Mon January 9, 2012
People Want More Coins, That's A Good Sign For The Economy
Originally published on Wed January 11, 2012 5:40 pm
All the instability in the global economy this year has been good for the United States Mint. People in search of a safe place to put their money have been buying gold and silver coins in record numbers.
"Precious metal coins were up $800 million dollars last year and that's approximately thirty some percent," says Richard Peterson, deputy director of the Mint.
According the the Mint's annual report, they sold 45.2 million ounces of gold and silver coins in 2011.
You can also find what looks like good news for the U.S. economy in the Mint's report — demand for quarter, dimes, nickels, and pennies was up this year. During the financial crisis, demand had plunged.
"People went into their piggy banks and their coin jars and spent those coins, " says Peterson. "Those coins flowed back into the banks and then ultimately back to Federal Reserve. The Federal Reserve vaults started filling up and they turned off the spigot of new coin production from the United States Mint."
In 2011, coin shipments increased by 37 percent, a sign that people are no longer tapping their piggy banks for extra cash.
For its entire history, the Mint has managed to make a profit, minting coins for general use. That part of its operations has always paid for itself. But it is about to take a big hit in connection with a coin you probably don't have in your pocket, the dollar coin.
As NPR has reported, over 1 billion dollar coins had piled up in vaults as the result of a law that required the Mint to make dollar coins honoring all the presidents. The Treasury Department last month basically ordered a halt to the program.
The Treasury estimates the change will save $50 million a year overall. But on the Mint's books the dollar coin has been a moneymaker. It costs the Mint just 18 cents to make a dollar coin, and it sells each coin for $1.
Despite the change, Peterson expects the Mint will break even or better next year making coins for everyday use.
"We believe we will be in the black next year and we do have a reserve available if needed," Peterson says.
Any profits the Mint makes from those coins in your pocket go to pay down the national debt.
MELISSA BLOCK, HOST:
There are all sorts of statistics people use to gauge the health of the economy and we're going to hear now about one of them. It's an annual report that comes from a place that makes money. We mean it manufactures money. The U.S. Mint.
David Kestenbaum of our Planet Money team explains.
DAVID KESTENBAUM, BYLINE: The Mint's report for 2011 just came out and here's something that might surprise you. The largest source of revenue - it's not the coins in your pocket.
RICHARD PETERSON: Revenue really was driven by precious metal bullion, gold and silver coins.
KESTENBAUM: This is Richard Peterson, deputy director of the Mint. The Mint makes gold and silver coins for collectors and investors.
PETERSON: Precious metal coins were up $800 million last year and that's approximately 30-some percent.
KESTENBAUM: Is that a high, an all-time high?
PETERSON: Yes, it is.
KESTENBAUM: People really wanted gold and silver coins this year, a sign that the global economy is still kind of freaked out, worried about Europe, about inflation, about everything, but you can find what looks like good news in the report. Demand for quarters, dimes, nickels, pennies - that was up. It had been down, way down, during the financial crisis.
Basically, people were so desperate for cash, they broke into their piggy banks.
PETERSON: People went into their piggy banks and their coin jars and spent those coins. And those coins flowed back into the banks and then ultimately back to the Federal Reserve. The vault started filling up and they turned off the spigot of new coin production from the United States Mint.
KESTENBAUM: Here's another detail from the global economy that pops up in the report. The price for metals is up. As a result, it costs more than a penny to make a penny and more than a nickel to make a nickel. That's been true for around five years. It now costs over two cents to make a penny and over 10 cents to make a nickel.
Peterson says the Mint is researching cheaper metals that could be used.
PETERSON: On the nickel right now, there are options that cost less than a nickel. On the penny, we're still evaluating.
KESTENBAUM: So it might actually be possible to make a penny for a penny?
PETERSON: I'll be happy to say, possible. Yes.
KESTENBAUM: For its entire history, the Mint has managed to make a profit minting coins for general use. That part of its business has always paid for itself, but it is about to take a big hit in connection with a coin you probably do not have in your pocket - the dollar coin.
As NPR has reported, over a billion dollar coins had piled up in vaults as the result of a law that required the Mint to make dollar coins honoring all the presidents. The Treasury Department last month basically ordered a halt. Big picture, that will save money. The Treasury estimates $50 million a year, but for the Mint, the dollar coin was a big money maker, the highest markup of any coin. It cost just 18 cents to make one last year and the Mint sold each one for face value, one dollar.
Now, most of that profit will go away. Peterson says he expects the Mint will still break even or better, making coins for everyday use.
PETERSON: We believe that we'll be in the black next year and we do have a reserve available if needed.
KESTENBAUM: By the way, any profits the Mint makes from those coins in your pocket, by law, those profits go to pay down the national debt.
David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.