Times, 06/21/2021, Gerry Shih
The price of that electricity was considerably cheaper just one year ago…
“…[at] $0.04/kwh, miners based in China said that the breakeven cost to mine Bitcoin hovers in the $5,000 to $6,000 range…” “Why the Actual Cost of Mining Bitcoin Can Leave It Vulnerable to a Deep Correction”, Forbes, 07/07/2020, Joseph Young
From the below graphics, one can see the dramatic difference (especially “Profit per year”) with only disparate electricity costs factored in – something akin to the rise in copper prices in the late 1850s.
In this example, Sichuan, China’s 4-cents / KWh vs Boston, MA’s 22-cents / KWh with a price of $33,488 for a single Bitcoin.
As can be readily seen, migrating mining operations from a cheap electricity location to a more expensive electricity location easily threatens the “Profit per year” – ultimately, the gross seigniorage – of any Bitcoin mining operation.
And it is not just the mining of Bitcoin that is so costly, but the spending as well…
“…In periods of high activity, as witnessed during much of 2021, bitcoin burns more energy than the whole of Argentina. The glaring inefficiencies of that process also explain why payments in bitcoin are slow and costly, and thus a rarity…” “Can Bitcoin Be Bettered?”, The Economist, 06/24/2021
Indeed, even the new 1857 one cent piece experienced something similar…
“As early as the spring 1858, so many of the new coins were in daily use that merchants bean to complain about the excess number of them to be found in their tills. These coins were not legal tender and those with large accumulations still had to use a broker to change them into gold or silver. Banks would not do this except for small amounts.” “From Copper to Copper-Nickel”, Numismatic News, 06/22/2021, R.W. Julian
So, in many ways, it appears the rules of money, at least in its minting, are slow to change, if at all. Indeed, running with Bitcoin no less a burden than gold itself.
To put it more poetically…
“Everybody needs money. That’s why they call it money.”
Mickey Bergman (Danny DeVito’s character from David Mamet’s 2001 movie “Heist”)
With a that in mind, I might well recommend another of our medium-of-exchange, if not medium-heat, themed titles…