>The US mint costs tax payers billions per year (they are >spending $44 million just to promote the new dollar coin, >each of which, BTW, costs 12 cents to mint).
That is not true. The Mint does not cost the U.S. taxpayers anything. Think about it. They make money at the Mint. It does cost 12 cents to make a dollar coin, which they sell for $1, meaning 88 cents profit for the Mint. John P. Mitchell, Acting Director Of The United States Mint stated that “not a single tax dollar went into the ad campaign. It was paid entirely from our operating profits, and we’ve got ‘em with this coin: 88 cents per Golden Dollar, to be exact. Shipping 37 million of Golden Dollars per week, we paid for the entire campaign in a few days. This year, we expect to produce and ship at least 1 billion Golden Dollars. At 88 cents profit per coin, Mister Chairman, that has got to be the best relationship among production-distribution cost, advertising expense, and revenue since the Pet Rock. In this situation, Mister Chairman, the American taxpayer bore none of the risk and none of the expense and will receive every penny of the financial return. As the Committee knows, the Mint recovers all operating expenses from revenues we generate, without the use of any tax revenues.”
Don’t beleive it. The US mint is actually claiming to be turning a profit by minting coins WHAT?!?!? What are they the Franklin Mint now. This level of BS coming from a government official has me seething. This is pure crap. What Mr. Mitchell is claiming is that the American public is buying the new gold coins as collector’s items with no intention of ever spending them. They are minting a billion of them, THEY ARE NOT COLLECTOR’S ITEMS, every one of them is going to be spent and re-spent until they wear out and need to be replaced. Think of it this way, you go to the US Mint as a tourist and decide to buy a coke from the vending machine accross the street. Your dollar bill is all worn out and the machine won’t take it so you go into the mint and “purchase” a new dollar coin and then go back to the machine and buy your coke. The mint just exchanged a brand new dollar coin (which cost them 12 cents to mint, 12 cents that could of been spent on defense or education) for a worn out dollar bill which they will burn because that is what they do. They replace old worn out money with new crisp/shiny money and then destroy the old stuff. There is no profit in this if the person receiving the new money intends to spend it. It doesn’t matter if it’s one thirsty tourist exchanging a buck or a bank exchanging a million bucks. The mint does not profit from exchanging new currency for old, it is a zero sum gain. However, they could “run the presses” like they do in some third world countries and pay off some of America’s debt without raising taxes, but this is purely inflationairy spending and I would be shocked and horrified to hear that they are doing this. In any case it would be cheaper just to print paper hundreds than dollar coins. The only benefit of the dollar coins is that they last so much longer than paper bills. Paper bills wear out after 18 months, the average coin lasts for decades. So even though the coins cost more to mint, they are more economical than paper ones in the long run. There is no long term cost savings, however, to using physical currency over an all EFT economy once the cost of the initial conversion has been recouped. Think of it this way, what costs more to produce, billions of coins and bills or trillions of electrons?
The operating revenues he is refering to are somewhat complicated to explain, and I’m no Econ major, but I felt I should try if I wanted you to feel confident that the mint is nothing but a drain on our resources. Every year that the US economy grows (I’m not certain what happens in recession years) people on average get richer and more money is needed to run the expanded economy. This new money begins its life in the computers of the Federal Reserve. For example, when you need to borrow a lot of money to buy a house you go to a bank. When a small bank needs to borrow a lot of money it goes to a big bank. When a big bank (or foreign nation) needs to borrow a lot of money it goes to the Federal Reserve. The Federal Reserve has the power to create money on its computers and then loans this money to banks. This is how money is born, in a computer not on a printing press. However, once a bank has successfully borrowed money from the Reserve it can then go to the mint and exchange a small portion of this money (which until now only existed on computers) for physical cash to distribute to its customers (i.e. small banks and eventually the consumer). Thus, more currency is printed each year than is destroyed, resulting in an apparent profit for the mint. In an all EFT economy, though, there would be no cash and all money would forever remain in various bank computer. This would spare us the expense of the beauracracy (like Mr. Mitchell), paper, presses, ink, engravers, plates, raw metals, theft, not to mention the enormous cost of transporting cash around in armored cars with armed gaurds.
If I am wrong about any of this I would appreciate it if someone who knows how it all really works would correct me, as I said I’m no Econ major.
Pardon me, but this is NOT what Mr. Mitchell is claiming AT ALL. I’m gonna let you in on a little secret, ok?
Currency IS NOT money!
Currency is merely one way to represent money, which is value. It costs the U.S. government 12 cents in value to produce and distribute something that someone else will spend for a dollar’s worth of value. That 88 cents pure profit. That is how ALL currency works, and it is of course why the U.S. government will continue to produce hard currency until the end of time. As a matter of fact, the government LOSES that 88 cents for each Sackie that is NOT spent as a dollar and is instead left to molder in a sock drawer, since it doesn’t carry value unless it is being used in financial transactions.
One of the neumismatics out there can get the real numbers, but the currency in circulation is only a small fraction of the total money in the country, most of which exists purely as numbers in a ledger book or in a computer database.
The other thing about going to purely electronic cash: security and privacy. Don’t listen to what anyone tells you about electronic cash being as private as hard cash. Any time you can have your money attached to your cash, the spending of said can be tracked. Think about those little “discount cards” that grocery stores use nowadays. Now even your hard currency spending can be tracked. And it is. And counterfeiting “electronic cash” is about a million times easier than counterfeiting real cash.
You are correct currency is not money. The US Mint prints currency, it does not “make money” the way a successful business makes money. There is no profit in exchanging a brand new dollar coin for a worn out dollar bill (if the US Mint wants a dollar bill they can print a new one, they don’t need to press a coin and then sell it). By your logic the US Mint could erase the national debt simply by running the presses until they had 5 trillion dollars worth of $10,000 bills (such large denominations exist, Cecil said so). This is possible and has happened in other countries throughout history (i.e. post WWI Germany, post communist Russia…) but it would be national economic suicide to do this. It would cause astronomical inflation rates which would soon destroy the value of all paper investments (cash, cash accounts, stocks, bonds…). Only things with real value like gold, canned food, shot guns, ammo…would retain their value as the inflation panic spread. I stand by my original assertation that the mint can’t truly profit off printing currency since nothing of any real value has been created.
However, in a previous post I asked sardonically if the US Mint had become the Franklin Mint. Since then I have paid a visit to the US mint’s web page http://www.usmint.gov and was astonished at what I found. I was wrong. The US Mint has found way more ways to hock cheap junk as collectibles than the Franklin mint ever dreamed of. Their catalog includes: year 2000 proof sets (one dollar coin, 5 state quarters, a half dollar, a dime, a nickel, and penny) with a face value of $2.91. They sell these for $19.95, now THERE is a profit. They also sell commerotive coins such as Yellowstone Silver Dollars for $37.00 and key chains with state quarters in them for $9.95. I had no idea that the US Mint was in the business of producing souvenirs in such variety. It may be possible that this is where the mint gets the operating profits that Mr. Mitchell referred to. Still, the US Mint could continue to sell souvenirs and trinkets in an all EFT economy, its just that there would be no way to spend these souvenirs as money (as if anyone would ever use a Yellowstone silver dollar which cost 37 bucks to buy a soda).
Just a minor point with something that jayron32 said:
I dunno, can you name any physical currency which would take a hundred trillion years to counterfit and is instantly recognizable as genuine? There do exist methods for ensuring both security and privacy in electronic transactions. As has been mentioned, these methods are very complicated, but what does that matter? It’s a computer that’s doing it all, anyway, and computers don’t think twice about things like RSL encryption and zero-information protocols that would give a human nightmares.