By Hubert Walker for CoinWeek ….
If you read nothing else concerning the U.S. Mint’s December 12 biennial report on coin production costs and research into production alternatives, then here are the report’s conclusions:
- There is no material that can make cent production cheaper.
- Currently, the costs to industries that make use of coin-accepting machines (such as vending, parking meter or change machines, etc.) far outweigh the savings incurred by using the most promising alternative coin composition.
- Businesses with a stake in coin-accepting machines recommend the Mint make no change whatsoever to the quarter at this time, no matter what changes might be made to smaller denominations.
- Zinc-based compositions aren’t good enough for denominations over one cent; multi-ply and nickel plated steel aren’t good enough for denominations higher than a quarter.
- Therefore, the US Mint does not recommend changing coin compositions at this time, though research is ongoing.
Friday’s release was the second biennial report as mandated by the Coin Modernization, Oversight, and Continuity Act of 2010 (Public Law 111-302), which requires the Treasury Secretary to research alternative means of manufacturing coins and reducing costs at the Mint. The Secretary must also issue a status report regarding such research every other year. The first report was released in December 2012.
Since 2010, the Mint has investigated 29 alternative coin compositions, with six showing real promise. The six compositions were then subjected to further testing. They include: nickel-plated steel, multi-ply-plated steel, stainless steel, copper-plated zinc, tin-plated copper-plated zinc and an 80/20 copper-nickel mixture. The 80/20 cupronickel was the best candidate of the group since its weight and electromagnetic signature (EMS) are almost identical to coins circulating presently.
A ringed-bimetallic option was also considered.
However, after much consultation (via the Office of Coin Studies, established by the Mint in 2013) with various members of the coin-accepting machine industry, it became apparent that the $5 to $7 million in savings switching to the 80/20 copper-nickel coinage might generate in no way makes up for the $2.5 to $6 billion such a move would cost the industry.
Nevertheless, research into alternative compositions continues, as does research into alternative production techniques and technology. Two manufacturing innovations are especially noteworthy. One is a system of lasers used to create coin blanks; the other involves a “push-back” system that would eliminate the need for on-site planchet annealing. While the laser system is an effective way to produce blanks, its use isn’t economical at this time. The push-back system, in addition to allowing off-site bulk annealing, is not only an efficient means of production, but is also similar enough to current techniques that little capital investment would be needed to implement it.
But much like alternative coin compositions, further research is necessary.
The report also detailed some of the factors impacting Mint expenditures for fiscal years 2013 and 2014. Among the key findings is the fact that even though costs had increased 17.8% since 2012, the decrease in base metal spot prices–not including zinc and nickel–was enough to help the Mint save money instead.
Also, increased demand for quarters managed to replace the seignorage lost when the golden dollar coin ceased to be minted for circulation.
The United States Mint also consulted with the Royal Canadian Mint due to the Canadian mint’s experience with plated steel coinage. Ultimately, the three steel-based alternative composition candidates were rejected as currently formulated because of their hardness–though again, additional research may change the situation.
The report says that the Treasury Department will continue to engage the coin-accepting machine industry and study consumer reaction to any change in American coinage.
Most people with a degree of intelligence are asking, what coin operated machines take pennies? Truth be told, probably 90% of coins actually used in these machines are quarters. Some of the newer machines now accept debit cards and credit cards. So it just makes more sense to 1. stop production of new pennies, or at least reduce the number of them being made. 2. switch to cheaper composition for nickels. The higher denominations make a nice profit from their current compositions.
This just seems like common “Sense” to me.
I think the Mint’s hands are more or less tied. Sure, the Mint can switch to different compositions practically anytime they want. It is the coin-accepting machine industry that holds them back. While the Mint can save millions of dollars, the makers and users of vending machines, change machines, parking meters, automatic toll booths, etc etc, stand to bear the brunt of the initial costs.
They are understandably apprehensive.
But they can’t avoid it forever. One hopes they are being proactive and that the market will reward them accordingly.
Common sense in my mind says that if we quit devaluing our currency, coin modernization would be a non-issue.
That’s right, the price of metal is not rising, it’s the dollar declining. I love how our country double taxes it’s working class. Sorry I want every penny I’m owed in change, they add up.
Yet a weak dollar can be useful (more exports, which results in higher GDP and a smaller trade deficit, for example), as can that other boogeyman, deficit spending.
The “household budget” theory of economics just doesn’t hold at such a large scale as the federal government. Just like “privatize everything” doesn’t work either.
I’ll just throw this out there: the government doesn’t have to be “profitable”. It’s not a business, thank goodness. Unfortunately, there are those politicians–who know better, I guarantee it–that feel the Mint is better off under privatization.
If anything, requiring the Mint to release a biennial report about how to save money when it’s not the Mint that’s in the Mint’s way… that’s wasteful spending.
Typo, try one more time:
Let’s ask the ordinary Russian citizen if he feels his weak Ruble is useful. shall we?
The average Russian has much to be angry and fearful about.
The US dollar is in no way as bad off as the Ruble.
Huh? Wha? I don’t know what metal prices Rebel is looking at, because the ones I have been watching are falling for over 4 years now. I guess that means the dollar is getting stronger, right?
Look, this whole “hard money” ideology that precious metals are just the reciprocal for the value of a dollar is all hokum, it always has been hokum, and it always will be hokum. It assumes that metals cannot fundamentally change their own values, despite the fact that they can, have, and always will.
Face it. We have no “yardstick” any more. All values are relative, and picking any one item, currency or commodity, to be the fixed measuring stick, while it may feel nice and comfy, is utter foolishness.
Canada and the other nations had little problem changing coins, yet our bureaucracy prevents change from occurring in our own coins. Until they change, more copper for me!
Other countries do seem to change their coins and currency much more frequently than we do. The United States does tend to be more conservative. But I don’t think bureaucracy is really the villain here (and by “bureaucracy”, I’m assuming you mean government-flavored).
Much like with the dollar coin, there are “powerful” business interests lined up against change. We’re still using inefficient dollar bills because of some paper mills in Massachusetts and the politicians they own.
Not that the coin-accepting machine industry has nefarious motives, per se, I just think they’re in denial.
Anyway, I’m no fan of “bureaucracy” either, but I like to know who’s really sticking it to me in any specific instance.
I agree completely. Britain reworked its coinage multiple times in 35 years, first moving from £/s/d to decimal pounds, then introducing a new 20p denomination followed by £1 and £2 coins, and finally downsizing the 5p, 10p, and 50p denominations. Canada changed compositions multiple times and the EU somehow managed to replace 15 historic monetary systems with new coins and bills over a period of just a few months. All of this happened without destroying civilization as we know it :)
But given how wedded to the past both Congress and the general population have become, and the extent to which entrenched interests (see: Crane Paper) are vested in maintaining that inefficient status quo, I expect to be long gone before our country catches up to the rest of the world.