Chart of the Week: Money for Nothing

I’m sure I’m not the only one who has a jar of coins at home. The one we keep meaning to take to the bank or the supermarket coin-counting machine. Well, now might be a good time to do it. The US government is losing money making money, and Elon Musk’s new Department of Government Efficiency (DOGE) wants to put a stop to it.

For the 19th year in a row, the US Mint has been producing one-cent coins at a loss. According to its latest annual report, every one-cent coin cost 3.69 cents to mint in 2024. That’s a costly habit for a government already dealing with record debt levels. The same is true for nickels, which cost 13.78 cents to make – more than double their face value. Minting cents and nickels resulted in a net loss of $179 million in 2023 alone.

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This isn’t just a quirky inefficiency – it has broader implications for fiscal policy and the economy. Governments worldwide are looking for ways to reduce unnecessary spending to stabilise their debt burdens. Lower deficits can support economic growth by keeping borrowing costs under control. In contrast, wasteful government spending pressures bond markets, pushing up yields and making borrowing more expensive.

President Donald Trump directed the US Treasury to cease the production of one-cent coins last week. Countries like Canada, Australia and New Zealand have already phased out their smallest denominations, without any issues. In an age of digital payments, where small change is increasingly irrelevant, the financial case for keeping one-cent coins in circulation makes less and less sense.

Key takeaway: Just as eliminating wasteful spending strengthens government finances and improves economic stability, a well-diversified multi-asset portfolio helps investors optimise returns by reducing inefficiencies and unnecessary risks. Holding onto outdated investment ideas – just like holding onto small change – can cost more than it’s worth.

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This article is provided for general information purposes only and should not be construed as personal financial advice to invest in any fund or product. These are the investment manager’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.

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