[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF MONEY: COINAGE PRODUCTION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
DOMESTIC MONETARY POLICY
AND TECHNOLOGY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
APRIL 17, 2012
__________
Printed for the use of the Committee on Financial Services
Serial No. 112-117
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75-089 PDF WASHINGTON : 2012
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HOUSE COMMITTEE ON FINANCIAL SERVICES
SPENCER BACHUS, Alabama, Chairman
JEB HENSARLING, Texas, Vice BARNEY FRANK, Massachusetts,
Chairman Ranking Member
PETER T. KING, New York MAXINE WATERS, California
EDWARD R. ROYCE, California CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois BRAD SHERMAN, California
GARY G. MILLER, California GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California JOE BACA, California
MICHELE BACHMANN, Minnesota STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan BRAD MILLER, North Carolina
KEVIN McCARTHY, California DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico AL GREEN, Texas
BILL POSEY, Florida EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK, GWEN MOORE, Wisconsin
Pennsylvania KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO R. CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee
James H. Clinger, Staff Director and Chief Counsel
Subcommittee on Domestic Monetary Policy and Technology
RON PAUL, Texas, Chairman
WALTER B. JONES, North Carolina, WM. LACY CLAY, Missouri, Ranking
Vice Chairman Member
FRANK D. LUCAS, Oklahoma CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina GREGORY W. MEEKS, New York
BLAINE LUETKEMEYER, Missouri AL GREEN, Texas
BILL HUIZENGA, Michigan EMANUEL CLEAVER, Missouri
NAN A. S. HAYWORTH, New York GARY C. PETERS, Michigan
DAVID SCHWEIKERT, Arizona
C O N T E N T S
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Page
Hearing held on:
April 17, 2012............................................... 1
Appendix:
April 17, 2012............................................... 23
WITNESSES
Tuesday, April 17, 2012
Blake, John, Executive Vice President of Engineering, Cummins
Allison Corporation............................................ 4
Bosco, Rodney J., Director, Disputes and Investigations Practice,
Navigant Consulting, Inc....................................... 6
Weber, Dennis H., coin industry consultant....................... 8
APPENDIX
Prepared statements:
Paul, Hon. Ron............................................... 24
Blake, John.................................................. 26
Bosco, Rodney J.............................................. 30
Weber, Dennis H.............................................. 98
Additional Material Submitted for the Record
Cleaver, Hon. Emanuel:
Written statement of Richard A. Peterson, Deputy Director,
United States Mint......................................... 102
THE FUTURE OF MONEY:
COINAGE PRODUCTION
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Tuesday, April 17, 2012
U.S. House of Representatives,
Subcommittee on Domestic Monetary
Policy and Technology,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2128, Rayburn House Office Building, Hon. Ron Paul
[chairman of the subcommittee] presiding.
Members present: Representatives Paul, Luetkemeyer,
Huizenga, Hayworth, Schweikert; Clay, Maloney, Green, and
Cleaver.
Also present: Representative Stivers.
Chairman Paul. This hearing will come to order. Without
objection, all Members' opening statements will be made a part
of the record.
The Chair also notes that the gentleman from Ohio, Mr.
Stivers, wishes to sit in on this hearing. Without objection,
he will be seated for this hearing and recognized for an
opening statement and for questions.
I now recognize myself for 5 minutes to make an opening
statement.
I want to welcome everybody to the hearing this morning.
This is a subject that is not brand new. It has come up in the
past on what we should do with our coinage, what we should do
with the penny, what we should do with the nickel, and why we
have to keep changing it all the time.
I see a hearing like this and this discussion, which has
gone on literally for years, as being a technical discussion
which cannot be ignored. But there is also a monetary issue
involved here, which is generally ignored, and I don't think it
should be. Why should we have to change the nature of our
coinage? Why shouldn't a penny be a copper penny? Why shouldn't
a dime be a silver dime? Why shouldn't a double eagle be gold?
And the reason is very simple. It is because we as a
country live beyond our means. We want to spend too much money
overseas. We want to spend too much money at home. We run up
huge deficits. We can't cover it by taxes. We can't borrow
enough money, so therefore, we print money. And that is where
the problem comes from.
We print money. The value of the money goes down and the
cost of things go up. The cost of labor goes up. The cost of
commodities go up. First, the so-called value or the dollar
value of silver and gold and copper and zinc--they go up
essentially because the value of the dollar goes down.
