Senators Continue Push To Replace Dollar Bill With $1 Coin

Between the lines.........? :devil:

 

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That's my comment.

The complaints started in 2011 when a news story revealed that the Fed had more the on billion of the dollar coins in storage and they were running out of room. They were requesting a $600,000 appropriation to construct a new warehouse. Rather than do that Congress discontinued the production of the dollar coins for circulation. The next thing you have to do is look at the 2011 and 2012 Annual Mint reports. The mint has for decades been the source of hundreds of millions of dollars in seigniorage profits which have been turned over to the Treasury General Fund. Between the 2011 report and the 2012 report the seigniorage profit on the circulating coinage dropped by around 386,000,000 and it was the result of the loss of the seigniorage profits from the dollar coins. The Mint had been turning over several hundred million in profits to the General Fund each year. After the discontinuance of the dollar coins it dropped to about $16,000,000. And the only reason the mint didn't post a LOSS was because their fiscal year started Oct 1, 2011 so the profits from the last President dollar struck in 2011, some $79,000,000 worth was reported in the 2012 annual report. Without that the 16 million dollar profit would have been a $63 million dollar loss.

Hence my comment about throwing away $400,000,000 to save $600,000. (And considering the 600K was a one time cost, while the 400M is an annual cost, you could say we are approaching throwing away $800M to save $600K. It has cost us over $10 for every dollar we saved.)

 

Now that you explain it, a three-year old child could understand it...can you find me a three-year old child to explain it to me?

 

To be fair, I think the $400,000,000 in losses to save $600,000 is an oversimplification because that money was still produced at a profit for the government in the form of $1 bills.

 

Except the discontinuance of the dollar coins didn't cause a $400M increase in the number of dollar bills produced. So you have roughly the same annual seigniorage on the dollar bills before and after the discontinuance, but a loss of $400M in seigniorage on the coins. That is a net loss. (The coins were produced and stored so they didn't have to make more dollar notes to "replace" them.)

 

Only economists and politicians think anything can be created out of nothing. A scientist knows beyond question that this is an impossibility. "Money" (profit) can only be created by an exchange that is mutually beneficial it can not be created by law or by theft.

 

This is making less and less sense, or I'm getting more and more confused.

You refer to a decrease in the Mint's seignoirage profits between 2011 and 2012 of $386M, but who's to say that is all a result of the discontinuation of the production of the dollar coin for circulation? Also, what were the figures on the seignoirage profits for the Bureau of Printing and Engraving during that same period? What would these numbers have been had they built the warehouse and continued producing the dollar coin for circulation? In order to dump $1 billion in new $1 coins into the economy, then $1 billion in new $1 bills that would otherwise have been introduced into circulation would not. I suspect the short term cost of printing $1 bills is less than minting $1 coins.

Also, in one post you're referring to future production, and then in your latest post you're referring to coins that were already produced and are in storage. I do understand they didn't "have to make more dollar notes to 'replace' them", but they did and there was a seignoirage profit associated with that production. It is misleading to only refer to the loss of not putting the dollar coins into circulation without offsetting that by the gains realized by putting dollar bills into circulation.

Also consider that some of the money going into circulation is merely replacing worn out money coming out of circulation, so it isn't all "profit".

IMHO - The only relevant numbers to consider long term are the cost differences in producing the dollar bill and the dollar coin, and the longevity of each in circulation.

 

...and to add another tidbit - The seignoirage profits associated with producing $1 coins and $1 bills pale in comparison to the seignoirage profits associated with printing new electronic currency. i.e. - Issuing more debt and making that money available for mortgage lending. $100,000 here, $400,000 there. All electronic. No bills or coins necessary. It eventually gets spent, but most of that spending is electronic too. The point being our government no longer has to "print" money to increase the number of dollars in the economy. Most of that happens electronically. The bills and coins are now merely the loose change on those large transactions.

 

That would be true if money was the same as energy or matter, but it is not since money can be "created" by incurring debt.

 

Seigniorage profits of coins and bills are figured differently. For paper money it is just so much waste paper until it is purchased by the Federal Reserve. At that point there is a seigniorage profit. With coins though the seigniorage profit is counted as soon as the coins are struck even if they just go straight into the storage vaults and are never acquired by the Fed or released into circulation. So if they strike a billion dollar coins and put them in the warehouse, they add 600 million to the books in the Treasury general Fund. If they print a billion dollar bills and the Fed doesn't want them right now so they put those in storage,, they have a printing expense and no profits for the General Fund books. When they stopped making the dollar coins that were just going into storage, there was no reason to increase dollar note production. When you stop making something that no one wants that doesn't make people want more of something else.

As to how you know the reduction in Mint Seigniorage was from stopped the dollar coins, the mint reports report seigniorage by denomination and the number made for a total seigniorage per denomination. Then they total those to get the total seigniorage profit. When you look at the figures there is some variance in the cent , nickel, dime and quarter, but the seigniorage listed for the dollar coin drops from 400+ million in 2011 to 79 million in 2012 (And that was the seigniorage on the coins struck in the last quarter of 2011. That 79 million will be gone when the 2013 mint report comes out. Seigniorage for the dollars will be $0