Steel Coinage

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February 9, 2015 By Michael Zielinski â€"22 Comments

A bill has been introduced in the House of Representatives which seeks to quickly and dramatically alter the composition for all current circulating United States coins. Specifically, the bill would require the one-cent, five-cent, dime, and quarter dollar coins to be produced primarily of steel, with the change implemented 90 days after the enactment of the Act.

The bill H.R. 516 or the “Cents and Sensibility Act� was introduced on January 22, 2015 and represents the third attempt from Rep. Steve Stivers of Ohio to alter the compositions of circulating coins. In 2011, he introduced two separate bills which separately sought to immediately alter the composition of cents and nickels to steel. In 2013, a bill was introduced seeking to alter the compositions of cents, nickels, dimes, and quarters to primarily steel. The current bill contains much the same provisions as the one introduced in 2013.

The bill calls for the four denominations to be produced primarily of steel and meet such other specifications as the Secretary of the Treasury may determine appropriate. The coins are to be treated in such a manner that they are similar in appearance to the coins produced prior to the date of enactment. Lastly, there is a requirement to use only steel produced in the United States unless the Secretary finds this requirement to be inconsistent with the public interest or an adequate supply of United States steel is not available.

There are additional requirements for the conversion to new coin specifications. These include the stipulations that such specifications would not require more than one change to coin-accepting and coin-handling equipment, facilitate or allow the use of coins or tokens of lesser value in place of circulating coins, or require non-trivial changes to coin-accepting or coin-handling equipment to accommodate co-circultion of coins carrying the new and old specifications.

Finally, there is an allowance for the Secretary of the Treasury to produce numismatic versions of the cent, nickel, dime, and quarter in compositions in place before the act.

The issue of circulating coin composition had gained significant attention when declining production volumes and increasing base metal costs drove the United States Mint costs to produce the cent and nickel to more than double their respective face values. For the 2011 fiscal year, the cost to produce and distribute the two lowest denominations rose to a peak of 2.41 cents per cent and 11.18 cents per nickel.

Since this time, rising production volumes and lower base metal prices have served to reduce the costs of producing these denominations, although both still remain well above their respective face values. For the 2013 fiscal year, the cost to produce and distribute the cent was 1.66 cents and the cost for the nickel was 8.09 cents.

Despite the losses generated by the two lowest denominations, across all circulating denominations, the Untied States Mint has consistently generated positive seigniorage. For the 2013 fiscal year, seigniorage generated from circulating coinage was $289.1 million.

Amidst the legislative attempts to immediately alter the composition of circulating coins, the United States Mint has been conducting research and development activities with regards to circulating coin composition under the Coin Modernization, Oversight, and Continuity Act of 2010. The most recent biennial reported delivered in December 2014 outlined the potentially significant private sector costs of a dramatic change in coin composition and indicated planned additional research into seamless materials which would have the same electromagnetic signature as current coinage.

The current bill H.R. 516 has two cosponsors and has been referred to the House Financial Services committee.

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While obviously the idea of fractional currency makes even less cents than the penny these days, the era of fractional coins is coming quickly to an end.

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As said before, the penny is not a feasible coin in any material as it costs more to produce and use it even if the material was free. The nickel is getting there too.

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I wouldn't have a problem with coins of steel but it really just doesn't make sense right now. The coins above 10 cents are fine for now, the coins below that should just be eliminated. If there were to be some sort of radical change to the coinage system, such as a total re-imagining, re-valuing or something then a wholesale composition change would be appropriate.

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SAVE Act Seeks to Prohibit Non-Cost Effective Coins
February 13, 2015 By Michael Zielinski

A bill introduced in the House of Representatives which seeks to provide for savings, accountability, value, and efficiency in government spending would have significant and potentially unintended consequences for coins.

The bill H.R. 614 known as the SAVE Act was introduced by Rep. Patrick Murphy of Florida on January 28, 2015. A similar bill had been introduced in the 113th Congress and gained 21 cosponsors, but failed to become law.

The current bill is 60 pages in length and contains a large number of provisions intended to cut wasteful spending and improve government efficiency. Rep. Murphy stated in a press release, "The SAVE Act would cut $479 billion in government waste through common-sense provisions that have garnered bipartisan support."

Among these provisions is Sec 208 of the bill which prohibits the non-cost effective minting and printing of coins and currency. With regards to coins, the bill would amend Section 5111 of title 31, United States Code by adding at the end the following:
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(e) Prohibition on Certain Minting- Notwithstanding any other provision of this subchapter, the Secretary may not mint or issue any coin that costs more to produce than the denomination of the coin (including labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping).

The United States Mint currently produces two circulating coins which cost more to produce and distribute than their respective denominations. Based on the figures from the 2013 fiscal year, the cost to produce and distribute the cent was 1.66 cents and the cost for the nickel was 8.09 cents. All other circulating coins are produced and distributed at a cost less than their respective denominations. Accordingly, if the bill were to become law, the Secretary of the Treasury would be prohibited from minting and issuing cents and nickels.

Notably, the text of the bill does not qualify the prohibition to circulating coins, which may give rise to unintended consequences for bullion and numismatic coins produced by the United States Mint.

The Mint currently produces five bullion coin series across three precious metals. These include the American Gold Eagle, American Silver Eagle, American Platinum Eagle, American Gold Buffalo, and the America the Beautiful Five Ounce Silver Bullion Coins. In all cases, the bullion coins have nominal denominations assigned which are far below the intrinsic value and market selling prices of the coins.

Unlike the circulating coins, the US Mint does not issue the bullion coins at their nominal denominations. Rather they are sold to distributors based on the market value of the precious metal content plus a mark up which covers the Mint's costs and provides for a small profit margin. As such, the denomination of these coins has no bearing on whether or not their production is cost effective.

Similarly, the Mint produces numerous commemorative coins and other numismatic products with production costs greater than their denominations. Once again, the denominations have no correlation to the cost effectiveness of the products since their are sold at fixed prices which cover all costs and include a profit margin.

Based on the current text of the bill, the SAVE Act would seem to prohibit the production of bullion and certain numismatic coins since their production costs exceed their denominations. Coin Update raised these issues when a similar bill had been introduced in the 113th Congress. Ultimately, the previous bill did not become law, but the reintroduced the bill contains the same troubling provision.

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Hence my comment that it makes no cents, pun intended.