But we can tinker. We can change. We can take the penny and
dilute the metal. In the old days, they might just clip the
coins or dilute the gold or the silver. Today, we even dilute
base metals.
First, we were on gold standards and silver standards. We
couldn't maintain it. And then, we thought at least we could
have a copper standard. The penny had real value up until about
1980. And then, the value of the copper became worth more than
the penny itself.
So this is where our problem lies. And if we are trying to
deal with this by saving money, by changing the technicalities
on how we produce the coinage itself, and think there might be
a savings--this idea that we can save money is rather
interesting to me, because the U.S. Mint isn't even in the
appropriations business. They so-call earn their own money.
Yes, they mint their own money. It is sort of like saying the
Federal Reserve doesn't--the Fed can make profits. Of course,
they create as much money as they want.
But diluting the metals doesn't solve the problem. And so,
we haven't been able to maintain the zinc standard. Now, we are
going to the steel standard. But it seems we are not even
starting off really well with the steel standard. Under the
steel standard--the best I can do with these calculations--it
will cost us more than a penny to make a penny. And a lot of
people don't even like the penny. I don't know how this is all
going to work out.
Sometimes, we mint coins and there seems to be no market
for them. We mint silver--not silver dollars--but metallic
dollars. And they keep making it and the Mint makes money with
seigniorage. But the truth is dollars, metal dollars, don't
circulate. The Fed buys them. I think sometimes we kid
ourselves about this.
But my prediction is this may be helpful. It may save a
couple of dollars. Others will argue it doesn't save anything--
that it might hide the problem for a little bit, but eventually
we will have to deal with the real problem in this country.
The reason we have a problem with our coinage--the problem
we have with our money, whether it is silver dollars or gold
dollars--is the fact that we live beyond our means. And we
think we can get away with just creating money out of thin air
and believe that is real wealth. But that is all coming to an
end.
So the most I think we could expect if we do anything about
silver--steel pennies or not--will not address, I think, the
real problem that we have in this country. Since the Mint is
not even in the budget, to say that there will be a savings, I
think might be a bit of a stretch. I would like to save
literally billions, if not trillions of dollars, and address
the subject.
But in the meantime, we will be dealing with these
technicalities on how we mint the coinage. And obviously, it is
the Congress that has this responsibility. It is not the
Treasury. It is not the Mint. It is not the Executive Branch.
Explicitly, in the Constitution, it says that Congress should
have this responsibility and we shouldn't be reneging and
giving up on this responsibility.
So with that, I would like to yield to Congresswoman
Maloney.
Mrs. Maloney. In some ways, this hearing is timely.
Canada's recent announcement to eliminate the penny has many in
Congress questioning whether we should be doing the same thing.
Have we simply stopped using smaller denomination coins like
the penny to warrant making it a thing of the past?
And there are several legislative proposals that would
change the composition of the penny to make it cheaper to
produce. But under the Coin Modernization Act that this
Congress passed in 2010, the Mint is required to undertake an
extensive study of alternative compositions of coins. This
study will be completed at the end of this year. So I hope that
this subcommittee will take another look at this issue when
that study is released and specific recommendations are made in
terms of how we can move forward.
For now, Congress has the authority to set the weights and
measures of coins that are produced, so I look forward to the
testimony. But I think we should wait until the report comes
out later this year before taking any specific actions. Thank
you. I yield back.
Chairman Paul. I thank the gentlelady. And now, I recognize
Congressman Stivers from Ohio.
Mr. Stivers. Thank you, Mr. Chairman. I would like to thank
Chairman Bachus and Chairman Paul from the subcommittee for
allowing this important hearing today.
I am a new Member of Congress. And I came here to help cut
excessive government spending and save taxpayers money. I
appreciate Chairman Paul's comments about the real problem in
Washington being spending. I believe that to be true, and I am
working hard to address that. But in these tough fiscal times,
I think there are some things we can do to be much more
efficient in America about the way we mint our coins, more
specifically, the composition of our coins.
I recognize what the gentlelady from New York stated about
a study that the Mint is currently conducting, which will be
finished by the end of year. But that is no reason for us to
wait to do our own due diligence. We need to forge ahead, which
I appreciate this committee is doing. I am not saying we are
going to absolutely run roughshod over a study or go ahead of
it, but I do think we need to continue to do our job.
So earlier this year, I introduced legislation to change
the composition of the 1-cent and 5-cent coins. Because since
2006, the commodity metals required to manufacture those coins
have made those couple of denominations--the penny and the
nickel--very expensive and uneconomical. Specifically, the cost
of minting a 1-cent and 5-cent coin is greater than their face
value.
