Penny’s Funeral: How Easy Money Broke the Dollar

Decades of artificially low interest rates and nearly $9 trillion in quantitative easing, combined with 713% CPI inflation since 1970, have warped investors’ sense of what is “normal.”

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In this week’s episode of Money Metals’ Midweek Memo podcast, host Mike Maharrey argues that decades of artificially low interest rates and nearly $9 trillion in quantitative easing, combined with 713% CPI inflation since 1970, have warped investors’ sense of what is “normal.”

He says these policies have produced a debt-addicted bubble economy and destroyed the real value of small denominations like the now-dead penny.

Maharrey says this ongoing fiat currency debasement is baked into the system, so savers should shift wealth into physical gold and silver—especially pre-1965 “junk silver” coins—to preserve purchasing power as the dollar continues to lose value.

Mike Maharrey opens this Midweek Memo with a childhood memory that becomes a metaphor for modern finance.

Blizzard Winters And Broken Market Perception

Growing up in Lexington, Kentucky, Mike Maharrey lived through the brutal winters of 1976–77 and 1977–78. Between December and February of 1977–78, about 32 inches of snow fell, with more than 42 inches over the entire winter. In a typical year, Lexington averages roughly 14.5 inches of snow.

The winter of 1976–77 still brought about 24 inches, around 10 inches above normal. As a 9- to 11-year-old, Maharrey internalized those blizzard seasons as normal. Later, when a winter produced only 5 inches of snow, it felt wrong, as if something had broken in the climate. In reality, the extreme winters were the outliers. The milder years were the true norm.

That misperception is his bridge to markets. Just as he learned to expect 40-inch winters, an entire generation of investors, analysts, and economists has learned to see 0 percent interest rates as normal. In his view, that belief is as mistaken as a kid in Kentucky waiting every year for a once-in-a-generation blizzard.

How 0% Interest Rates Became “Normal”

Maharrey walks through the post-2008 era to show how abnormal it really is. After the financial crisis, the Federal Reserve launched four rounds of quantitative easing and ultimately injected nearly 9 trillion dollars into the economy. It did so by buying US Treasuries and mortgage-backed securities with money created out of thin air, inflating its balance sheet and flooding the financial system.

At the same time, the Fed slashed interest rates to zero for the first time in 2008. Rates did not lift off that floor until December 2015, giving the United States seven straight years of 0 percent interest. Once inflation is factored in, trillions of dollars in bonds around the world carried negative real yields during this period.

When the Fed finally tried to “normalize” policy, it only managed to push the federal funds rate to about 2.5 percent by 2018, a full decade after the crisis. Markets stumbled almost immediately. The stock market sold off in the fall of 2018, and by 2019, the Fed had already cut rates three times and halted its attempt to shrink the balance sheet.

Crucially, all of this happened before COVID-19. The central bank was easing again a year before the pandemic, which later provided convenient cover for another round of zero rates and massive money printing.

Mortgage Shock, Housing Bubbles, And Negative Real Yields

When inflation could no longer be dismissed as “transitory,” the Fed began raising rates in March 2022 and eventually pushed them to about 5.5 percent. Many market participants see this as a punishingly high rate environment. Maharrey counters that 5.5 percent is actually slightly below the historical average for interest rates when you look back to the 1960s and 1970s.

On a long-term chart, he says, you can see a downward ratchet. Each crisis forces the Fed to cut rates lower than before, and it never quite gets them back up before the next downturn hits. Once the policy rate hit zero in 2008 and officials hesitated to go negative as Europe did, the Fed layered massive quantitative easing on top.

The same warped perception shows up in mortgage markets. As of mid-November, the 30-year fixed mortgage rate hovered around 6.3 percent, and has spent months in the 6 to 7 percent band. Today, that feels very high to many potential homebuyers. Historically, Maharrey notes, 6 to 7 percent used to be the low end of normal mortgage rates.

What makes it so painful now is the combination of those rates with a huge surge in home prices. Between mid-2020 and mid-2022, home prices exploded by 50 percent or more. That boom coincided with another 4 to 5 trillion dollars in quantitative easing during the COVID era. He cites commentary from Wolf Street pointing out that the Fed engineered 30-year fixed mortgage rates below 3 percent even as inflation was racing toward roughly 9 percent, creating negative real mortgage rates of minus 3 percent, minus 4 percent, or even worse. In effect, borrowers were being paid in inflation to take on debt.

With money that cheap, buyers’ brains “turn to mush,” as he puts it, and prices cease to matter. That is how you blow a housing bubble, and it looks very similar to what happened in the early 2000s when the Fed cut rates to around 1 to 1.5 percent after the dot-com bust and set the stage for the subprime crisis.

Easy Money Versus Inflation: The Fed’s No-Win Choice

Decades of artificially low rates and repeated rounds of quantitative easing have, in Maharrey’s view, produced an economy addicted to easy money. Like a heroin addict who needs ever larger hits to achieve the same high, the system now requires deeper and longer bursts of cheap credit to survive each downturn.

That is why the Fed is eager to pivot back toward cuts even though price inflation remains stubborn. In a sane world, he argues, central bankers would be holding rates higher or even raising them in the face of persistent inflation. Instead, they are already hinting at an easier policy.

