Nov 20, 2012 | coins, commemorative, legal, legislative, palladium, policy, US Mint
On November 6, two weeks ago, the United States held an election and it resulted in basically no change in the political structure. President Barack Obama was re-elected, the House of Representatives is still being lead by the Republicans and the Senate by the Democrats. Leadership in both chambers should not change.
For numismatists, there will be one change in the 113th Congress with the retirement of Ron Paul (R-TX) who is currently Chairman of the Financial Services Subcommittee on Domestic Monetary Policy and Technology, the subcommittee that oversees the U.S. Mint. There will also be a change on the leadership of the Financial Services Committee itself with the retirement of Barney Frank (D-MA), the Democrats will have to select a ranking member. There is no speculation as to who will replace these two retiring representatives.
In retrospect, after worrying about Paul becoming chairman of this subcommittee, the Financial Services Committee was able to maneuver around Paul’s usual intransigence by taking on legislation at the committee level rather than rely on the vetting of the subcommittee. In fact, because of Paul’s attempted run for the presidency, his absence made it easy for the committee to bypass his subcommittee.
There is still work for the 112th congress to do aside from the “fiscal cliff” and sequestration. H.R. 5977, the Collectible Coin Protection Act, still needs to be acted upon. The Collectible Coin Protection Act will allow collectors, dealers, and grading services to bring legal actions that are much more effective, with much stronger remedies than previously existed. It will allow those harmed to work with the Justice Department to bring criminal actions, where appropriate.
Now that congress is in their lame duck session, the only way H.R. 5977 can become law, is to have it considered under suspension of the rules and force an up or down vote. In order for the bill to be considered under suspension of the rules will be to have members of congress co-sponsor the legislation. At the time of this writing, there are 11 co-sponsors from both sides of the aisle. I urge all of my readers to support H.R. 5977 by asking their representative to co-sponsor H.R. 5977. If you can help, read the information I wrote for the posting “ANACS Revelation Shows We Continue to Have Counterfeit Problems” that describes how to contact your member of congress.
Bibiana Boerio was nominate to be the Director of the U.S. Mint.
An issue that will probably be deferred to the 113th congress will be the report to congress that is required under the Coin Modernization, Oversight, and Continuity Act of 2010, (Public Law No: 111-302 [Text] [PDF]). The law requires the U.S. Mint to produce a report about the metals used for coinage and alternatives two years from enactment. Since the law was signed by the president on December 14, 2010, the U.S. Mint is required to submit their report by December 14, 2012.
Adolph A. Weinman’s Winged Liberty Head “Mercury” Dime effigy to be used on the new palladium bullion coin.
Although there is no report from the U.S. Mint as to the status of either report, it would be reasonably certain that the U.S. Mint will submit both reports by December 14. However, it would also be reasonably certain that the House Financial Services Subcommittee on Domestic Monetary Policy and Technology will leave it for the next congress’s agenda.
Jul 17, 2012 | legal, legislative, policy, web
Concern is circulating through the numismatics industry after the Wall Street Journal published a story that the Republican Governors Association supports the collection of sales tax for Internet sales within their state.
The process started earlier this year as governors, looking for a way to close budget gaps, started to consider forcing companies like Amazon.com to collect sales taxes for goods shipped to their states. In February, New Jersey Governor Chris Christie (R) negotiated a deal with Amazon to collect sales taxes for purchases shipped to New Jersey. As part of that deal, Amazon will be opening a warehouse and shipping center in New Jersey.
What was not reported was that the reason Amazon opened a facility in New Jersey was that federal law currently prevents the collection of taxes for sales shipped across state lines for companies that do not have a presence in the state. Since Amazon now has a presence in New Jersey, they can collect sales taxes on purchases. Otherwise, federal law exempts Amazon and any other company selling on the Internet from paying sales taxes to states they have no presence in the state where the item was shipped.
