Obama's 2011 budget proposal to debase coinage
From realcent.forumco.com:
FYI - President Obama submitted his 2011 budget proposal today. You can view it at: www.budget.gov I took a look at this site and happened to come across the following proposal on page 100 of the "Terminations, Reductions and Savings"
document. Keep in mind that President's proposals are just that
-proposals- and are not always approved by Congress or otherwise
implemented.
- - -
100 TERMINATIONS, REDUCTIONS, AND SAVINGS
OTHER SAVINGS: COINAGE MATERIAL
Department of the Treasury
The Budget proposes to provide the U.S. Mint with greater flexibility in
the material composition of coins to reduce its losses on some coins
and the production costs associated with volatile metal prices.
Justification
The Mint’s primary cost driver is the price of metal, a factor over which
it has no control. Daily spot prices of copper and zinc, the Mint’s two
main metallic materials, have fluctuated in excess of 100 percent, and
the price of nickel by 500 percent in recent years.1 This contributes
to volatile and negative margins on both the penny and nickel: in
recent years the penny has cost approximately 1.8 cents and the nickel
approximately 9 cents to produce.2 Costs have exceeded the value of
these two coins by over $100 million in prior years. Through its gains
on other coins, the Mint annually returns hundreds of millions of
dollars to the Treasury General Fund (GF) and is funded by the Mint
Public Enterprise Fund.
Greater flexibility in the composition of coinage materials could enable the Mint to utilize less expensive
metals in the minting process and substantially reduce its production
costs. Using alternative coinage materials could save $150 million
annually after an initial period of development and capital
adjustments. These savings result from increased seigniorage, or the
difference between the face value of the coin paid by the Federal
Reserve and the cost of production. Seigniorage increases the available
means of financing,
but has no direct budgetary impact. Specifically, the Budget includes provisions that authorize the
Department of the Treasury to approve alternative coinage compositions
and weights across five denominations (half dollar, quarter, dime,
nickel, and penny).
The 2011 Budget would bring the costs of coins more in-line with their face values and create a more
sustainable, cost-effective 21st Century use of materials in the
minting process. The Budget enables the Department of the Treasury to
explore, analyze, and approve new, less expensive materials for all
circulating coins based on factors that will result in the highest
quality of coin production at the most cost-effective price. Such
factors may include physical, chemical, metallurgical and technical
characteristics; material,
fabrication, minting, and distribution costs; materials availability and sources of raw materials; durability;
effects on sorting, handling, packaging and vending machines; and
resistance to counterfeiting. The added flexibility the Budget proposes
will improve the minting process and enable the Mint to mitigate the
high,
volatile costs of commodity metals.
Citations
1 Global InfoMine, Metals Prices, http://www.infomine.com/investment/metalprices/ (January 2010).
2 USA TODAY, Coins Cost More to Make than Face
Value, http://www.usatoday.com/money/2006-05-09-penny-usat_x.htm (May 2006).
FYI - President Obama submitted his 2011 budget proposal today. You can view it at: www.budget.gov I took a look at this site and happened to come across the following proposal on page 100 of the "Terminations, Reductions and Savings"
document. Keep in mind that President's proposals are just that
-proposals- and are not always approved by Congress or otherwise
implemented.
- - -
100 TERMINATIONS, REDUCTIONS, AND SAVINGS
OTHER SAVINGS: COINAGE MATERIAL
Department of the Treasury
The Budget proposes to provide the U.S. Mint with greater flexibility in
the material composition of coins to reduce its losses on some coins
and the production costs associated with volatile metal prices.
Justification
The Mint’s primary cost driver is the price of metal, a factor over which
it has no control. Daily spot prices of copper and zinc, the Mint’s two
main metallic materials, have fluctuated in excess of 100 percent, and
the price of nickel by 500 percent in recent years.1 This contributes
to volatile and negative margins on both the penny and nickel: in
recent years the penny has cost approximately 1.8 cents and the nickel
approximately 9 cents to produce.2 Costs have exceeded the value of
these two coins by over $100 million in prior years. Through its gains
on other coins, the Mint annually returns hundreds of millions of
dollars to the Treasury General Fund (GF) and is funded by the Mint
Public Enterprise Fund.
Greater flexibility in the composition of coinage materials could enable the Mint to utilize less expensive
metals in the minting process and substantially reduce its production
costs. Using alternative coinage materials could save $150 million
annually after an initial period of development and capital
adjustments. These savings result from increased seigniorage, or the
difference between the face value of the coin paid by the Federal
Reserve and the cost of production. Seigniorage increases the available
means of financing,
but has no direct budgetary impact. Specifically, the Budget includes provisions that authorize the
Department of the Treasury to approve alternative coinage compositions
and weights across five denominations (half dollar, quarter, dime,
nickel, and penny).
