If a coin is minted the material might cost less or more then the monetary value on it how are the governments assigning values to it?
In: Economics
They don’t.
They put a number on it which defines how many of one coin you need to give the government to get another coin.
Grocery stores decide how many coins with various numbers you need to give them for a gallon of milk.
It used to be in the old days that coins were worth more or less their material value.
But hose days are long gone.
Governments went from coins made of actual precocious metals to just handing out coins and bank notes that were worth a certain amount of that metal and could be exchanged for it.
Those days however are gone too.
Nowadays money is just money and the only thing giving it value is everyone agreeing that it has. (It really complicated.)
Coins are usually made out of materials worth less than their nominal value. The mints effectively make a profit by literally making money. This is called “Seigniorage”.
Some coins actually cost more to make than they are worth. This is the mint losing money, by making money and normally considered a really dumb move.
In the US a 1 cent coin cost more than 1 cent to make for example.
All of the money in a market ends up roughly equaling all of the stuff being sold in that market. If the human race generates nothing but bread, and ten tons of bread a year, then collectively every single person should collectively be able to afford exactly ten tons of bread every year.
As such, the value of the currency is decided based upon two things; how much of the currency exists, and how much the market produces. This gets more complicated with millions of markets running side by side, but that’s the fist.
Because they’re the government. They can do that.
There’s lots of fancy words around the edges of this idea, but it’s a simple idea. The government says “whatever it cost to make, this little metal disk is worth one cent. We will accept it when you pay your taxes, and everyone else you deal with must accept it as payment too, under xyz conditions.”
And bam, now that disk is worth a cent.
TL:DR, money is worth the value it’s given because we will only give it up for equally valuable products.
Money doesn’t really have inherent value, it just acts as a promise or a debt. On a British banknote you can find the line “I hereby promise to pay the bearer on demand the sum of X pounds”. Money was invented so that people didn’t have to trade goods-for-goods, you could trade your goods for money, and your money for someone else’s goods.
New money is often only minted to replace old money, not to add to the pool. This is why printing more doesn’t make a country richer, it just makes the other money in the country less valuable. Money is only worth the value of the good we are giving it up for, so increasing the produce in a country is the way to boost its economy, not just adding more coins and notes.
they arent
the whole basis of currency is that all the parties involved agreed on the value of the token your trading with, in this case, Coins
the only reason coins are minted the way they are is because they need ot be made of durable enough alloy to not be perishable and a cheap enough alloy that it can be minted at under face value.
by itself it has no value, this is why if you mint your own coins they woudl be worthless.
however the ones your country’s treasury mints arent, they have the means ot back up their value and control the supply, so ppl will be willing to trade with it under the promise they will hold their value.
Junk metal coins are fiat “money”. The transaction value is solely based on the number printed on it.
For example, pennies minted prior to 1982 are mostly copper, if melted, the copper value is about two cents. Pennies minted after 1982 are mostly zinc, their melt value is less than a penny.
In the next 30 days the Federal Reserve will inflate the US currency supply by $500 Billion dollars, in a desperate attempt to prevent a world-wide collapse of fiat currencies. Good luck, everyone!
Good answers, here, especially “they don’t.”
I will add that when the value of the material approaches the value of the coin, they will redesign or discontinue it. U.S. pennies used to be copper, and now they are only copper plated.
Pennies used to be over 90% copper with a little alloy to make it harder so it lasts longer. Now, they are famously 98% zinc, with just a copper coating.
I dont know exactly when nickels went to playing, but when I was looking at how to DIY home nickel-plating, I read that some guys are trying to find older Canadian nickels, which were almost pure nickel. Cheaper than buying new nickel for the plating process.
US dimes, quarters, and half-dollars from before the 1960’s were very high in silver. Of course now they are played. I have a couple of silver dollars from before WWII, and they contain one ounce of silver, but weigh 1.2 oz., because there is 0.2 oz of alloy to make them harder…
Governments basically don’t assign value. The economy does, which is to say that everyone working together deciding how much various things are worth, even money, does.
They do have controls. So do businesses. So do consumers. And all of those people, to a greater or lesser extent, manipulate the economy, consciously or unconsciously.
Basically, money is an idea, and cash is nothing but token in a board game we use to represent that idea. There are physical traits that make money valuable, specifically the ones that make it hard for people to cheat at the game, but one of the important things about a good currency is that it won’t have any actual value itself.
Even when you say that the material costs something… gold isn’t “useful” in all but a very few conditions. The value of the gold in a coin is just as arbitrary as the value of the coin itself.
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