Sales tax on Internet-based purchases will affect everyone that sells online including the eBay seller, coin dealers, auction houses, and bullion sellers. If you sell online, you will have to figure out how to collect sales taxes. While larger companies may have the facilities and resources to collect sales taxes and pay them to the state. The rest will have to work with a service provider to be compliant with the law. Any time a small business has to add new capabilities using an outside service, it will be an additional expense to the small business.
In the numismatics industry, most of the dealers are small businesses. Many work from their homes shipping orders throughout the country while others may work from shops with a local clientele that also provides some Internet sales.
Aside from the administrative overhead to collect taxes, states have different rules for what is taxable and what is not. Some states do not tax bullion sales while other states tax bullion sales, but do not tax them over a certain limit which could be different from state to state. Some states do not tax coin sales while other states do, but when the sales are lower than a threshold, which can change between states.
This will not only hurt numismatic sales, but all small business sales across the Internet.
While Governor Christie and his fellow governors look at Amazon as their fiscal savior, Joe’s Local Coin Shop that may do a few thousand dollars in sales from the Internet now has to figure out how to collect sales taxes for the states or stop taking Internet-based orders, reducing income. Talk about a “job killing tax plan!”
Three bills have been introduced into congress that will end the restrictions to collecting sales taxes on Internet-based sales:
- S. 1452—Main Street Fairness Act and its companion H.R. 2701. Not only will this bill open up the collection sales taxes across state boundaries, but it “asks” the states to create Unified Rules for collecting sales tax.
- H.R. 3179—Marketplace Equity Act: This bill will open cross state sales tax collection but has an exemption for small businesses. To qualify for the small business exemption, the company would have to sell less than $1 million nationwide and less than $100,000 in the state. However, the bill would allow the states to adjust these limits and affecting administrative costs to small businesses.
- S. 1832—Marketplace Fairness Act: Simiar to the Main Street Fairness Act, it has no exemptions for small businesses, but limits the sales tax to goods and services sold while exempting shipping and handling.
Adding these additional administrative burdens to small businesses in the dealer community will close or restrict interstate markets especially for the buyer in rural America who depends on Internet sales to build a collection. There will also be an impact with online auction sites that makes coins available from all over the country. It will drive up costs to run these auctions and drive sellers away.
Time is going to come when states will have to start to collect sales taxes from interstate sales. However, congress has to do its job as a regulator of interstate commerce to protect the small businesses, like coin dealers, from having to manage 50 different sales tax rules.
Contact your member of congress and let them know that if they are going to allow sales tax to be collected from Internet sales, they need to do their job under the commerce clause to prevent this from putting dealers out of business.
To find your member of the House of Representatives, go to house.gov and enter your zip code in the box on the upper right of the page. Follow the instructions to contact your representative.
For the Senate, go to senate.gov and use the pull-down menu at the top right of the page, select your state, press the “Go” button and click on your senator’s web form address and let them know what you think.
The only way to help preserve our ability to continue to buy numismatics via the Internet from any dealer, anywhere!
Jan 2, 2012 | ancient, legal, policy
Start your new year off right and help the ancient coin collectors in the United States!
On December 17, I posted “First They Came For The Ancient Coins…” about the State Department accepting public comment on the extension of the Memoranda of Understanding with Cyprus by the State Department’s Cultural Property Advisory Committee (CPAC). The deadline for submitting comments is on January 3, 2012—TOMORROW!
Recently, the American Numismatic Association joined the cause. “We are deeply concerned that ever-expanding import restrictions have gravely damaged the ability of American citizens to learn about ancient cultures through handling common ancient coinage of the sort that is avidly collected worldwide,” ANA President Tom Hallenbeck said. “Such regulations, to the extent they exist at all, should be narrowly tailored to restrict goods that could only be the product of looting from archaeological sites. Coins cannot meet this test. By their nature, ancient coins have circulated far from their place of origin, have been extensively collected throughout the world in modern centuries, and like common mass-produced items, ancient coins do not normally have any verifiable provenance.”
To submit comments three pages in length or less electronically, go here: http://www.regulations.gov/#!submitComment;D=DOS-2011-0135-0002.