In fact, included in the U.S. Mint's recent annual report,
the unit cost to produce a penny was 2.41 cents. And the cost
to produce a nickel was 11.18 cents. Last year, the Mint
produced 4.3 billion pennies and 914 million nickels.
Currently, the penny is produced from highly expensive
zinc, which is copper-plated. And the nickel is made of a
nickel-copper alloy. The production costs of these
denominations have resulted in millions more in cost to the
Treasury--to the Mint--than they need to have.
And so that is why I suggested, in my legislation, creating
steel coins. An American multi-ply steel composition would the
material we would use. Most nickel is from Canada, but even
Canada makes their nickels out of steel, ironically. And
because it is an American resource, it would help American jobs
and these new coins could easily resemble the current coins.
You could put a copper plating on a steel penny and they could
co-circulate with the existing currency and be used in things
like vending machines.
In fact, there was a recent study that estimated that
replacing the metallic content of nickels and dimes could
actually save as much as $182 million to $207 million annually.
So, I think it is a great opportunity for the U.S. Mint to
operate more efficiently.
I know the U.S. Mint is considering various materials, but
I think that the Royal Canadian Mint recently made their
transition to steel coins. It has been an effort that has saved
the taxpayers in Canada money. I think it could work here. And
I think it is worth examining.
I appreciate Chairman Paul for having this hearing and I
look forward to addressing the issues related to making our
coins much more economical.
Thank you, Chairman Paul. I yield back the balance of my
time.
Chairman Paul. I thank the gentleman.
I thank the Members for their opening statements, and now I
would like to introduce our witnesses.
Mr. John Blake is executive vice president of engineering
at Cummins Allison Corporation, a leading producer of coin and
currency counting machines.
Mr. Rodney Bosco is the director of the disputes and
investigations practice at Navigant Consulting, Incorporated.
Mr. Dennis Weber is a coin industry consultant, and was
formerly the vice president of marketing and sales for Jarden
Zinc Products.
Without objection, your written statements will be made a
part of the record. You will now be recognized for a 5-minute
summary of your testimony. We will start with Mr. Blake.
STATEMENT OF JOHN BLAKE, EXECUTIVE VICE PRESIDENT OF
ENGINEERING, CUMMINS ALLISON CORPORATION
Mr. Blake. Mr. Chairman, members of the subcommittee, on
behalf of Cummins Allison Corporation, we would like to thank
you for this opportunity for me to speak with you today. My
name is John Blake. I am executive vice president of Cummins
Allison, in charge of the engineering and product development
function.
Cummins Allison is a privately held company located near
Chicago in Mt. Prospect, Illinois. And we are a global leader
in the development of systems for counting, sorting, and
authenticating currency, checks, and coins. We have a 125-year
heritage of leadership and product innovation. We serve
financial institutions worldwide, as well as retail, gaming,
armored carriers, government, and virtually anybody who handles
coin and currency sorting and processing.
We have 50 branch offices in the United States that sell
and service our products. We also have wholly owned
subsidiaries in France, Germany, Canada, the U.K., and Ireland.
And we work with a network of dealerships worldwide in 70
different countries that also sell and service our products.
All Cummins products are designed, developed, and
manufactured in the United States. And we have a portfolio of
350 patents that we depend on to protect our IP and support our
R&D investments.
As far as products, we have a broad portfolio of products
from small desktop machines for retailers to large high-speed
machines for volume customers who demand industry leading
speed, accuracy, and dependability. We also have a line of
self-service coin machines used by the public to count coins
that are collected at home.
And one of the critical features of our products is our
sensing technology. We have a research group near San Diego
that develops state-of-the-art sensing technologies that are
used in our equipment. What that allows our customers to do is
to authenticate and denominate currency and coin, and off-sort
any strangers or counterfeit.
Cummins Allison supports congressional efforts to identify
cost-savings opportunities, including efforts to reduce costs
associated with the circulation of coin and currency. And being
an IP-intensive engineering and manufacturing company, we
understand the challenge; that is, how to reduce cost while
still being innovative and maintaining features and
functionality and quality. We know firsthand it is not an easy
endeavor.
Cummins Allison has been through a number of coin changes
from various countries. Some have gone well. Some have not gone
very well. And I offer the following points for consideration.
The United States has been through a number of changes.
