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Free the US Mint!
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(December 10, 2009) Don’t look back, the poet once said. But today, when our US Mint seems unable to cope with demand for gold bullion coins, perhaps it should simply re-acquire the skills it exercised at the turn of the century 1899-1900.
Years ago, our own US Mints turned out gold coins in quantities that put the Mint’s modern bullion gold coin programs to shame.

The US Mint’s standing policy since its founding in 1793 was that gold in the form of native (placer) gold, dory (mixed silver and gold) bars, bullion, or even worn out gold coins from other countries, could be handed over at the Mint for refining and conversion into legal tender coin of the realm, US dollars, at a cost to the bringer of such gold of less than 1% for refining and coining fees.

Refining and coining were important functions our government provided its citizens in a time when gold and silver were money. So when gold started to pour out of California in 1849, a federal infrastructure was in place to refine and coin that gold. In 1850, over a million US gold coins were struck. From that year forward and until 1933, annual production of US gold coins seldom fell below that figure.

In 1898, in the wake of the Yukon gold rush and its bounty of the yellow metal, the San Francisco Mint struck 4,446,175 gold coins. In 1900, the Philadelphia Mint struck 3,640,800 gold coins.

At the dawn of the 20th century, steam presses did most of the work at US mints. Electricity was a source of power just recently introduced. Gold was refined and tested with parting acids, a technology that had not progressed much since the time of the ancient Egyptians and Romans. Coin blanks and finished coins were counted and weighed individually, by hand. Yet, vast quantities of gold coins were produced.

Most notably, in 1904 the US Mint in Philadelphia as part of its normal operations, accepted raw gold, refined it to a fineness of 90% gold and 10% copper within a tolerance of 0.001%, rolled it out into sheets of coin thickness, cut planchets (blanks) from that rolled 90% pure gold, weighed the planchets individually (setting aside the short-weight and over-weight blanks for re-melting), and struck some 6,971,419 gold $20, $10, $5 and $2.50 denominations to facilitate the needs of commerce and to serve as stores of value for those who desired ‘hard money.’

This year, the Mint's bullion facility at West Point, NY, has produced 1,767,500 gold coins, about a quarter of the number produced in Philadelphia in 1904. Why so few, when the buying public clearly demands more?

The short answer points up the perils of depending on outside producers in a chain of manufacture - the Mint has over the past few decades outsourced all precious metals refining and planchet production to foreign mints and private refiners.

Bullion Eagle buyers will long remember that from August of 2008 through February of 2009 in the case of gold Eagles, and for the last ten months of 2008 in the case of silver Eagles, the US Mint was unable to produce coins sufficient to meet demand. During those long periods, premiums charged to the average consumer soared, as the Mint could not obtain enough blanks to fulfill their obligation to supply US bullion buyers adequately.

Director of the Mint Edmund Moy, in an editorial in Coin World magazine last month, wrote that “(W)e are using all sources that can supply planchets – and which meet required specifications – to meet the unprecedented demand that we are facing.

This “unprecedented demand” that the Director alludes to has been the norm for gold Eagles for over a year now. And for silver Eagles, supply problems began in February 2008 and persisted for nearly twelve months, costing consumers tens of millions of dollars in inflated premiums paid due to shortages. And today, as is usual every December, shortages are upon us again.

These persistent supply deficiencies arise because the Mint does not have the basic capability of refining gold and silver, and fabricating their own blanks to strike into bullion coins. Essentially, our Mint prepares the dies and strikes the coins, but because it obtains the blanks precious metal discs from private fabricators and foreign mints, countless and persistent delays plague the bullion programs.

It has been proven over the past 18 months that under these out-sourcing procedures, the Mint cannot fulfill its legal obligation to strike enough Eagles. Yet, 18 months since supply problems first became apparent, Director Moy still writes of efforts to “look for ways to expand our supplier base.

It is time, Director Moy, to seize the day!

Please inform Secretary of the Treasury Timothy Geithner that you cannot fulfill your legal obligation to provide gold and silver bullion for US citizens unless the Mint has its own refining and blank production facility, as it had for the first 170 years of its existence. If Secretary Geithner is not responsive (admittedly, he has been busy lately), then perhaps you should go to Congress directly.

As you said in your Coin World guest editorial, “We must obviously comply with the law.” And exactly who but the Director of the United States Mint has the power to see that done? Unless you personally demand that our Mint once again be given the capability to coin precious metals, from refining to final striking, then your customers, the bullion buyers of America, who are the source of this so-called ‘unprecedented demand,’ will continue to be ill-served by a Mint which cannot today accomplish the sort of production which was commonplace 100 years ago.

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On a side note, we enjoyed James Grant’s article, “Requiem for the Dollar” in the Wall Street Journal’s edition of December 5/6 2009. Mr. Grant tells a fine story, starting with the Coinage Act of 1792, which “prescribed the death penalty for any official who fraudulently debased the people’s money.” Mr. Grant argues that someday the dollar will have to mean something ‘real’ again, i.e., gold convertibility, and that perhaps in the spirit of modern mercy, life imprisonment should be the fate of our modern betrayers of the dollar rather than the death penalty. All in all, well worth a look. _____________________________________________________________

And on a personal note, I have been informed of “Facebook” rumors implying that Onlygold.com has filled its slate of new hires for the year 2011. We take this to be an obvious and transparent attempt to discourage potential applicants.

Here are the facts: Not only is 2011 up for grabs, but so is our 2010 summer internship program. So, if you think you can stand the Phoenix heat, send us an application!

-Richard Smith, December 10, 2009

 

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