For more information and ideas of what to say, please reread my earlier post.
Allowing the State Department to entertain these types of actions should be abhorrent to any collector because if it begins with the ancient coins, then where does it stop? To borrow the concept from Pastor Martin Niemöller’s “First they came…”:
First they came for the ancient coins,
and I didn’t speak out because I wasn’t a ancient coin collector.
Then they came for all foreign coins,
and I didn’t speak out because I wasn’t a foreign coin collector.
Then they came for the obsolete currency,
and I didn’t speak out because I wasn’t a obsolete currency collector.
Then they came for the pattern coins,
and I didn’t speak out because I wasn’t a pattern coin collector.
Then they came for my silver and gold United State coins,
and there was no one left to speak out for me.
Make it your resolution to help maintain the hobby for all of us!
Dec 17, 2011 | ancient, legal, policy
I am sharing the following from Wayne G. Sayles, Executive Director of the Ancient Coin Collectors Guild (ACCG). Please read my comment following Wayne’s letter.
The following is an extremely important message from Peter K. Tompa, ACCG Board Member and Chairman of the Legislative Affairs Committee:
Fresh on the heels of its deliberation over import restrictions on coins from Bulgaria, the US State Department has now announced a hearing on extension of the MOU (Memoranda of Understanding) with Cyprus that is now up for its 5-year renewal. The Cultural Property Advisory Committee is seeking public comment on the renewal request To submit comments electronically to the State Department’s Cultural Property Advisory Committee (CPAC), see below:
Those present restrictions bar entry into the United States of the following coin types unless they are accompanied with documentation establishing that they were out of Cyprus as of the date of the restrictions, July 16, 2007:
- Issues of the ancient kingdoms of Amathus, Kition, Kourion, Idalion, Lapethos, Marion, Paphos, Soli, and Salamis dating from the end of the 6th century B.C. to 332 B.C.
- Issues of the Hellenistic period, such as those of Paphos, Salamis, and Kition from 332 B.C. to c. 30 B.C. (including coins of Alexander the Great, Ptolemy, and his Dynasty)
- Provincial and local issues of the Roman period from c. 30 B.C. to 235 A.D.
Why bother to comment when the State Department rejected CPAC’s recommendations against import restrictions on Cypriot coins back in 2007 and then misled both Congress and the public about its actions? And isn’t it also true that although the vast majority of public comments recorded have been squarely against import restrictions, the State Department and U.S. Customs have imposed import restrictions on coins anyway, most recently on ancient coins from Greece?
Simply, silence just allows the State Department bureaucrats and their allies in the archaeological establishment to claim that collectors have acquiesced to broad restrictions on their ability to import common ancient coins that are widely available worldwide. And, of course, acquiescence is all that may be needed to justify going back and imposing import restrictions on the Roman Imperial coins that are still exempt from these regulations.
Under the circumstances, please take 5 minutes and tell CPAC, the State Department bureaucrats and the archaeologists what you think.
How do I comment? To submit comments three pages in length or less electronically, go here: http://www.regulations.gov/#!submitComment;D=DOS-2011-0135-0002.
If you are having trouble, go to the Federal eRulemaking Portal (http://www.regulations.gov), enter the Docket No. DOS-2011-0135 for Cyprus, and follow the prompts to submit a comment. To send comments via US Mail or FEDEX see the directions contained in the Federal Register Notice above. For further information, also see http://exchanges.state.gov/heritage/whatsnew.html.
What should I say? The State Department bureaucracy has dictated that any public comments should relate solely to the following statutory criteria:
- Whether the cultural patrimony of Cyprus is in jeopardy from looting of its archaeological materials;
- Whether Cyprus has taken measures consistent with the 1970 UNESCO Convention to protect its cultural patrimony;
- Whether application of U.S. import restrictions, if applied in concert with similar restrictions by other art importing countries, would be of substantial benefit in deterring a serious situation of pillage and that less drastic remedies are not available; and,
- Whether the application of import restrictions is consistent with the general interest of the international community in the interchange of cultural property among nations for scientific, cultural, and educational purposes.