Take the penny, for instance. Most of those changes, more
recently, have been done to material only. They have maintained
the size; that is, the diameter and the thickness of the coin.
And those transitions to those new designs or new materials
have gone relatively smoothly.
In other countries--we have been talking about the Canadian
one dollar and two dollars that was recently introduced, 2
weeks ago. There again, they have changed the material only.
They have maintained the diameter and the thickness of the
coin. And at least from what I understand today, the transition
has been relatively smooth in that regard.
Cummins Allison's machines can process material changes. It
becomes more difficult when you start talking about changing
the diameter and thicknesses of coins. Those changes could
require significant modifications to our machines or perhaps
even replacement, which would be a significant impact in the
marketplace.
Coin construction can have impact in other ways. It can
impact machine function and coin durability, such as if you use
soft materials. If you use soft materials, that impacts not
only the wear characteristics of the coin, but also the
durability of the machines that we have in the marketplace.
Common metals also are more readily available, and
therefore, are an open opportunity for counterfeiting--maybe
not so much a threat for low-value coins. But certainly for
higher-value coins, that would become a significant concern.
So, the ease of counterfeiting should be carefully studied in
any change that is proposed.
Coins should be unique to other coins in other countries.
Again, counterfeiting--we had one particular case in the U.K.
with the U.K. pound, where they used the same blank in another
country, and it is creating a problem in the U.K.
Some competitors use scales. While Cummins equipment can
process coins of different weights, when you are talking about
scales and different weights of material, it is very difficult
to separate denominations, count and authenticate, based on the
differences of weight of a particular denomination of coin.
Finally, changes could impact worldwide the value of
American currency and could affect public commerce. Confidence
in commerce will cost the government far more than what would
be saved by initial material alteration.
So for seamless transition, Cummins Allison believes that
stakeholder input is essential, and early involvement is the
key. Stakeholders should work collectively to raise and address
issues. And we suggest the development of a government industry
stakeholder taskforce that would ensure technical, commercial,
and public issues are addressed early and at every stage of the
project.
For Cummins directly, we would welcome the ability to test
and report on options early and we believe this is very
important. We prefer to establish a strong partnership with
Congress, the Treasury Department, and the U.S. Mint. This
relationship would ensure that decisions made are in the best
interest of the American public.
So in conclusion, Mr. Chairman and members of the
subcommittee, again, thank you for the opportunity to appear
here. Cummins appreciates your efforts and supports the efforts
of the U.S. Mint to reduce costs. However, we encourage
everyone to proceed slowly and cautiously on decisions to alter
weight, appearance, size, and material of our Nation's coins.
Any savings realized would mean nothing if there are societal
costs due to the inability to process and circulate American
currency. If changes make coins attractive to counterfeit, that
puts our economic and national security at risk.
So, we commend the subcommittee for taking the time and
care to research this important matter. Going forward, we
encourage Congress, the Treasury Department, and the United
States Mint to consult with all stakeholders long before
decisions are made. This should ensure a smooth transition and
public acceptance while protecting the security of our Nation's
monetary system. Thank you.
[The prepared statement of Mr. Blake can be found on page
26 of the appendix.]
Chairman Paul. Thank you. Now, I recognize Mr. Bosco.
STATEMENT OF RODNEY J. BOSCO, DIRECTOR, DISPUTES AND
INVESTIGATIONS PRACTICE, NAVIGANT CONSULTING, INC.
Mr. Bosco. Thank you, Mr. Chairman, members of the
subcommittee, Congressman Stivers. My name is Rodney Bosco. I
am a director in the Disputes and Investigations Practice at
Navigant Consulting, Incorporated. Navigant is a global
advisory firm that provides independent, objective analysis and
opinions on accounting, financial, economic, and operational
issues facing our clients.
I am pleased to testify today concerning our Nation's
coinage, the factors that influence their cost of production,
and two studies we recently conducted that have applicability
to legislation being considered by this body.
Our first study examines potential cost savings available
to the United States Mint if it were to move to multi-ply
plated steel compositions for the vended nickel, dime, and
quarter denominations. Our second study looks at the potential
consequences of a hypothetical decision to eliminate production
of the penny on the United States Mint's costs and profits.
Both studies were commissioned by Jarden Zinc Products,
North America's leading plated coin blank producer and a
licensee of the Royal Canadian Mint's multi-ply plated steel
technology. The studies were conducted by myself and by Kevin
Davis, who is a director and colleague of mine at Navigant.
