by Erin Doane
In 1974, the United States suffered through a major penny shortage. Over the previous 15 years, the U.S. Mint had produced 62 billion pennies but only about 30 billion were in circulation. So, what happened to the other roughly 30 billion tiny coins? Many of them had been squirreled away in piggybanks and old pickle jars, while others were lost in the bottoms of pocket books, in cluttered drawers, and under sofa cushions. The real cause of the shortage, however, was that a large number of pennies were being intentionally hoarded.
In the early 1970s, the price of copper started to rise and speculators began hoarding pennies. The thought was that, eventually, the value of the copper in the penny would be greater than its face value. If the copper was extracted and sold, then the speculator would make a profit. In April 1974, the demand for pennies was double what it had been a year earlier, due primarily to such speculation, and the Treasury Department decided to act. It tried to put a halt to the hoarding and destruction of pennies by imposing stiff penalties for melting down the coins for their copper content. Offenders faced the possibility of up to a $10,000 fine and five years in prison.
In May, the U.S. Mint also launched a get-out-the-penny campaign as another way to recover pennies. Mary Brooks, Director of the mint, called on every American to get pennies back into circulation. She urged anyone who saved the coins at home to spend them or cash them in at local banks. She also encouraged schools, churches, and charity organizations to host penny drives. Brooks told the penny hoarders that there was no reason to collect and hold the coins. If someone took 240,000 pennies – an investment of $2,400 – and melting them down to sell the copper at the price of $1.50 a pound (the amount per pound needed to make the copper value greater than the face value of the coin), they would make just $100 profit or about 4 percent on their investment. If that person instead put the $2,400 in pennies in a regular passbook savings account at a bank, they would earn 5 percent. At the time of that calculation, copper was only selling at $1.20 a pound and the price was dropping.
Never-the-less, speculators continued to hold their caches and local banks and businesses were short on the coins. The Federal Reserve reduced the weekly supply of pennies they provided to banks by 50 to 75 percent. In order to make up the difference, banks around the country started offering a premium for pennies. The First City National Bank in Binghamton paid $1.05 for 100 pennies. The Lincoln First Bank in Rochester similarly offered to exchange a dollar for every 95 pennies turned in. Neither of the two major banks in Elmira, the Chemung Canal Trust Co. and Marine Midland Bank-Southern, offered a premium. They both posted signs encouraging customers to turn in their pennies but worried that offering a premium would actually exacerbate the shortage. One unnamed bank manager said, “People might think that if we’re offering $1.05 today maybe it will go up to $1.10 tomorrow.” That would only encourage more hoarding.
At the end of May, the local Lions and Kiwanis Clubs in Elmira did their part to help out with the shortage. They deposited 50,000 pennies, weighing in at 312 ½ pounds, at Marine Midland Bank. The pennies had come from gumball machines the clubs operated throughout Elmira, Elmira Heights, and Horsehead. The gumball machines had been a regular part of the Elmira Kiwanis Club’s fundraising efforts since the late 1940s. Monies raised from them went to support local organizations including the YMCA and YWCA, Girl and Boy Scouts, the Neighborhood House, and Glove House.
Businesses in Chemung County did not seem to suffer too badly from the penny shortage. The manager of Nichols Discount Store on Lake Road said that their supply of pennies from the bank had dropped from $200 to $100 a week but customers cooperated in bringing in pennies to pay the odd change on their transactions. Acme food store in Southport also asked customers to pay in exact change and had all the pennies they needed. The manager of the J.C. Penney store at the mall worried that they might run out of pennies but that did not happen. And at the A&P Supermarket on Miller and Erie Streets, customers brought in rolls of pennies to help out. It does not appear that local stores had to resort to handing out paper scrip in lieu of pennies as some stores across the country had to do.
Copper prices continued to fall through June. A proposal to make pennies out of aluminum was dropped in part because of the lower cost of copper. There had also been heavy lobbying against the plan by vending machine companies that would have had to retool their machines for the new coinage. The lower cost of copper also spurred the U.S. Mint to increase penny production from 35 million to between 36 and 37 million a day. This along with the public outpouring of rogue coins put an end to the great penny shortage of 1974.
Erin Doane is the curator at the Chemung County Historical Society. Click HERE to see more of their blog.