(See 19 U.S.C. § 2602(a).) Yet, collectors can really only speak to what they know. So, tell them what you think within this broad framework. For instance, over time, import restrictions will certainly impact the American public’s ability to study and preserve historical coins and maintain people to people contacts with collectors abroad. Yet, foreign collectors-including collectors in Cyprus-will be able to import coins as before. And, one can also remind CPAC that less drastic remedies, like regulating metal detectors or instituting reporting programs akin to the Treasure Act and Portable Antiquities Scheme, must be tried first.
Be forceful, but polite. We can and should disagree with what the State Department bureaucrats and their allies in the archaeological establishment are doing to our hobby, but we should endeavor to do so in an upstanding manner.
For more information about these issues, see: http://culturalpropertyobserver.blogspot.com/
Please submit comments just once, before the deadline on Jan. 3, 2012.
With best wishes and thanks for your support,
Wayne G. Sayles
Executive Director
From Scott: I am not a collector of ancient coins, but as a member of the numismatic community, it bothers me that the State Department has been capitulating to nearly every foreign government regarding artifacts that have been in worldwide circulation for hundreds or thousands of years with no issue. Suddenly, when countries appear to have an issue with the United States, they appear to be using peripheral means to try to take action against the U.S. and its citizens. Allowing the State Department to entertain these types of actions should be abhorrent to any collector because if it begins with the ancient coins, then where does it stop?
To borrow the concept from Pastor Martin Niemöller’s “First they came…”:
First they came for the ancient coins,
and I didn’t speak out because I wasn’t a ancient coin collector.
Then they came for all foreign coins,
and I didn’t speak out because I wasn’t a foreign coin collector.
Then they came for the obsolete currency,
and I didn’t speak out because I wasn’t a obsolete currency collector.
Then they came for the pattern coins,
and I didn’t speak out because I wasn’t a pattern coin collector.
Then they came for my silver and gold United State coins,
and there was no one left to speak out for me.
Speak now before they come for your coins!
The letter was sent via email by Wayne Sales on December 15, 2011. It was reformatted to fit in this space and some information links were added.
Oct 21, 2011 | ancient, legal, policy
I received this in email and thought it was important enough to reprint here.
This message is being transmitted on behalf of the Ancient Coin Collectors Guild (ACCG) concerning an urgent matter that affects all collectors of ancient coins.
What is being asked of you is to take 5 minutes to write a comment to the State Department’s Cultural Property Advisory Committee via a website. Please submit your comment once by the deadline of November 2, 2011, 5pm EST.
Please consider sending this to any coin collector you know:
The US State Department is seeking public comment on a new request for import restrictions made on behalf of Bulgaria. To submit comments electronically to the State Department’s Cultural Property Advisory Committee (CPAC), go here: http://www.regulations.gov/#!submitComment;D=DOS-2011-0115-0001. For further details of the request, see http://exchanges.state.gov/heritage/whatsnew.html.
What is at issue? Despite President Obama’s efforts to foster government transparency, the State Department has not indicated whether coins are part of the request. Nonetheless, based on recent history, it is probable that import restrictions on coins will be proposed. As a practical matter, this means the State Department and US Customs may be considering restrictions on tribal coinages from Thrace, coins of Greek city states like Apollonia Pontica and Messembria, Roman provincial coins struck at Bulgarian mints, and even some Roman Imperial coins. It’s also possible that any restrictions will include later coins as well. Though details are few, the public summary the State Department has provided indicates that Bulgaria seeks import restrictions on objects from 7500 B.C. to the 19th c. AD. If restrictions are imposed on coins, many common types will likely become so difficult to import legally that they will become unavailable to most collectors.
