Jan 7, 2011 | commentary, economy, Federal Reserve, history
I am not one who looks at our current monetary system and believes that changes must revert back to a standard based on precious metals. I understand that such a standard requires government intervention by controlling the prices of the metals in order to create a monetary standard that does not allow for growth and expansion. History shows that the attempt to control the prices of precious metals while trying to maintain economic growth has not worked. We can look at the Coin Act of 1873, also known as the Crime of 1873, for manipulating silver out of the monetary system and creating a series of recessions and depressions because of the lack of real growth.
On the other end, taking the U.S. off the gold standard in 1933 was the first step in expansion of the U.S. economy. The final step in economic growth was fully breaking the dollar’s tie to gold while allowing the price of gold and the U.S. dollar to trade freely on open markets. Even though the United States experienced a concept call stagflation in the 1970s, the strength of the U.S. dollar was growing around the world. It was during this time that many economies were basing their own currencies on dollars to where some countries use dollars instead of their local currency.
After many years of seeing the dollar take over economies all over the world, the European Union joined to form a common currency in order to offer an alternative to the U.S. dollar. When the Euro was launched in 1999, the two European economic powers went in different directions. Germany, which has a significant manufacturing and technology base, joined the Euro while Great Britain, worrying about its sovereignty because it could not control its currency, kept its currency based on the Pound. Today, the Euro is having problems with the economic programs throughout Europe (Greece, Ireland, and Portugal with Spain not far behind) and Great Britain able to weather their own storm, albeit not without protest. Talk about replacing the Dollar with the Euro as the benchmark currency have subsided.
The issue of sovereignty becomes an interesting question with a joint resolution introduced to the Virginia House of Delegates. House Joint Resolution No. 557, introduced by Del. Bob Marshall (R-Manassas 13th district), to “[Establish] a joint subcommittee to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.”
As with many bills on both the federal and state level, the bill begins with paragraphs what begin “Whereas….” For this joint resolution, it claims authority by cherry picking rulings from 19th century rulings made during the height of the Robber Barron era before the introduction of the various Anti-Trust Acts to justify the assumptions. They also cherry pick statements from the United States Code (U.S.C.) that take the statements out of context in order to pervert their meanings.
The “Whereas…” section also claims that “many widely recognized experts predict the inevitable destruction of the Federal Reserve System&rsuqo;s currency through hyperinflation in the foreseeable future.” Who are these experts?
If the resolution passes, it directs that a joint committee will be created to study whether the Treasurer of the Commonwealth of Virginia and the Bureau of Financial Institutions can and should coin its own money for use within the Commonwealth should the Federal Reserve or other sources collapse. The committee is supposed to report its findings by the first day of the 2012 Regular Session of the General Assembly.
After living in the Washington, DC area for almost 20 years and having jobs that worked with the federal government, I have seen my share of wingnuts from both sides of the aisle. But I have come to learn that the extremes on either side is aptly described as extreme. The extreme nature of this resolution ignores Article I, Section 10 of the U.S. Constitution that says “No State shall… coin Money.”
While the Federal Reserve and the U.S. Mint has its issues regarding the policies of the manufacture and distribution of money (remember the Bureau of Engraving and Printing prints the currency), proposing to violate the constitution is unconscionable. Besides, if it ever gets to the point that the Federal Reserve fails, Virginia coining their own money may be the least of our problems.
Dec 8, 2010 | BEP, currency, Federal Reserve
Following up on something reported here in October, mainstream media has caught up with the news that the Bureau of Engraving and Printing and the Federal Reserve will delay the release of the redesigned $100 Federal Reserve Note because of production issues. The announcement said that the BEP has identified a problem with sporadic creasing of the paper during printing of the new $100 note that did not appear during pre-production testing.
What added to the urgency was the report that the BEP said that about one-third of the 1.1 billion notes produced for the formal release may be creased and otherwise not usable. BEP is attempting to salvage what it can from the previous production run.