As the subcommittee endeavors to find ways in which to make
our coins more cost-effective to produce, our work has led us
to three key findings that I would like to share with you
today. First, raw material costs--that is, the cost of the
metal itself--currently make up between 50 and 70 percent of
the total production costs for the nickel, the dime, and the
quarter.
The change in the metallic content of these coins to multi-
ply plated steel will reduce the per unit raw material cost of
each of these coins by over 80 percent, based on recent metal
prices. Applied to the average, historical production of these
coins over the past 30 years, raw material cost savings would
average approximately $200 million annually.
Our second finding relates to the opportunity presented by
the parallel adoption of an alloy recovery program. Under such
a program, the United States Mint would collect and replace
existing copper nickel alloy coins with multi-ply plated steel
coins and salvage the copper in the nickel from the retrieved
coins. Since its launch of multi-ply plated steel coins in
2001, the Royal Canadian Mint has had in place an alloy
recovery program that has generated more than $200 million in
revenue for the Canadian people.
The United States Mint could execute a similar program for
its current copper and nickel alloy coins--the 5-cent, 10-cent,
and quarter, dollar denominations. Based on the analysis we
have conducted, which assumes the recovery of one-third of the
coins minted in the last 30 years, such a program has the
potential to generate more than $2 billion in additional
revenue for the United States Mint.
Our third finding relates to the impact of eliminating
penny production on the United States Mint's costs and profits.
The United States Mint has reported that its production of 4.3
billion pennies during Fiscal Year 2011 resulted in a loss of
$60.2 million, or roughly 2.4 cents per coin, leading some to
suggest that the penny should be dropped as a means of
eliminating such losses.
We have found that ending production of the penny would not
eliminate these losses, as a portion of the United States
Mint's fabrication, distribution, and administrative costs
currently assigned to the penny are fixed and would continue to
be incurred regardless of whether the penny is produced.
We estimate this fixed portion to equal $30.7 million,
based on 2001 production, resulting in an apparent cost
reduction at first blush of $29.5 million in Fiscal Year 2011.
However, the analysis does not end here. Dropping the penny
will result in increased demand for the nickel, which the U.S.
Mint currently reports costs an excess of 11 cents to produce
each coin. If production of the nickel doubled in response to
elimination of the penny, a scenario posed by the U.S. Mint's
acting Director in answering a question from this subcommittee
in 2006, the United States Mint would incur losses of
approximately $40 million related to the additional nickel
production. This amount is greater than the perceived cost
reduction of $29.5 looking at the penny alone, resulting in an
overall increase in net loss to the Mint of as much as $10
million. So our analysis of the United States Mint's costs
found the possibility of greater losses to the Treasury without
the penny.
Mr. Chairman, I thank you for the opportunity to appear
here today. And I welcome the opportunity to answer your
questions.
[The prepared statement of Mr. Bosco can be found on page
30 of the appendix.]
Chairman Paul. Thank you. I recognize Mr. Weber.
STATEMENT OF DENNIS H. WEBER, COIN INDUSTRY CONSULTANT
Mr. Weber. Thank you, Mr. Chairman. I appreciate the
opportunity to visit with the committee this morning and speak
to the Canadian experience with controlling costs for
circulating coinage. I am a technical consultant under contract
to the Royal Canadian Mint. I am not an employee of the Mint,
nor am I a spokesman for the Royal Canadian Mint.
For nearly 3,000 years, mankind has used coinage to
facilitate commercial transactions. And one would think that in
that amount of time, every possible combination of materials,
shapes, and designs would have been used. But societies change.
Technologies change. And the demands of the marketplace
necessitate the continuous evolution of coinage systems.
On April 10th, the Royal Canadian Mint completed a process
that was initiated in 1996. Last week, the Canadian 1-dollar
and 2-dollar coins were converted from nickel and copper-based
alloy to the modern, safe, and secure multi-ply technology.
Multi-ply technology is a proprietary process developed in
Canada that applies electroplated layers of nickel and copper
to an inexpensive steel core, which creates circulating coinage
that is both attractive and affordable. In an age of escalating
global metal costs, governments need to produce coins more
cost-effectively without compromising quality. Canada has been
using the multi-ply process for circulating coins since 2001
when the 5-cent, 10-cent, 25-cent, and 50-cent denominations
were converted from expensive nickel and nickel-based alloys to
the more affordable steel coins.