Why bother? Large numbers of coin collectors have made their concerns known to CPAC. Recently, 70% of the comments CPAC received on an MOU with Greece were from concerned coin collectors. Even though recent extensions of import restrictions to certain Greek and Roman Republican coins from Italy and on coins from Cyprus despite the vast amount of public comment make it easy to become cynical, public comment can at least help moderate demands for import restrictions. For example, the archaeologists actively sought import restrictions on Roman coins as well during the discussions about the Italian MOU, but they remain exempted, and thus easy to obtain on the open market, likely due to the 2000 or so faxes CPAC received from concerned collectors.
What should I say? Tell the State Department and CPAC what you think about the bureaucracy’s efforts to deny you the ability to collect common ancient artifacts that are available worldwide. You might also might consider noting that coins from Bulgarian mints are common and often very inexpensive. Tens of thousands or hundreds of thousands exist in collections around the world, and because of the low price the vast majority of these coins will never have been through an auction and will have no verifiable provenance.
If you are having trouble commenting from the direct link above, go to http://www.regulations.gov and search on docket number DOS-2011-0115. Further information about regulation.gov, including instructions for accessing agency documents, submitting comments, and viewing the dockets, is available on the site under “How To Use This Site.” Kindly note that your comments will be public so avoid conveying any personal information, and, of course, be polite in commenting on the issue.
Please submit comments just once, before the cutoff of 5:00 PM EST Nov. 2, 2011.
NOTE: Click this link to see the Notice of Receipt of Cultural Property Request From the Government of the Republic of Bulgaria.
From a note sent by vauctions.com.
Jul 21, 2011 | coins, commentary, legal, US Mint
“People of the United States of America have been vindicated.”
This utterance came from Assistant U.S. Attorney Jacqueline Romero, the government’s lead attorney in the case Langbord v. United States after the jury deliberation said that the ten 1933 Saint-Gaudens Double Eagle coins found by Joan Langbord is government property.
For years, the government has wasted taxpayer dollars on attorneys, staff, investigators, and expert witnesses (the government paid David Tripp $300 per hour) to deny the numismatic world the coins of legend. For what purpose? As a result, the jury set a precedence by saying that these coins “left the Mint illegally and were concealed.” It is an argument that can be used to confiscate any coin or pattern that has left the U.S. Mint.
What does this verdict say about the five 1913 Liberty Head Nickels? While the 1933 Saint-Gaudens Double Eagles were legally struck before the order to cease their distribution and melt the coins, the five 1913 Liberty Head Nickels were not supposed to exist. The U.S. Mint was supposed to start striking Buffalo Nickels for circulation, yet someone at the Mint struck five coins using Charles Barber’s Liberty Head design and they left the Mint without any record of their existence.
What does this verdict say about the pattern coins that are in collector hands. None of these patters were supposed to leave the U.S. Mint. Yet there are records of patterns being given out as favors to “important people” to curry favor. Aside from being Secretary of the Treasury at the beginning of the first Franklin D. Roosevelt administration, William H. Woodin was a collector of coins and patterns he collected mostly while director of the New York Federal Reserve Bank. Are those pattern now illegal since they left the Mint illegally and were concealed?
What does this verdict say about the 1974 Aluminum Cent? The U.S. Mint struck these patterns to show to try to convince congress to change the composition of the cent to save money. After they were distributed to congress as “demonstrations,” the U.S. Mint asked for their return. Not all of the congress members returned the coins and some ended up in collectors hands. Are these aluminum coins illegal since they were not legally issued coins?
With all due respect to Assistant U.S. Attorney Romero, I do not feel vindicated. I feel cheated!
Jun 12, 2011 | economy, legal, technology
Deep in the background of an economy run amok has been the development of a new currency that has found a home supporting both legal and illegal commerce in a way that makes it difficult for regulators to regulate. To facilitate these transaction, this new underground economy has turned to Bitcoins.
Bitcoins can be best described as digital currency whose wallet system is based on a digital address. They have no intrinsic value except that of the open market that has formed around the Bitcoin System. Bitcoins do not use a bank or any central authority to govern them and Bitcoins are valued by an open market. It is a peer-to-peer system that is self-regulated by its users and limited by the number of coins in existence.