Sources confirm that these new notes are the most expensive to produce at 12-cents per note. Production costs using the older paper was 7-cents per note.
The BEP is working with Crane & Co., the exclusive currency paper supplier since 1879, to resolve the issue.
Oct 19, 2010 | Federal Reserve, legal, tokens
After receiving my copy of Numismatic News in yesterday’s mail, I immediately turned to the Letters and Viewpoint section to see what the readers are saying to find a Viewpoint article: “Private ‘Coins’ Should be Collected.” In the article, Will Gragg writes that Liberty Dollar issued by the National Organization for the Repeal of the Federal Reserve (NORFED) should be collected. Aside that the article seems like a thinly veiled support for the Liberty Dollar, I began to wonder what happened to Bernard von NotHaus.
Bernard von NotHaus was a co-founder of the Royal Hawaiian Mint. He served as the mint’s supervisor before leaving and founding NORFED under the premise that the Federal Reserve is illegal and devaluing U.S. money by issuing fiat money. Believing that he could create currency using precious metals that could be used in trade, von NotHaus created the Liberty Dollar. NORFED marketed their “coins” as “Real Money” and that their associated notes are “America’s Inflation Proof Currency.”
In 2006, the U.S. Mint issued a consumer alert warning that the Liberty Dollar is not legal tender. Von NotHaus and coconspirators were arrested in 2007 by the FBI. He was release on bond. A grand jury handed down indictments against von NotHaus and his coconspirators for primarily violating 18 U.S.C. § 486, for “Uttering [circulating] coins of gold, silver or other metal.”
Von NotHaus was arrested on June 30, 2010 for violating the terms of his bond. After appearing before Judge David S. Cayer, Federal District Court for the Western District of North Carolina in Charlotte on Wednesday, July 14, von NotHaus’s bond was revoked and is in federal prison pending trial.
It was difficult to find information on the status of von NotHaus. Reports about his arrest and incarceration did not appear in the “mainstream media.” This news was found by reading other sources that reported von NotHaus’s arrest at the beginning of August.
According to the court’s calendar, the case of USA v. von NotHaus, et. al. (5:09-cr-00027-RLV-DCK-1) was scheduled for a hearing today (October 19) before Judge Richard Voorhees. No public information about the hearing was available at the time this was written.
Justice moves slowly.
Oct 2, 2010 | BEP, currency, Federal Reserve
On October 1, the Federal Reserve announced that they will delay the release of the redesigned $100 Federal Reserve Note because of production issues. The release was planned for February 10, 2011.
The announcement said that the BEP has identified a problem with sporadic creasing of the paper during printing of the new $100 note that did not appear during pre-production testing. While the BEP is working to resolve the issue, the Federal Reserve will not have enough notes to begin worldwide distribution causing the delay. No date was announced.
Sep 11, 2010 | BEP, cents, commentary, Federal Reserve, legal, US Mint
It looks like the pundits have run wild with the malarky that gins up crowds for an issue that should not be an issue. This one was started by John Green, someone with the credibility of a camera who posts videos for something he and his partner calls Vlog Brothers. Apparently, the vlog (video blog) is about whatever comes to their minds whether it is right or not.
In Green’s latest screed posted on YouTube he ruminates about how the “penny” is worthless and the U.S. Mint should not be producing them. In the comments to the video, he claims that he read two articles, one from The Washington Post and another from Consumer Affairs, about the alleged opportunity costs of the coin. In fact, The Washington Post article is an opinion piece and has limited value in the argument. What Green did not say is that both articles are over four years old. Apparently, he could not find anything more recent or factual.
I found the video on the The New York Times block of Stephen J. Dubner, a co-author of the Freakonomics books and journalist who like some of his other The New York Times brethren has issues with facts (e.g., Duke lacrosse case).
Starting with the grossly obvious: The United States Mint does not strike “pennies.” The coin is one cent and not a penny. The penny is the lowest denomination of the current British monetary system. Back when Alexander Hamilton devised the U.S. monetary system, the lowest British denomination was the Farthing, ¼ penny. Rather, Hamilton called the coins “cents” to distinguish the United States coins from the British coins.
