Michael Lewis tells Steven Colbert about somebody who bought twenty million nickel coins, a million dollars’ worth, from the U.S. Mint. Jeremy Taylor at TV Replay snarks, “So hotshot financial types are hoarding nickels, apparently. This can’t be a positive sign for the economy.” (h/t Reynolds)

Let’s do some arithmetic, shall we?

According to the U.S. Mint, a nickel coin is 25% nickel, the balance (75%, duh) copper, and weighs as close to exactly 5.00 grams as the Mint can get it. That’s a total of 100 million grams, which is 100,000 kilograms or 100 tonnes, containing 25 tonnes of nickel and 75 tonnes of copper. (In the video clip, Colbert remarks that “…it must weigh a ton.” Guess again, Stephen.)

In English measure, that’s 27.55778 (short) tons or 55,115.57 pounds (avoirdipois) of nickel, 82.67335 tons or 165,346.7 pounds of copper.

On the London Metal Exchange as of 22:30 GMT 5 February 2011, copper is bringing $4.5296 per pound, and nickel $12.7346 per pound. If we assume that refining costs are nil, the copper is worth $748,954.41232 and the nickel would bring $701,874.737722, for a total of $1,450,829.15; our investor’s strategy is looking pretty good; he’s already made a profit of almost half a million dollars, and prices are still going up. Of course, refining costs are not nil — the coins, being part copper and part nickel, would count as scrap to be refined, and their worth is correspondingly reduced; by how much isn’t quickly Googleable.

But — If our wise investor is an American, things look a little different. The proportions of nickel and copper in a 5¢ coin have varied over the years, because the nickel is the last American coin whose value as metal should be approximately equal to its value as money. The Mint has adjusted the mix, now more nickel and less copper, now the other way, to keep the metal value close to par. Please note that, like oil, the prices on the LME are primarily quoted in U.S. dollars — and, like the price of oil, the price of metals more nearly reflects the value of the dollar, or rather of its inverse. The investor hasn’t made any money — the not quite one-and-a-half million dollars is worth, now, what the million he paid for the coins was not long ago.

The investor isn’t turning a profit, he’s hedging against inflation, and not doing too badly at it. Primary metals like nickel and copper are used in manufacturing and industry in general, and demand for them (and therefore what people will pay for them) is trending a bit downward as the world-wide recession takes hold. Their prices don’t move fast, except for minor fluctuations, so they aren’t bad inflation or deflation hedges if you’ve got the scratch to buy enough to make it worthwhile; 100 tons is a pretty small metals holding. For those of us whose bank accounts don’t have seven or more figures before the decimal point, it isn’t possible to trade primary metals in large enough quantities to make it a useful investment.

What this does tell us, though, is that it’s time to take a tip from Argentina, or (better) from those who managed to survive the Seventies. If the price of a nickel as metal has gone up by half again, it means the price of stuff at Wal*Mart is just before doing the same, and we’d do well to stock up on stuff instead of keeping the bank account flush. The talking heads will be telling you not to do that, because if everybody does it makes the problem much, much worse — but I lived through Dick and Jimmah, and I can tell you without fear of contradiction that when they aren’t making reassuring noises on teevee, those same talking heads are paddling like mad, trying to get rid of dollars and buy stuff that will be worth something after the prices spike. Effum. If you can do it, buy stuff and don’t keep money. “Every man for himself” is the rule they’ll be going by; no reason to bail them out.

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