Wednesday, June 18, 2008

Steeling seigniorage 

A recent bill, HR 5510, authorizes the substitution of steel for zinc and a bit of copper in U.S. pennies. But they can't look different -- the law says the coins must continue to "impart a copper color to the appearance" of the steel penny. This wasn't true of the pennies issues during WW2 when, like now, copper was scarce. Nobody complained then because the scarcity was due to the use of copper in war munitions. Now it's foreign competition for precious metals, which has driven the cost of the zinc-copper penny to 1.26 cents.

Dan McLaughlin
writes that this is inflationary, a form of seigniorage. Yes it is, but in an oh-so-small way, not likely to be noticed by any of us. The U.S. Mint makes approximately $74 million face value in pennies each year, which it sells to the Federal Reserve. The Mint receives back Federal Reserve notes. As long as those notes are not new (or otherwise sterilized), the new coins are not adding to money. And this is a gross value -- we would want to deduct the pennies that are taken out of circulation by the Fed because they are too worn. On currency issue of hundreds of billions of dollars, it's unlikely that even $50 million in penny-inflation is going to make that big a deal.

Of course the best reasons have been offered already by John Palmer. The penny is a waste of time, it is argued. Removing it might cost us a few cents from rounding up prices, but the return in saved time might be worth that. But worth it to whom?

(says he whose daily coffee-and-bagel-with-cream-cheese at Panera currently costs $3.51.)

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Wednesday, November 14, 2007

Gimme coffee or taste my ire 

This morning's visit to Panera brought an unwelcome, though not unexpected, surprise. Prices were raised on several products and lowered on a few. In particular, beverage prices were up across the board, including the ending of the $.50 discount one received for using a travel mug. (I could comment on this as anti-green behavior, but you know that would be crocodile tears in my case. I'm just unhappy about losing a discount I used to receive.)

Now the Panera we frequent is a weekday regularity in my life. There are about ten men (and one brave spouse occasionally -- this group meets too early for Mrs. S) who go there and have sat together consistently through the closure of one place and eventually chose Panera as their new home. We tend to linger there for about an hour. And we drink coffee, lots of coffee, and we have toast or bagels by and large. Some have only coffee.

I wonder whether Panera wishes to have our business. The sharp increase in coffee prices would indicate a desire to better ration seats in Panera (and their free wi-fi, which still nevertheless does not allow me to blog -- their service provider classifies Blogger as "web communications", which is not permitted to be used on the Panera wi-fi. Nobody can explain why.) But if they wanted to do that, why not simply charge for refills? And the maintenance and even price drop for a few food items may indicate they wish to be more restaurant and less coffee shop.

While on this topic, I note that my group is a bit demanding. When a coffee dispenser is empty, we get crabby, carry the empty over to the counter and await delivery of the new pot. They can sense our impatience. I wonder if this is another reason for Tim Harford's observation over the weekend (h/t: Mungowitz) that women are served more slowly than men at coffee shops. I suspect men are also more sensitive to price changes -- well, except for the women's group my late mother-in-law was in; now those people were cheap! -- and perhaps Panera wants to change the profile in that direction too. Women might by more of the higher-profit items from Panera than men, who again show up for a bagel and coffee and seldom eat the sweet pastries. And perhaps men just get served faster because we're more vocal about slack service.

I suspect the Panera gang might move, in which case your humble Mayor will write more in the morning.

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