But the name of the coin is a basic issue. The real measure of the alleged journalist’s muster is if he could look beyond the salacious drivel to discover the truth that may actually cause real thought and consideration from the public. If Green and Dubner would do their homework they will know that:
NO TAX DOLLARS ARE USED IN THE MANUFACTURE OF COINS AND FEDERAL RESERVE NOTES IN THE UNITED STATES!
“Wait,” you might interrupt. “Aren’t these government agencies that are funded by congress?”
Yes, both the U.S. Mint and the Bureau of Engraving and Printing are bureaus under the Department of the Treasury whose budgets are approved by congress. However, the money that congress allocates to these bureaus are NOT taken from the general fund.
Both the U.S. Mint and the BEP are profit making bureaus. After manufacturing the money, it is sold at face value to the Federal Reserve for distribution to member banks and then to the public. The difference between the face value of the money and the cost to manufacture the money is the profit—called seigniorage. Even though the one cent and five cent coins cost more to manufacture than their face value, the U.S. Mint continues to generate profit from the sale of all coins sold to the Federal Reserve in addition to the sales of bullion and collectible coins.
According to the 2009 U.S. Mint Annual Report (covering Fiscal Year 2009: October 2008–September 2009), they earned $98.1 million in seigniorage. That is a profit of $98.1 million in a down economy!
When the U.S. Mint is paid by the Federal Reserve for the coins, a collector purchases collectibles directly from the U.S. Mint, or a bullion dealer buys bullion coins, the seigniorage is deposited into a special account called the United States Mint Public Enterprise Fund (PEF) as required by law (see 31 U.S.C. §5136). As sales are deposited in the PEF, the law requires that the U.S. Mint use the money in the PEF for budgetary reasons like to manufacture coins, maintain facilities, pay employees, etc. No tax money is deposited in the Public Enterprise Fund and the PEF is managed like all general accounts by the Treasury Department. In fact, excess profit is required to be deposited in the Treasury general fund.
There is a similar fund for the Bureau of Engraving and Printing (see 31 U.S.C. §5142).
If the money that the U.S. Mint uses for all its operations is withdrawn from the PEF and if the PEF does not contain any tax receipts, then how does it hurt taxpayers if the U.S. Mint continues to manufacture one and five cent coins?
More philosophically, it is “[the] primary mission of the United States Mint is to produce an adequate volume of circulating coinage for the nation to conduct its trade and commerce.” This is done by striking coins that are ordered by the Federal Reserve System for placing into commerce. If the Federal Reserve only orders coins they need to sell to member banks, then why is does Federal Reserve Currency and Coin Services order so many one cent coins? If they are useless and cannot buy much, why do they keep ordering more cents?
It is unfortunate that a journalist chose to support his fact deprived argument using an editorially questionable YouTube video.
Aug 2, 2010 | BEP, coins, currency, Federal Reserve, fun, gold, technology, US Mint
It has been said that the dog days of summer is when it is very hot causing a period where there is a lot of inactivity or stagnation. There has been little of the dog days here in the nation’s capital. Aside from a lot of work to do, severe storms can wreak havoc with electrical lines—which causes computers not to work. July has been an interesting month and I hope August is more like the dog days without the same heat and humidity!
For something a little different we turn to the technology website CNET. CNET is a long time resource for the consumer technology community that was acquired by CBS Interactive last year. With the commitment of growth from CBS, CNET has been expanding their technology coverage in a number of interesting ways. For CNET, reporter Daniel Terdiman, writer of the Geek Gestalt blog, is taking another road trip. Road Trip 2010 brings Daniel to the east coast where he has visited a few sites of numismatic interest.
While in Washington, D.C., Daniel stopped at the Bureau of Engraving and Printing where he was given a tour Behind the scenes with the next-gen $100 bill. Daniel opens up his trip report by saying, “I’m staring at $38.4 million in cash, and it’s hard not to drool.” It is a nice look behind the scenes at the BEP from the eyes of someone who is not a collector. Do not forget to check out the stacks of money in the photo gallery.