Because the multi-ply steel coins are nearly identical in
size, weight, and appearance to the nickel alloy coins they
replace, the transition went almost unnoticed by the general
population of Canada. The major reason the transition from pure
nickel and nickel alloy coins to multi-ply electroplated steel
went so smoothly was the commitment by the Royal Canadian Mint
to involve the major stakeholders early and continuously
throughout the process.
The national banks of Canada, charitable organizations,
coin handling and coin transportation companies, and the
vending industry were personally and continuously updated
during the conversion. Particular attention was given to the
vending industry as their support was critical for a seamless
changeover. Despite the fact that the vending industry
represented only a fractional percentage of retail
transactions, nevertheless, every reasonable effort was made to
address their concerns.
The annual production volume of Canadian circulation of
coins has traditionally been only about one-tenth the volume of
circulating coins produced by the U.S. Mint. Nevertheless, the
transformation from nickel and nickel alloy to multi-ply has
saved Canadian taxpayers over $250 million.
The older pure nickel and nickel alloy coins have
successfully co-circulated in Canada with the new multi-ply
coin for over a decade. The Royal Canadian Mint, however, has
for the last 6 years maintained an active program of removing
the older nickel and nickel alloy coins from circulation.
Again, with the escalating global prices for commodity
metals, the older coins are eventually defaced and sold for
their metal content. The profit from these sales is returned to
the Canadian taxpayers. But Canada is not alone in enjoying the
cost-saving benefits of multi-ply technology. Since its
introduction, multi-ply technology has been adopted
internationally by 28 different countries, representing over 60
denominations.
The New Zealand experience is a good illustration of this
process. In 2004, the Reserve Bank of New Zealand sought public
input on a proposal to reduce the size of the 10-cent, 20-cent,
and 50-cent coin, while concurrently changing the composition
from expensive alloy to electroplated steel. The Reserve Bank
wanted to reduce the size of the coins to make coin usage more
convenient for the public and for cash-handling businesses. The
conversion to electroplated steel was motivated by the desire
to maintain positive seigniorage well into the future.
The Reserve Bank also recognized that to be accepted by the
public, the new coins had to be durable and they needed to
function in vending machines. After extensive, independent
testing, the Reserve Bank of New Zealand selected multi-ply as
the only process that met their criteria for public acceptance.
Multi-ply coins have been in circulation in New Zealand since
2006.
The Reserve Bank of New Zealand took a very aggressive
approach with the introduction of their new multi-ply coins.
Rather than co-circulate coins of different sizes and different
compositions, the Reserve Bank elected to completely replace
the old coins and over a period of 6 months, old coins were
removed from circulation as the new coins were introduced.
After the coins were recalled, they were demonetized, and
the demonetized coins were sold to recoup the current metal
value. The profit generated from the demonetized coins was
sufficient to cover the cost of the new multi-ply coins and to
generate additional revenue for the taxpayers of New Zealand.
I brought with me samples today for the committee of
current circulation coins for the Canadian 5-cent and 25-cent
coin. And I think the committee will notice that the 5-cent
coin is almost identical in weight and feel to the U.S. nickel.
The major difference is that the Canadian 5-cent coin costs
approximately 3 cents to produce versus the reported 11-cent
cost to manufacture the U.S. 5-cent coin. Assuming that
approximately a billion coins or a billion nickels are produced
every year, this generates a cost savings to the American
taxpayer of approximately $80 million a year.
So I want to thank the committee for the opportunity to
appear today, and I look forward to your questions.
[The prepared statement of Mr. Weber can be found on page
98 of the appendix.]
Chairman Paul. I thank the panel, and I will yield myself 5
minutes for questioning.
I want to talk a little bit about a cost, but not the cost
to the government because we are debating on how much money the
government might save or what it will be--how much cost it will
be to change. But what about the cost to private industry or
local government that has meters--parking meters--or other coin
machines? There have been some estimates that there will be a
cost to them, too. They have to change their equipment and
change their coin machines. One estimate was as low as $530
million, which would be not inconsequential. It is really hard
to calculate absolutely how much it would cost--some have even
said it could cost over a billion dollars.
Mr. Blake or Mr. Bosco, could you address that? What is the
cost? We can't say there would be no cost. There has to be some
cost when these machines have to be changed.
Mr. Blake. I can speak on behalf of Cummins Allison and our
equipment. It is a difficult thing to say because it depends
mostly on the nature of the changes. As I mentioned earlier, if
you change metal only and you maintain the size and diameter of
the coin, the cost, at least for our equipment, would most
likely be less significant, maybe because we most likely will
have to change things like software or sensors or things like
that.