A debt-soaked bubble economy cannot function in a genuinely normal interest-rate environment. From a historical standpoint, current rates sit on the low side of normal, but after seven years at 0 percent and another plunge to zero during the pandemic, anything above that feels extreme. Confronted with a choice between maintaining the bubbles or truly killing inflation, Maharrey believes the Fed has chosen the bubbles and surrendered to ongoing devaluation.

He adds that expectations themselves are now part of the problem. As long as investors, politicians, and the public assume low rates and money printing are standard tools with minimal cost, there will be little resistance to continued monetary “malfeasance.” Perception shapes behavior, but it does not erase the economic consequences that are building under the surface.

The Death Of The Penny And 713% Inflation Since 1970

With that macro background, Maharrey zooms in on a small but powerful symbol of devaluation: the US penny. The Philadelphia Mint recently struck the last five pennies, marking them with an omega symbol to signify that they are the final coins of their kind. These five will be auctioned off, and US Treasurer Brandon Beach traveled to Philadelphia to witness the final production.

Earlier in the year, President Donald Trump effectively signed the penny’s death warrant, arguing that it no longer made financial sense. He said the United States had been minting pennies that “literally cost us more than 2 cents.” Maharrey notes that this actually understated the problem. According to the US Mint, it costs about 3.69 cents to mint and distribute a single penny.

In 2024, the Mint produced around 3.2 billion pennies at a cost of roughly 85.3 million dollars. Those pennies made up more than half of all new coins minted that year. Yet a single cent buys almost nothing in today’s economy. The coin has become barely more valuable than the lint in the pocket with it.

Maharrey ties that directly to decades of inflation. Since 1970, based on the official Consumer Price Index, prices have increased by more than 713 percent. That penny gumball from childhood now costs about 8.1 cents. And he stresses that even this 713 percent figure likely understates the true loss of purchasing power because the CPI formula was changed in the 1990s in ways that tend to understate inflation.

At the same time, inflation has driven up the cost of raw materials and production, so the penny is both expensive to mint and nearly worthless in use. Instead of confronting the underlying money printing and deficit spending, he says, the government simply removed the most visible reminder of the dollar’s decay by killing the penny.

Coin Debasement, Junk Silver, And Fiat Lies

The demise of the penny is only the latest chapter in a long history of coin debasement. In 1982, the Mint quietly changed the penny’s composition from 95 percent copper and 5 percent zinc to a core of 97.5 percent zinc with only 2.5 percent copper plating. The coin kept its name but lost most of its intrinsic value.

Nearly two decades earlier, under the Coinage Act of 1965 signed by President Lyndon B. Johnson, the Treasury removed all silver from dimes, quarters, and half dollars. Modern versions are copper-cored clad coins with base-metal faces. Pre-1965 pieces, by contrast, are 90 percent silver. These older coins are now commonly called “junk silver,” a label Maharrey finds ironic. The real junk, he says, is the modern clad coinage. The old silver pieces are still real money.

He recalls that Johnson insisted removing silver would not affect the value of US coins, claiming the Treasury could keep metal prices aligned. A few years later, President Richard Nixon offered similar assurances when he severed the last formal tie to gold, promising that the dollar would be “worth just as much” afterward. Maharrey calls these statements either lies or willful ignorance. In a fiat currency system where money is unbacked, devaluation is not a bug. It is the operating model.

Meanwhile, production costs continue to climb up the denomination scale. According to the Mint’s own data, it costs about 13.8 cents to produce and distribute a single nickel. With pennies already gone and nickels costing more than their face value, he wonders what will be marched to the monetary firing squad next.

Why Gold And Silver Still Win

Throughout the episode, Maharrey returns to a simple conclusion. When money is untethered from anything tangible, depreciation is as certain as death and taxes. The 713 percent CPI rise since 1970, the removal of copper and silver from coins, repeated rounds of quantitative easing totaling nearly 9 trillion dollars, and years of 0 percent interest rates all point in the same direction.

In that environment, he argues, gold and silver serve as real money. As governments devalue their currencies, it takes more dollars to purchase the same ounce of metal. That makes gold and silver look more expensive in nominal terms, but in reality, they are preserving purchasing power while paper currency erodes.

He highlights pre-1965 90 percent silver coins—quarters, dimes, and half dollars often labeled junk silver—as especially useful. They are small, divisible units of real money and a practical way to hold silver. Maharrey notes that, even with silver around 50 dollars an ounce in his example, he still sees it as a bargain when you consider the gold-to-silver ratio and ongoing supply deficits in the silver market.

For listeners who want to respond, he points to Money Metals Exchange as a source for “junk silver” and other bullion. He notes that junk silver is available below spot, making it one of the most economical ways to acquire physical silver. It can even serve as a teaching tool, for example, as a Christmas gift that doubles as a lesson in inflation and sound money.

He closes by urging listeners not to wait for politicians or central bankers to reverse course. The debt load, policy habits, and political incentives all point toward continued devaluation. The rational move, he says, is to shift savings out of depreciating dollars and into real money—physical gold and silver—before the next phase of this long inflationary experiment unfolds.

Originally Published on Money Metals.