After making other stops, Daniel was in Philadelphia and visited the US Mint. Daniel opens his article talking about the gold-colored planchets that will be struck into dollar coins. Aside from watching the minting process, he spoke with the U.S. Mint’s Chief Engraver John Mercanti about the technology used in creating coins. Daniel spoke with Engraver Joseph Menna about the digital production process—do not forget to watch the YouTube video. When you check out the pictures and when you get to picture 18 imagine the amount of money you could make on the error market if you had access to this bin!
Finally, stopping in New York City required a stop of the Federal Reserve Bank of New York. Located at 33 Liberty Street in lower Manhattan, it is the branch of the Federal Reserve that distributes U.S. currency worldwide. Eighty feet below the bedrock that the building is constructed on is the gold vault where 36 countries have deposited $255 billion worth of gold. More gold is stored at the New York Fed than anywhere in the world including the U.S. Bullion Depository at Fort Knox, Kentucky. Since photography is not allowed at the N.Y. Fed, they did provide pictures that Daniel used in his report.
Although Daniel did not get much of a tour through the New York Fed, the series of numismatic-related articles are still a good read from someone without a numismatic background. You may want to check out stories on some of his other stops, including the one place I want to visit!
Apr 21, 2010 | BEP, currency, Federal Reserve, video
The Bureau of Engraving and Printing unveiled the new $100 Federal Reserve Note earlier today in Washington, DC. Along with the watermark, security thread, and color-shifting ink, the new note now includes enhanced micro printing, a new application for color-shifting ink, and a security ribbon that appears to animate as the note is tilted. Since the $100 note is the most circulated and most counterfeited note in the world, the BEP has been working with the U.S. Secret Service and the Federal Reserve Board to stay ahead of the counterfeiters.
“The $100 is the highest value denomination that we issue, and it circulates broadly around the world,” said Michael Lambert, Assistant Director for Cash at the Federal Reserve Board. “Therefore, we took the necessary time to develop advanced security features that are easy for the public to use in everyday transactions, but difficult for counterfeiters to replicate.”
“As with previous U.S. currency redesigns, this note incorporates the best technology available to ensure we’re staying ahead of counterfeiters,” said Secretary of the Treasury Tim Geithner.
The redesigned $100 note includes a new security ribbon. The blue 3-D Security Ribbon on the front of the new $100 note contains images of bells and 100s that move and change from one to the other as you tilt the note as if it was animated. Next to the ribbon at the bottom of the front of the new note is the Bell in the Inkwell. The bell changes color from copper to green when the note is tilted, an effect that makes it seem to appear and disappear within the copper inkwell.
In addition to the new security features, the BEP also retained three security features from the old $100 note design including:
- Portrait Watermark: Hold the note to light to see a faint image of Benjamin Franklin in the blank space to the right of the large portrait. It is visible from either side of the note.
- Security Thread: Hold the note to light to see an embedded thread that runs vertically to the left of the portrait. The letters USA and the numeral 100 appear in an alternating pattern and can be seen from both sides of the note. The thread glows pink when illuminated by ultraviolet light.
- Color-Shifting 100: Tilt the note to see the numeral 100 in the lower right corner of the front of the note change from copper to green.
“The advanced security features we’ve included in the new $100 note will thwart potential counterfeiters from producing high-quality fakes that can fool consumers and merchants,” said Larry R. Felix, Director of the Treasury’s Bureau of Engraving and Printing. “Protect yourself—it only takes a few seconds to check the new $100 note and know it’s real.”
The new $100 note also displays American symbols of freedom including phrases from the Declaration of Independence and the quill the Founding Fathers used to sign this historic document. Both are located to the right of the portrait on the front of the note.
The back of the note has a new vignette of Independence Hall featuring the rear, rather than the front, of the building. Both the vignette on the back of the note and the portrait on the front have been enlarged, and the oval that previously appeared around both images has been removed. Also on the right of the reverse is a large “100” printed in gold ink. It is expected that this feature will help those with visual impairments distinguish the denomination.
