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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 06/15/2006 : 21:26:19
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From ThePalmBeachPost.com
Coin-making not in Mint condition
By Joel Engelhardt
HASH(0x568624)
Tuesday, May 09, 2006
Now, I don't know much about how to make money, at least not how the U.S. Mint makes it.
But it seems to me that if it costs more to make a coin than it's worth, that's a problem. And if the mint were to keep making a coin and selling it for less than it's really worth, people might start hoarding the coin in hopes of cashing in.
That would mean the mint would have to make even more coins to keep up with rising demand. And when you're making as many coins as the U.S. Mint - 1.7 billion nickels this year, 8.7 billion pennies - and losing money on just about every one of them, that doesn't sound like a great way to make money.
A nickel is now worth more than 5 cents - 5.25 cents in metal value as of last Friday. Pennies are worth .84 of a cent. That doesn't include the cost of manufacturing and transportation, which drives the cost of a penny to about 1.4 cents. That's a high price to pay for a coin that gave up its copper body 24 years ago, retaining nothing more than a copper sheen over zinc.
Demand for the metals that make up our least valuable coins is rising. Supplies are dwindling. You can blame a modernizing world, particularly China and India. The climb, with prices tripling in five years, shows no sign of relenting.
It costs about 1.5 cents to strike a nickel. If the ingredients - three parts copper to one part nickel - cost 5.25 cents, then that nickel in your pocket cost the government nearly 7 cents to mint. The government, of course, buys metals under contract, so it may not have been hit yet by the most recent wave of rising prices.
It's hard to know, though, because mint officials won't say when those contracts expire. On Friday, they issued a statement admitting the problem for the first time. The cost of making a nickel, at 4.83 cents last October, is now 6.4 cents, the mint said. The mint has had no permanent director since Henrietta Fore left in July 2005. The mint has to be looking at cheaper coins - metal slugs or alloys are possible - but must be sure the coins still are recognized by vending machines and coin-counters.
But the mint doesn't have final say. That power belongs to Congress. It figures that the Congress that gave us an $8 trillion national debt - and growing - is about to start churning out billions of pennies and nickels - at a loss.
All this doesn't make that nickel change from a Big Mac Value Meal worth anything more than 5 cents. There's a temptation, however, to hold onto it for a while and see if it won't be worth 8 cents someday.
Finding a smelting operation willing to take copper nickels or zinc pennies, however, isn't possible, Coin World magazine reports. "China, with its insatiable appetite for industrial metals," the magazine suggested, only partly in jest, "is more likely to anchor giant ships in U.S. harbors to buy the coins" and melt them down.
There goes China again. Not content to feed off our debt, it's prepared to profit off our currency. China's growing demand for industrial metals is one reason behind the soaring values. Zinc, the main ingredient in pennies, is three times more expensive than it was in 2001, as is copper. The New York Times recently warned of the rising cost of pennies. Pressure is building for Congress to act.
The mint expects to lose $32 million producing pennies and nickels this year and expects gains on the production of the dime and quarter to drop by $45 million. That's $77 million less for the Treasury.
And it's only just begun. Chinese industrialists won't be the only ones hoarding America's least valuable coins. Collectors and, ultimately, the public will be filling jars. The mint will have to produce more coins to meet demand. The losses will mount.
When the product is money and the entity having trouble making money off the making of money is the U.S. Mint, it's every American's problem.] Congress can cheapen the coin, or get rid of pennies and nickels altogether. After all, a penny saved is still a penny earned - for the time being.
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If you can conceive it, you can achieve it. -Napoleon Hill
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Edited by - Ardent Listener on 06/15/2006 21:40:20 |
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Coin making not in Mint condition
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Posted - 06/15/2006 : 21:32:04