The 2011 Budget would bring the costs of coins more in-line with their face values and create a more
sustainable, cost-effective 21st Century use of materials in the
minting process. The Budget enables the Department of the Treasury to
explore, analyze, and approve new, less expensive materials for all
circulating coins based on factors that will result in the highest
quality of coin production at the most cost-effective price. Such
factors may include physical, chemical, metallurgical and technical
characteristics; material,
fabrication, minting, and distribution costs; materials availability and sources of raw materials; durability;
effects on sorting, handling, packaging and vending machines; and
resistance to counterfeiting. The added flexibility the Budget proposes
will improve the minting process and enable the Mint to mitigate the
high,
volatile costs of commodity metals.
Citations
1 Global InfoMine, Metals Prices, http://www.infomine.com/investment/metalprices/ (January 2010).
2 USA TODAY, Coins Cost More to Make than Face
Value, http://www.usatoday.com/money/2006-05-09-penny-usat_x.htm (May 2006).
Views: 33
Replies to This Discussion
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Permalink Reply by Buffalo on -
Steve, right on the money, life is no longer simple and Lureuin, I think you summed the situation up pretty clearly for quite some time to come. This is a quote from an article I just read about the jobs report due out on Friday:
"On Friday, expect to see the BLS revise job creation estimates down by a whopping 824,000 jobs. The culprit, as I have been harping on for a couple years is a birth-death model far out of sync with reality."
The full article is here for anyone interested. I also just finished reading a very long article about "paper gold" in London and elsewhere that claims basically it is nothing but paper. The author claims that virtually all of the physical gold was pulled by depositors by the end of 2009, and that these funds are settling current demands for possession by paying up to 25% cash premiums in lieu of gold they don't have and therefore can't pay out. He goes on to say that independent audits and possible criminal investigations are either in progress or upcoming, because these funds have in effect resold gold they didn't own to start with. How much of all this is true is beyond me but if it is, physical gold prices should increase considerably and may be very different than the "spot" price.
Lureuin said:In a nutshell- "WE"RE SCREWED"!!!!!
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Permalink Reply by True Money on -
With all else having been said, the U.S. Government must continue a standard tangible means of barter or transaction that is universally recognized and accepted for all transactions or "LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE". The coin is definitely the best conception of this. However, coins until recently, not only represented a certain value, but also physically contained that value in metal content. Personally, I would love to see silver reintroduced into everyday circulation as a standard means of debt payment to replace paper/cloth $20 bills and introduce $100, $500, and $1000 denominations in gold.
Now that is True Money!
-True Money!
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Permalink Reply by Steve W on -
Money,
You still don't get the point that governments control the money supply. No government wants the value of currency to be determined by market forces beyond their influence. Since we are a democracy, "Government" ultimately means the majority of the voters. What you propose would take us back to 1933. Think about it!
Lureuin, do not despair! We have been in much greater danger than this before and we came out just fine. Our current situation is of our making and we can change it as soon as the political will manifests itself. The wars are discretionary just like agricultural price supports. We might be better off spending the money on the TSA and the Coast Guard. I remember President Johnson telling us that our whole future was at stake in Vietnam. LOL! One can return to a situation like 1999 when we had balanced budgets, robust taxation, and an expanding economy. It is just going to take time to fix the mess made by President Cheney, his crew of merry pirates, and Wall Street Bankers. We just need to focus and execute like my old basketball coach used to say.
True Money said:With all else having been said, the U.S. Government must continue a standard tangible means of barter or transaction that is universally recognized and accepted for all transactions or "LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE". The coin is definitely the best conception of this. However, coins until recently, not only represented a certain value, but also physically contained that value in metal content. Personally, I would love to see silver reintroduced into everyday circulation as a standard means of debt payment to replace paper/cloth $20 bills and introduce $100, $500, and $1000 denominations in gold.
Now that is True Money! -True Money!
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Permalink Reply by Steve W on
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That is amazing! What a scheme. Sell what you have then resell it after you no longer have it. These people are true crooks.
Buffalo said:Steve, right on the money, life is no longer simple and Lureuin, I think you summed the situation up pretty clearly for quite some time to come. This is a quote from an article I just read about the jobs report due out on Friday:
"On Friday, expect to see the BLS revise job creation estimates down by a whopping 824,000 jobs. The culprit, as I have been harping on for a couple years is a birth-death model far out of sync with reality."