To obtain Bitcoins, someone can use their machine and the Bitcoin client (available for Windows, Mac, and Linux) to try to create Bitcoins. A Bitcoin is created when the client solves a difficult mathematical equation. You can also buy Bitcoins on an exchange, trade cash for Bitcoins, or accept Bitcoins for goods and services. Because of the volatility of this market, exchange rates can fluctuate unpredictably.
Although there are legitimate uses for Bitcoins, last week it was reported that Bitcoin is being used to support illegal activities including being used to support the hacking group LulzSec and an underground website that deals illegal drugs called “Silk Road.” Following the publication of these stories, Senators Chuck Schumer (D-NY) and Joe Manchin (D-WV), has asked U.S. Attorney General Eric Holder to shutdown the Silk Road website.
Shutting down Silk Road may be difficult since it requires a technology that anonymizes Internet connections to make it difficult to find. Rather, it might be easier for for the government to cut off its money supply—Bitcoin.
Bitcoin is an interesting concept. Bitcoins are created electronically and have no intrinsic value. Bitcoins get its value through a market that is created around these bits of information and is used to create its own economy. They do not have the protection of being legal tender or backed by a government that would make Bitcoin users whole should the market crash or is closed by legal action. There is also a question whether Bitcoin is legal. Following the conviction of Bernard von NotHaus for creation, distribution, and handling of the “Liberty Dollars,” could Bitcoin be next?
It may not be that simple. It has been reported that the part of the indictment that said “it is a violation of law for private coin systems to compete with the official coinage of the United States” was struck from the document the jury used for its deliberations. In an exchange with prosecutors before the case went to the jury, the judge said that the paragraph did not “appear to the court to be a factual predicate that is supported by the evidence in the case.”
Does this mean that prosecutor was unable to show that von NotHaus tried to create a private coin system or that the government could not prove that a private coin system was a violation of the constitution? We may never know unless von NotHaus appeals the decision and appelate courts rule on the case. In the mean time, that does not prevent the Department of Justice from pursuing Bitcoin or similar ventures.
Bitcoin may be the ultimate private market that someone like Rep. Ron Paul may endorse. But after enduring an economy where legal tender and investments tied to them have shown great volatility, Bitcoin might have to find a more solid foundation before being able to compete in the mainstream economy.
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.
Sep 18, 2010 | ancient, legal, policy
Following the lead of Italy, Greece has asked the State Department’s Cultural Property Advisory Committee (CPAC) for import restrictions be imposed on cultural property.
Even though there has not been a decision made on the Italian request, the Ancient Coin Collectors Guild (ACCG) is asking for your help in responding to the CPAC. I said before, this can damage the hobby for everyone. It can start with Italy and Greece, but where does it stop? Will Canada come after my collection of Canadian coins? What about the 1912 Russian banknotes my relatives brought with them when they landed at Ellis Island? Once this snowball begins to roll downhill, what is to prevent congress from declaring pattern coins as contraband? It reminds me of a numismatic version of the “First they came…” attributed Pastor Martin Niemöller about the inactivity of German intellectuals following the Nazi rise to power and the purging of their chosen targets.
This time, the State Department is using the facilities of regulations.gov to facilitate the response. First I recommend reading the notice “Receipt of Cultural Property Request from the Government of the Hellenic Republic.” Then go to this article on the Cultural Property Observer blog that has five good talking points for you to include in your response. Then write your note in a separate window because there is a 20-minute time limit on the regulations.gov page.
When you are ready, you can go to the comments page and upload the file or copy and paste your note in the space provided.
According to Wayne G. Sayles, Executive Director of ACCG, “Don’t worry about getting the content perfect, just state in your own words why you oppose import restrictions on ancient coins. It doesn’t need to be long, nor eloquent.”
The comment period ends on September 22, 2010 and the meeting of the CPAC is scheduled for October 12, 2010. Please lend your support before a government comes after your favorite collectibles!
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.
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