Review
After the animation stopped on the front page of newmoney.gov the first thing I noticed is that Ben looks a little green. With a better use of color that does not make the note look close to the money seen in common board games, the portrait of Benjamin Franklin retains that green tint from the previous note while every other aspect of the note has changed. Since the BEP chose to use a portrait of an elderly Franklin, he looks like he could be ill.
As opposed to other notes, the there are no splashes of color that makes it look like a mistake. The design is better balanced and using the inkwell as a design element and part of the security features works well. If the BEP wanted to do better with color, it would have worked better by making the portrait of Franklin in color. That would have given the note a nice look and even seemed progressive in currency design.
The back of the note is still green. I guess if US currency will continue to be nicknamed the greenback, the BEP must keep the back of the note green. It is interesting that as part of the redesign, the BEP enlarged the “100” on the back of the note to take up almost the entire height of the area. It is being printed in gold. The size should help the visual impaired but it is unclear if the gold color will help those with visual impairments.
The most interesting change to the note is the 3-D security ribbon. It appears that the BEP has adapted holographic technology in a manner to embed into the fibers of the note to make it more difficult to counterfeit. It will be interesting to see how this looks with the note in hand since it looks very interesting in the videos distributed by the BEP.
It is a better redesign than their other efforts, but I would still like to see a better use of color.
Here is the Unveiling Video and B-roll videos produced for the BEP:
All images and video complements of the United States Bureau of Engraving and Printing.
Apr 18, 2010 | BEP, coins, currency, Federal Reserve, national park quarters, US Mint
In what has the potential to be an exciting week in numismatics, the US Mint and the Bureau of Engraving and Printing will be introducing newly designed money to the public.
As part of the 2010 National Coin Week, on April 20, the U.S. Mint will launch the America the Beautiful Quarters™ Program with the release of the Hot Springs National Park Quarter. The ceremony will take place on the park’s 178th anniversary in front of the Administration Building at 10 A.M. Central Time (CT). A coin exchange will follow the event. The ceremony will be broadcast live on the web at americathebeautifulquarters.gov beginning at 9:55 A.M. (CT).
The United States Mint will hold a Coin Forum on Monday evening, April 19, at 5 P.M. (CT) at the Quapaw Bath House. The Coin Forum is an opportunity for the public to express their views about future coinage, and to learn about upcoming United States Mint coin programs and initiatives.
As part of the promotion for the launch, the US Mint has released B-Roll with images of the site, design footage showing the computer design of the coin, production footage including creating of the dies, and striking of the quarters.
Then, on April 21 in the Treasury Cash Room, the Bureau of Engraving and Printing will unveil a newly designed $100 Note. The U.S. government redesigns currency in order to stay ahead of counterfeiters and protect the public. The BEP has not previewed the new design.
The unveiling of the $100 note is the first step in a global multi-government agency public education program implemented by the Department of the Treasury, the Federal Reserve Board and the U.S. Secret Service, to educate those who use the $100 note about its changes before it begins circulating. The $100 note is the highest value denomination of U.S. currency in general circulation, and it circulates broadly around the world.
Program will begin at 10 A.M. Eastern Time (ET) and will include Secretary of the Treasury Timothy Geithner, Chairman of the Board of Governors of the Federal Reserve System Ben Bernanke, Treasurer of the United States Rosie Rios, Director of the United States Secret Service Mark Sullivan. Education and media materials, including the B-roll, will be available at www.newmoney.gov.
Hot Springs Quarter courtesy of the US Mint
Cash Room images courtesy of the US Department of the Treasury
Feb 10, 2010 | bullion, cents, coins, economy, Federal Reserve, US Mint
After reading a few stories on how the president’s 2011 federal budget was proposing changes to coin composition. Many of these articles point out how the budget projects that changes could save the US Mint about $150 million per year after making over $777 million in circulating coins (business strikes) in fiscal year 2009. The US Mint’s Fiscal Year 2009 Annual Report says that the US Mint earned over $904 million in seigniorage from all sources.
