I was wonderin' why that since coins typically don't 'wear out', why does the mint have to make hundreds of millions more of them every year...where do they all disappear to?
Under the couch cushions, coin jars, trash, street, collectors, wishing wells, etc. Then there are all those that do need to be taken out of circulation. Collectors and hoarders can be responsible for removing large numbers of coins from circulation sometimes, but I think more typically numismatists and hoarders are not impacting the supply too significantly. Then there are those coins (presidential dollars for ex) that are minted and never even make it into widespread circulation due to lack of demand. They sit in vaults while the mint continues to make more A fair number of people right now are sorting 95% copper cents from the copper plated zinc and hoarding away the copper cents as a hedge against inflation. I don't think there will be a penny shortage any time soon, but I do wonder if the mint will need to step up production to account for this in particular. When the base metal of the coin is worth more than its face value (as with the 95% copper cents, and silver coins back in the sixties) they quickly disappear from circulation. Ben
I had about an hour yesterday to go metal detecting. I dug up 14 memorial cents, 1968-2004. Alot are simply lost...
I can still remember the Andy Rooney piece where he put quarters, dimes, nickels, and pennies on the ground and watched with a camera. People would bend over to pick up everything but leave the pennies. I guess their just not worth using anymore. BTW, I always pick them up when I see them.
Maybe the government could offer some kind of incentive to keep the coins circulating...seems like that would be a lot cheaper than having to make so many more every year. Like maybe if you brought coins to the bank, and they would give you a premium for them above face...seems like that would be cheaper than the cost of making hundreds of millions more every year. Just a thought.
Maybe it's just siegnorage where they make a billion coins for a million dollars and just consider it profit....
I pick up the pennies also. I don't know why they keep minting you never here of a coin shortage that's for sure.
Maybe that's because they keep minting them... Mints have always been in a red queen's race to keep a sufficient number of coins in circulation, from ancient times to the present. The mint in 1963 estimated that 4.5% of all US coins in circulation were lost annually. Sure, there was more hoarding at the time, but factor in the decreased buying power and I'm sure that the figures have kept up. Don't believe me? This is a topic that has been very important to my research. Check out these articles: Newton, Douglas P. "Found Coins as Indicators of Coins in Circulation: Testing Some Assumptions" European Journal of Archaeology (2006) Cole, T. J. "The Lifetime of Coins in Circulation" Numismatic Chronicle (1976) U.S. Congress, Senate, Commitee on Banking and Currency, Additional Mint Facilities, Hearing before a subcommittee of the Committee on Banking and Currency, United States Senate, on S. 874, 88th Cong., 1st Sess. (1963)
If you want to know where those coins vanish to, I think there was a post somewhere about what people do to coins. You would be shocked at how many are hoarded, melted and just distroyed for numerous reasons. They also get buried, lost, thrown in riviers, lakes, oceans, placed on RR tracks and on and on and on. They are used to make jewlery, toilet seats, bookends, table tops and more things than could be listed here.
Since coins (except the nickel) have metal values far below the currency value, it helps the mint when coins are lost or collected. It is like a hidden tax. They should and do encourage collecting. They now have to figure out how to encourage losing more of them in the ponds, lakes, oceans, etc. Uncle Sam says it is good luck to throw them overboard.
Don't forget the mint has production costs to factor in as well. I know cents cost more than their face value to produce. I'm not sure about the rest, but I've seen the figures somewhere...
You might be right about the cents but they are far outweighed by the other ones (check out coinflation.com). I'm also a little curious about the production costs at the mint. If it is like other businesses, you have to allocate indirect costs across the entire volume of product line. If they stop minting the cents, many of those costs will move to the other coins making them more expensive to produce. Lets say that they make 9 billion cents a year. It costs them $0.0061/cent in RM costs. They now have $0.0039/cent in production and indirect costs. The production and indirect cost are now $35 million. They will only lose money on the cents if they stop making them and the actual cost savings is over $35 million. If it is like the business that I'm in, much of the costs will not go away but transfer to the other products (nickels, dimes, quarters, etc.).
Age old story of how much does it cost to produce our monitary system. In reality it is far worse than people usually hear. What is usually mentioned is the cost of the materials used to make the stuff. Never is it mentioned or tabulated as to all the other expenditures required in the manufacture of our monitary system. For example if you decided to produced pencils. You would need wood, graphite, eraser materials, etc. Then there is the glues, coloring materials and much more. These are the types of items the Mint tells you they require to make our money. Of course they always omit the building, A/C and heat for that building, plumbing, electrical, phones, presses, dies, gas. And then too there is the cost of having materials brought in, shipped out, storage, materials for packing and lots more. You want to make pencils so you also have to hire people to make them, pay them salaries, pay for insurances and other benifits. THINK. If you wanted to have any buisness, you would have to pay for all that. If the government added in all those expenses, a Cent would probably cost a hundred dollars. But then they have those things called taxes you know.
You'll find al of that accounted for in the Annual Mint Report (or at least it used to be. The annual mint report has gotten pretty crummy in the past few years.) Not really because the Mint does not receive tax money or any other appropriation. It is self supporting and actually generates revenue for the general fund thereby (at least in theory) reducing your taxes.
I could be really wrong, but I doubt seriously that the mint is losing money on making money. If they were, we wouldn't have a counterfeit market out there.
Simple way to understand why they have to keep making more. In 2004 (last year I have figures for) they struck 13,171,000,000 coins for circulation. That comes to 44 coins per person in the US, or 176 coins per year for the average family of four people. Now that means that if the average family of four people manages to lose, throw out, destroy, or just hoard 3 coins per week, they will consume 90% of the mints entire annual output. and leave just 1,471,000,000 coins in circulation or just five coins per person. Tell me, just how difficult do you think it would be for a family of four to manage to get rid of 3 coins per week?