As far as the other industries, the vending industries,
again, I would encourage the committee to engage those
organizations and really study this and consider any changes.
It could be significant, or it could be simple. It depends on
what it is.
Chairman Paul. But you wouldn't be able to eliminate some
costs to the vendors?
Mr. Blake. There is always going to be an associated cost.
Even if I had to update software for a particular machine,
there is always a cost involved. How extensive that is depends
on the nature of the changes.
Chairman Paul. Do you have anything to add, Mr. Bosco?
Mr. Bosco. We certainly recognize the fact that there will
be additional costs. Unfortunately, the scope of our analysis
was centered on the impact of the Mint's operations and did not
look at external consequences of changing the coins. So
unfortunately, I am not in a position to add anything further
to the discussion.
Chairman Paul. Mr. Weber, I wanted to ask about the cost of
the blanks. This is a basic cost and we can't ignore that. But
if we could buy blanks from a foreign country at one-half the
price that they can be produced in the United States, would
that be a wise move for us in the Congress to recommend that we
buy the steel blanks at the best price?
Mr. Weber. I think there is adequate capacity from vendors
in the United States to supply blanks to the U.S. Mint, so that
shouldn't ever be an issue. And there is certainly--if those
blanks could be purchased domestically, the impact on
transportation costs--I don't know if it would be exempt from
import duties or whatever, but certainly, I think if we can
keep that business at home, it would be a lot better.
I should mention that in fact, all of the steel that goes
into the Canadian coins for their circulation business and for
the coins that they produce and export to foreign countries,
comes from steel which is precision-rolled here in the United
States. So, the steel for those coins are used in Canada. And
the coins that are exported do come from the United States.
Chairman Paul. Yes, but wouldn't it be a wise and frugal
move that if it came up--we don't know how to predict future
prices--if it were 50 percent lower, wouldn't this be a wise
thing for us to do since we are in the business of trying to
save some money?
Mr. Weber. I think that all of those options need to be
considered.
Chairman Paul. Okay. Also, I would like to ask a little bit
about eliminating the penny--you really don't save money. Was
that you, Mr. Bosco? You mentioned that you don't save a whole
lot of money by just stopping? To me, this is rather amazing,
astounding that you can stop something--I can't imagine
anything in private industry where you no longer produce
something and there would be no savings. But why don't you
explain that to me, that you wouldn't save money, because you
are not--if you got rid of the penny, you wouldn't be buying
blanks anymore, so there has to be some savings. Would you
address that?
Mr. Bosco. And you are absolutely right, Mr. Chairman. If
the United States were to stop production of the penny, they
would no longer purchase blanks from their current supplier and
that would save them approximately $47 million. In addition,
they would lose the revenue that they receive from selling
those finished pennies to the Federal Reserve of approximately
$43 million. So we are looking at a net savings just at that
level, of approximately $4.3 million.
The other issue, though, which is perhaps unique to the
penny, but perhaps is not as prevalent in other types of
commercial goods, is that in order to facilitate commerce,
there needs to be low denomination coins. And in the absence of
the penny being available as a low denomination coin, the
nickel would need to pick up the slack. Additional nickels
would need to be produced. And under the current composition of
the nickel, the Mint would lose approximately 6.5 cents for
each nickel it makes.
So yes, up to a point, there is savings for the penny, but
then when you take into account the additional demand for the
nickel, those savings become eroded, and eventually they flip
over and become additional loss.
Chairman Paul. But I am not sure we can compare selling
something to the Federal Reserve as a real sale. The Federal
Reserve has no money, except they print it. It is not really a
cost. It really indirectly is a part of the problem, because
the Fed just creates the money and they buy these pennies or
the dollars and that so-called profit goes to the Mint. And it
is just sort of a game that we play.
So if you didn't have that money coming in, and let's say
the Mint was on budget where it should be and the Congress had
to appropriate the money, they are going to go to the Fed, too.
They won't have the money. They just go to the Fed and the Fed
prints the money and gives it to the Mint. So this idea that we
are actually selling something which might not ever be used,
and quite frankly, I am not sure too many people are using
these pennies. They tell me there are a lot of jars filled with
pennies in people's homes. And this whole idea that the Fed
keeps buying them--I can't imagine a bank actually ordering
pennies from the Federal Reserve, because they have a high
demand for pennies. Most people are trying to get rid of their
pennies. Though, what I would like to sort of hone in on is
actually where we are, but anyway, I want to go ahead and yield
to Mr. Cleaver his 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman. Let me first present
a statement from Richard Peterson, the Deputy Director of the
U.S. Mint, who is not here with us today. And I ask for
unanimous consent that this statement be placed in the hearing
record.