While everyone is concentrating on the costs of changing coinage metals, there is a missing point: even if the US Mint was able obtain the copper covered zinc planchets for the cent at no cost, the US Mint will lose 0.62-cents per cent struck just for the labor and administrative costs.
In 2009, the US Mint shipped $777 million in circulating coins after shipping over $1.2 billion in 2008. The 40-percent reduction in production also was matched by a 40-percent reduction in the amount the US Mint spent on the metals. In other words, the increase in the costs of metals between 2008 and 2009 was minimal. However, the cost to produce the 40-percent fewer coins cost the US Mint 1.1-percent more in 2009! With presses sitting idle for long periods of time for the first time in many years, the US Mint paid $98.1 million in 2009 for striking few coins and costing $97 million in 2008.
The US Mint documents the costs in the Annual Report as Sales, General & Administrative (SGA). In the Annual Report the reported SGA from 2006 through 2009 has remained stable. Increases have roughly followed the rate of inflation. When looking at the SGA for individual coins, the US Mint spent $65.3 million to sell $459 million one-dollar coins to the Federal Reserve in 2009. In 2008, it cost $52.2 million to sell $475 million one-dollar coins.
The US Mint’s core responsibility is to manufacture the coins required by the Federal Reserve for commerce. In 2009, the seigniorage for business strikes was $427.8 million while making $32.7 million for bullion sales.
The problem is not the cost of the metals. The problem is the inefficiency of operations at the US Mint. “In FY 2009,” the US Mint’s FY2009 Annual Report reads, “the worsening economic environment challenged our ability to maintain efficient manufacturing operations but also presented opportunities for long-term efficiency gains.” Then where are the efficiencies? If the US Mint has an efficient manufacturing process, then why did it cost the US Mint 1.1-percent more in 2009 to producing 40-percent fewer coins than they did in 2008?
If the Obama Administration wants the US Mint to produce more in seigniorage, then the place to start is to immediately replace the political hack that is the current director. A replacement should be someone that has had a manufacturing background working in a regulated environment to lead the US Mint forward.
Feb 12, 2009 | cents, coin design, coins, Federal Reserve, US Mint
The US Mint will introduce the first in a series of redesigned Lincoln Cents honoring our 16th President’s 200th birthday at the Abraham Lincoln Brithplace in Hodgenville, Kentucky. Unveiling will occur at 10:00 AM during The Kentucky Abraham Lincoln Bicentennial Celebration to be held at LaRue County High School in Hodgenville, Kentucky.
Billed as the first redesign of the Lincoln Cent in over 50 years, the first coin issued will honor his birth and early childhood in what is now known as Hodgenville, Kentucky. Lincoln was born on February 12, 1809, in a log cabin to Thomas and Nancy Hank Lincoln. While the log cabin where Lincoln lived has been lost to history, a replica of common design for the era was used as a model for the coin. The reverse was design by Artistic Infusion Program (AIP) Master Designer Richard Masters and sculpted by Sculptor-Engraver Jim Licaretz
However, it may be a while before the new coin will be seen in change. Susan Headley points out that the way coins are distributed through the Federal Reserve system, there may be a backlog of coins in stock that will prevent the new cents from reaching the public. Susan explains that the bad economy has caused more coins being returned to the Fed than being distributed. Since the Fed buys only what it needs from the US Mint, it may be a while before the inventory is depleted enough for the Fed to order coins.
Susan reported that when she visited the Philadelphia Mint last week, she found that three of the lines striking cents were not running. When I visited the Philadelphia Mint in the summer of 2007, we were told that the machines that strike cents run 24 hours a day, seven days a week. To hear that the Mint has reduced production of cents is very worrisome for the economy and those who work at the Mint. I hope their superintendent has the chutzpa that Mae Biester showed in the 1950s.
Image courtesy of the US Mint.
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