The full article is here for anyone interested. I also just finished reading a very long article about "paper gold" in London and elsewhere that claims basically it is nothing but paper. The author claims that virtually all of the physical gold was pulled by depositors by the end of 2009, and that these funds are settling current demands for possession by paying up to 25% cash premiums in lieu of gold they don't have and therefore can't pay out. He goes on to say that independent audits and possible criminal investigations are either in progress or upcoming, because these funds have in effect resold gold they didn't own to start with. How much of all this is true is beyond me but if it is, physical gold prices should increase considerably and may be very different than the "spot" price.
Lureuin said:In a nutshell- "WE"RE SCREWED"!!!!!
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Permalink Reply by Buffalo on
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TM, where do you propose the US obtain the massive quantities of gold and silver that would be required? According to the annual IMF report of member nation's gold reserves, the US claimed in December 2009 just over 261,000,000 troy ounces (which has been claimed to be untrue by some). Looking at the BEP stats, over the last five years 5.7 billion $100 notes have been produced with a total value of $570 billion, and nearly 3 billion of those notes in the last 2 years alone. This is just one denomination but do the math and it calculates out to the entire US gold reserve valued at approximately $2184 per ounce to equal the value of just the $100 bills printed in the last five years. Also, production of gold or silver circulating coins at anything close to the metal content value would mean the coins would be hoarded and disappear from circulation as fast as they were produced. So a $100 coin could only contain less than 1/20 ounce of gold, and even at that the total US gold reserve would soon be exhausted. One could do a similar analysis on the others, but the fact is that the economy now is much larger than was the case when gold and silver were practical as circulating coinage. IMHO, the sheer size of the economy now means that precious metal circulating coinage is just not a viable alternative. Also from the government's viewpoint, what benefit would they gain by using precious metals to replace something that costs less than 7¢ per bill to print? If they can't even afford to produce cents and nickels, how would this work?
True Money said:With all else having been said, the U.S. Government must continue a standard tangible means of barter or transaction that is universally recognized and accepted for all transactions or "LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE". The coin is definitely the best conception of this. However, coins until recently, not only represented a certain value, but also physically contained that value in metal content. Personally, I would love to see silver reintroduced into everyday circulation as a standard means of debt payment to replace paper/cloth $20 bills and introduce $100, $500, and $1000 denominations in gold.
Now that is True Money!
-True Money!
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Permalink Reply by Buffalo on
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As I said Steve, I am not sure how factual this is. I don't do any paper gold investments, but I have seen others claim the same type of problems. I would say it is something to keep an eye on going forward.
Steve W said:That is amazing! What a scheme. Sell what you have then resell it after you no longer have it. These people are true crooks.
Buffalo said:Steve, right on the money, life is no longer simple and Lureuin, I think you summed the situation up pretty clearly for quite some time to come. This is a quote from an article I just read about the jobs report due out on Friday:
"On Friday, expect to see the BLS revise job creation estimates down by a whopping 824,000 jobs. The culprit, as I have been harping on for a couple years is a birth-death model far out of sync with reality."
The full article is here for anyone interested. I also just finished reading a very long article about "paper gold" in London and elsewhere that claims basically it is nothing but paper. The author claims that virtually all of the physical gold was pulled by depositors by the end of 2009, and that these funds are settling current demands for possession by paying up to 25% cash premiums in lieu of gold they don't have and therefore can't pay out. He goes on to say that independent audits and possible criminal investigations are either in progress or upcoming, because these funds have in effect resold gold they didn't own to start with. How much of all this is true is beyond me but if it is, physical gold prices should increase considerably and may be very different than the "spot" price.
Lureuin said:In a nutshell- "WE"RE SCREWED"!!!!!
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Permalink Reply by True Money on
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The printing of worthless money is just that! Go years without printing money and force people to use what is out there. Hoarders will eventually have to delve into their hoards to purchase things. The money is already out there. Use what we already have. Don't add fuel to the fire! Put the fire out!!!!!!!!!!
-True Money!
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Permalink Reply by Lureuin on -
I'm OK with Money's idea, which would bring out all kinds of older coins. Some would work through the cycle and be destroyed or melted, which would make my collection all the more valuable. lol
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Permalink Reply by Buffalo on
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"Every cloud has a silver lining" as they say, although I guess the buyers wouldn't be paying cash.
Lureuin said:I'm OK with Money's idea, which would bring out all kinds of older coins. Some would work through the cycle and be destroyed or melted, which would make my collection all the more valuable. lol
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