Archive for Sunday, March 16, 2008

US Mint wants to make sense of coins

Skyrocketing metal prices cause cost of making currency to exceed value

March 16, 2008


No more penny for your thoughts. It's 1.7 cents. And start thinking more of the nickel, because it's worth a dime.

Those are the U.S. Treasury costs of minting the penny and nickel, thanks to metal prices shooting up by as much as 450 percent since 2003.

With congressional lawmakers trying to right the lopsided ledger of making money, the pennies in your purse may soon be made of steel but treated to retain the copper color.

"Never before in our nation's history has the government spent more money to mint and issue a coin than the coin's legal tender value," said Edmund Moy, director of the United States Mint, in testimony submitted to the House Financial Services Committee's panel on monetary policy.

"With each new penny and nickel we issue, we also increase the national debt by almost as much as the coin is worth, and these losses are rapidly mounting."

Changing the metals or the percentage mix in coins could save the Treasury about $30 million a year for the penny and $70 million for the nickel under the proposed Coin Modernization and Taxpayer Savings Act of 2008, supporters said.

The bill would give the Treasury the flexibility to revamp the metal and weight makeup of all coins in response to metal prices.

The legislation would require the department to immediately stem losses over the one-cent coin by making pennies primarily of steel within 180 days of the law's passage.

Since 2003, copper and nickel prices have shot up 300 percent and zinc up to 450 percent, according to the subcommittee.

When high supply drove down prices more than a decade ago, mining slowed considerably and the dwindling supply started driving up prices, said Bart Melek, a Toronto-based global commodities strategist with BMO Capital Markets, a financial services provider.

For example, he said, zinc averaged $828 per ton in 2003, and last year, it averaged $3,249.

But lately, developing Asia countries have been gobbling up base metals - copper for computers and pipes, zinc as an anti-rust agent and nickel for stainless steel.

"China has been growing in the double digits in the past four years," Melek said. "All of a sudden, it's become the consumer of base metals as they build up their infrastructure."

Some lawmakers are concerned about giving the Treasury full power to alter coins.

Last year's version of the bill sank partly when the National Automatic Merchandising Association warned of multimillion-dollar costs to retool vending machines for new coins.

The Treasury has produced coins since 1792. In 1943, zinc-coated steel pennies were made because copper was a huge wartime demand.

When industry demanded more silver, the Mint in 1965 started cladding the dime, quarter and half-dollar coins in cupro nickel.

In 1982, copper prices prompted pennies to change to its current copper-plated zinc.


The_Voice_of_Reason 10 years ago

Wow.... this government is waging a three trillion dollar war and their worried about spending "too" much on pennies and nickels.... Am I the only one who finds this sad?

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