Obama: Lets Debase Our Coinage Even Further to "Save Money"

As a means of saving money, this is one of Obama's proposed cuts in his budget.

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SAVINGS: INCREASED FLEXIBILITY FOR THE U.S. MINT IN COINAGE

Department of the Treasury

The Budget proposes to provide the 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. Additionally, the Budget increases the Mint's flexibility to match customer demand and supply by eliminating the provision requiring the Mint to produce Native American dollar coins in an amount equal to 20 percent of all dollar coins produced. 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 400 percent, and the price of nickel by 500 percent over the past 10 years.1 This contributes to volatile and negative margins on both the penny and nickel: recently, the penny has cost approximately 2.4 cents, and the nickel approximately 11.2 cents to produce.2

Through its gains on the costs of producing 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. The gains from the dime, quarter, and dollar coin are used to offset the losses from the penny and the nickel, with the excess funds being transferred to GF. However, on December 13, 2011, citing inventories of 1.4 billion surplus dollar coins in Federal Reserve vaults, enough to meet current levels of circulating demand for more than a decade, the Secretary of the Treasury suspended production of the Presidential dollar coin as part of the Vice President's Campaign to Cut Waste. The suspended production of the Presidential dollar coin will reduce the amount of revenue available for the Mint to offset production costs of the penny and the nickel. 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 the Mint millions annually after a potential initial period of development and capital adjustments. Savings estimates will be available after the Mint concludes ongoing research on the most cost-effective materials.

The 2013 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 metals 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.

Additionally, the Budget would remove the current law requirement that twenty percent of all dollar coins produced be of the Native American design. Numismatic quality dollar coins would remain available for purchase, but eliminating the twenty percent requirement would increase the Mint's flexibility to match the supply to consumer demand.

Citations 1 http://www.infomine.com/investment/metalprices/

2 http://news.coinupdate.com/cost-to-make-penny-and-nickel-rises-1139/