Hello and welcome to another episode of the Minor Issues podcast. I am Mark Thornton from the Mises Institute.
I have been criticized by listeners lately that the podcast has been concentrating on major issues, so today I’m going super-minor with the topic of piggy banks: yours and Uncle Sam’s. There are links to discounts for the next Mises Institute conference as well as the Bitcoin vs. Gold contest below.
The piggy bank originated about 500 years ago at the dawn of capitalism, when ordinary people started to possess silver coins. The clay container often only had a small slot to put coins in so that you literally had to break the bank if you wanted to spend the money. With increasing prosperity, the piggy bank was once a tool to teach children the purpose and importance of saving for the future.
This 500-year tradition seems to be yet another “minor” detail of life that has been killed by a world dominated by fiat paper money. However, while the poor piggy has been slaughtered by inflation and big government—even in a world where most transactions are electronic—many people still have large amounts of coins, with one estimate approaching $100 worth per household.
The media and pundits have labelled all this small change “just sitting around doing nothing” as irrational and a waste. As usual they are wrong. As we will see, “sitting around doing nothing” is a real, rational thing for many people, most especially as the government’s inflation has driven down the value of our money. The value of a pre-1965 silver dime is now worth $2.25 of silver.
Let’s contrast this with US Secretary of the Treasury, Janet Yellen, who announced last week that your government will once again—with the national debt ceiling once again upon them—have to break into its own “piggy bank” to help pay the bills.
When regular people do “something” with their jar of small change, it could mean to help buy a holiday present or needed medicine. Some people even use their small change to make an extra payment into their retirement funds, mortgage payment, or to pay down their credit card balances. Some people just continue to accumulate for a rainy day—and that’s perfectly rational, especially for households that live paycheck-to-paycheck. You can even turn your spare change into an inflation-fighting machine as I will explain below.
That is not exactly the same type of thing your government is doing. Secretary Yellen wrote to Congress—the week she left office—that her agency will start taking “extraordinary measures,” or special accounting maneuvers to prevent the nation from hitting the debt ceiling and going into default on its obligations. In essence, they are once again employing accounting tricks for not paying certain bills in order to pay other bills. It does nothing to actually reduce spending.
It reminds me of a college friend who had two checking accounts and was constantly making deposits and withdrawals and living on the “float,” or the time between the arrival of funds and when they would be credited or debited to his accounts. Not exactly the image of the United States as an “economic superpower” some of us would like to imagine!
The even bigger problem is that the US federal government has debt somewhere in the range of $135+ trillion in net present value terms—several times worth compared to total annual GDP in the US. This is probably even more than the total private wealth accumulation in the US. They would have to cut expenditures by $3 trillion per year (every year) and sell off vast amounts of assets to turn this behemoth of a garbage scowl around.
In my book, this means the government is broke or bankrupt and suggests to me that our government is going to turn increasingly to inflation—to inflate away and secretly default on their obligations to government pensioners, Social Security, Medicare, etc.
In that world, you need some inflation protection, and you might just start to find it in your piggy bank. Just use your stash to buy some “junk” silver coins (pre-1965 US coins) or other forms of silver or gold (or bitcoin?) or buy a small amount per pay period. Something like silver is more likely to increase in value with inflation compared to the fiat coins in your jar and you are just as unlikely to spend it, except in an emergency.
By the way, you might find some treasures in your piggy bank, like junk silver, or even WWII nickels which are made out of 35 percent silver. In addition, the current penny and nickel have a “melt value” near their denomination value so it might be easier to just keep them in a container that can be used as an effective door stop, super paper weight, weapon, or as a strength training device.
This has been another episode of the Minor Issues podcast. Thanks for listening and sharing. I am Mark Thornton at the Mises Institute.
