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U.S. Mint: Making Money By Making Money

This article was written by in Coin Collecting. 9 comments.


I hardly use cash anymore. Almost every financial transaction I make as I go about my business is accomplished electronically or with plastic. Since putting to rest my cash-only experiment a year ago, I’ve only used cash in a couple of circumstances: food delivery when I’m too exhausted to cook, getting my clothing laundered or dry cleaned every few weeks, and supporting whatever issue for which my co-workers solicit (from Girl Scout cookies to bereavement gifts).

Hard money, coins and bills, are becoming obsolete. It will be a long time before cash ceases to exist in commerce, but physical money is less relevant for everyday commerce. Yet, the U.S. Mint continues to churn out billions of new coins each year. I’ve enjoyed collecting coins, hunting through change to find something rare or to fill holes in a book, but lately I’ve had much less of an opportunity to do so. I rarely have change in my pocket.

As I’ve mentioned before, the Mint (and Congress who has authorized this behavior) has gone overboard in their attempts to design coinage that has more value to collectors than it has to the general public. That will backfire; the mass quantities “collectible items” available make collecting them not a very special activity. Coin collecting will never again be the “hobby of kings.”

Rather than making an artistic design for a coin and letting it remain for a generation or two, the Mint presents programs like the State Quarters series. I thought this era was over; I didn’t realize until recently that the Mint intends to continue by releasing 56 more redesigns for the quarter, lasting until 2021.

The American the Beautiful Quarters series announced last year commemorates the establishment of national parks, forests and wildlife refuges. This is a worthy cause but I prefer Ken Burns’ documentary for drawing the public’s attention.

This is really about business. The Mint sells the coins to collectors at a significant mark-up from the face value of the coins, a mark-up that will most likely not be recovered by the collector.

There is some good news. The design for the reverse of the cent seems to indicate the Mint would like to return to a classical approach. I would prefer to see all “leader” portraits and buildings removed from coins to make way for more abstract or symbolic designs. The new union shield and ribbon is a step in the right direction.

Updated January 26, 2011 and originally published January 18, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Outlaw

Wow, could not agree more. I found the new quarters, and to a lesser extent the Presidential Dollars series, to be tacky — doesn’t even look like real currency any more… which is probably not the PR misstep the federal gov’t needs right now, what with concerns about the dollar’s value and all.

Have not seen the new design for the penny until now, it looks awesome. I love all of the early “union” style stuff from the 1890s and early 20th century. They should just revert to all of that. And the walking liberty half-dollars from the 30s.

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avatar Tax Guy

We’ve experienced the same things here in Canada. In the past we had the special “Mountie” quarter, but in the last few years we’ve seen quite a few other special releases: The poppy quarter, Canada 125th year dollar counts etc. I’m sure a lot of people collect there here, but I still large numbers of these coins in circulation. Do you really think the coins are being sold primarily to collectors?

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avatar Scott B in DC

The America The Beautiful Quarter Series was passed because of the potential seigniorage (profit on sales of coins). If you read the Congressional Record about the bill will show that Rep. Mike Castle (R-DE), who introduced the bill, pointed to the success of the 50 State Quarters program and used that program’s data to predict the profit of the series. The problem is that the yearly output of coins has declined year to year.

The issue is not the cashless society. Studies by both Visa and Master Card is showing that the use of credit cards have been declining since the start of the recession and grew even greater when the banks started charging 30-percent interest in anticipation of the new credit card laws.

Cash is being used more when people are spending. Coinstar is reporting record profits from its coin machines as people dig out the coins from every corner of their homes to cash in so they can pay for essentials. Banks that offer free coin counter services reports record usage. Look at the annual report for PNC bank to see their commentary on the coins.

Another barometer is the recently quarterly report (10Q) from Wal-Mart who has seen cash sales rise. Wal-Mart comments that this could be good for the company since they are not paying credit card fees on those transactions.

These coins are sent to coin distributors and the Federal Reserve coin stores to be redistributed to the banks. Since the banks are buying these coins from their distributors or directly from the Fed and the supplies are still high, there is no need for the Fed to order coins from the US Mint. Thus, production at the Mint drops. No orders, no need to manufacture them.

Hard money is not becoming obsolete. Thanks to the greed of the credit card companies and the economy, it is alive and well and showing a resurgence in popularity.

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avatar Luke Landes ♦127,371 (Platinum)

Scott B: I think what you’re seeing is merely a short-term trend. The marketplace for credit may have shrunk recently, but other types of electronic payment, like pay-by-email, electronic checks, and even paying via mobile phone, are increasing. I expect credit cards, or any technology Visa and MasterCard foist upon us, will be back with a vengeance when consumer confidence is high.

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avatar Investor Junkie

I agree with Flexo and think could be a great reason to invest in one of the credit card companies.

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avatar Scott B in DC

This is a re-occuring short-term trend. Since the first major growth of credit cards in the late 1970s, the market place changes with the economy. We saw it in 1987, briefly in 1984, again in 2002 (post 9/11), and we are seeing it now. Whenever the economy turns, the use of credit cards dip and the use of cash rises.

After this experience, credit card use will NOT be back with a vengeance! Ask all of those people who saw their interest rates climb to 30-percent over the last few months, even if they were paying their bills on time. Ask all of those people who saw their fees double on cards they rarely use.

Ask me… I fit into both categories. I am paying down my cards and using cash. I do not plan to carry many credit cards anymore. Maybe just one for emergencies. I am not going to carry the bank’s on this–and there are a lot of people who agree with me.

Either your a banker, economist, or someone with an elitist position who is looking down the wrong end of the telescope. Try looking at the bulk of the people who have seen the disrespect by the banks and other credit card companies and you will find people who are reducing their debt and closing credit cards. Until then, the US Mint remains open.

BTW: Why haven’t you picked on the Bureau of Engraving and Printing? Did you know that it costs the BEP just under 8-cents per note to produce, regardless of the denomination? The US Mint may make 78-cents for every dollar struck in seigniorage, but the BEP’s seignorage for one dollar is 92-cents! According to the BEP, 45-percent of their production are $1 bills. of that 95-percent are replacements for damaged bills that had to be removed from circulation. Where’s you commentary on that?

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avatar Candide

The other way the mint makes money is by people collecting the conventional coins, it takes money out of circulation.

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avatar Investor Junkie

This reminds me of the WSJ article a saw last month how people were capitalizing on the free shipping the US Mint was offering. In the process getting frequent flyer miles.

http://online.wsj.com/article/SB126014168569179245.html

Cashless society is the way to go!

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avatar tigernicole86 ♦55 (Newbie)

I’ve tended to collect the coins but if I have too many, I cash them in.

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