Chairman Paul. Without objection, it is so ordered.
Mr. Cleaver. Thank you, Mr. Chairman. I understand the
desire to want to get this issue out in the discussion arena
for the Members, but we are going to receive a report from the
Treasury in December. Many of the issues we are discussing, I
think, would be discussed at that time when the report comes
in. And many of the answers that we are considering may be
provided in the report.
Nonetheless, I do have some issues. One is, of course,
whether or not, with the Coin Modernization and Taxpayer
Savings Act, it would allow the Treasury the authority to make
these changes, including coin composition, without Congress.
Now, I am assuming, Mr. Weber, that when Canada did this,
they went through the budget process. And so, therefore, I
guess maybe the legislators did make some changes if it went
through the legislative process. Is that what happened?
Mr. Weber. Yes. The Canadian Mint and the U.S. Mint are
very similar, in that neither one of those organizations makes
policy. They implement policy. So just as the U.S. Mint
produces coins that are specified by Congress, the Royal
Canadian Mint produces coins that are specified by Parliament.
Mr. Cleaver. Were there provisions made for the high
possibility that the metals would increase in cost at some
point, and a candidate could again face a situation where the
cost of the metal exceeds the monetary unit? Was there some
provision made for that?
Mr. Weber. I am a little off base here, but I think that
the provisions that were established back in the mid-1990s that
allowed for the creation of multi-ply coins, which we believe
will be in positive seigniorage well into the future, did allow
for the Canadian 1-cent coin to be produced in either copper-
plated zinc or copper-plated steel, at the discretion of the
Mint, whichever was more cost effective for the taxpayer.
So, there was on the lowest denomination coins some
flexibility built in. But the multi-ply was seen as a real
solution to the long-term negative seigniorage potential. The
elimination of commodity metals and going to a very cost
effective steel core coin was--is perceived to be effective in
keeping all of those coins in positive seigniorage for at least
the next decade.
Mr. Cleaver. Yes. That is where I was going is that
ultimately, or eventually, you are going to end up having to
address that issue, even if it is 10 years from now. Am I
correct?
Mr. Weber. I am a bit of a coin collector and I have, as
Dr. Paul alluded to, $20 gold pieces and $1 Morgan silver
dollars. And I think it would be extremely difficult in a
commodity-driven marketplace to maintain an alloy coin in a
positive seigniorage position for an indefinite period of time.
But that is why modernization efforts have to take place. The
economy is constantly changing.
If you look at the number of coins produced by the U.S.
Mint, they are half of what they were a decade ago. And that is
because of e-commerce, debit cards, etc.
Mr. Cleaver. I don't have time to get my next question out
to Mr. Bosco, so I will ask it later. Thank you, Mr. Chairman.
And I yield back the balance of my time.
Chairman Paul. I thank the gentleman. And now, I yield 5
minutes to Mr. Luetkemeyer from Missouri.
Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Bosco, I was
interested in--we were discussing this before at the committee
hearing and I want to follow up a little bit with the comments
made by the chairman.
I had two interns in my office in the last 2 years from
Australia--one last year and one this year. And when they got
ready to leave, I asked them what was the unique thing about
our country or just interesting thing that they thought off the
top of their head would be something that would stick out with
them. And both of them made a comment with regards to the
penny, which is interesting, because they said, ``In Australia,
we don't have pennies. We just round it up to the nearest
nickel.'' They said, ``It is very inconvenient to carry all
those pennies in our pocket all the time.''
Do you know of any other countries in the world that don't
have pennies or pence or whatever it is?
Mr. Bosco. I know that there are other sovereignties that
have dropped their pennies--
Mr. Luetkemeyer. Their lowest denomination?
Mr. Bosco. I can't name them for you as I sit here, but I
know certainly Australia and New Zealand--
Mr. Luetkemeyer. It begs the question that the chairman was
asking about your comment with regards to saving money by not--
that we can't save any money by getting rid of the penny. I
really have a problem with trying to grasp how you cannot save
money by doing that.
Your comment that we are going to use more nickels, I
really don't see how that is even close to being accurate from
the standpoint you may use a few more, but I don't think you
are going to use many more, because you are going to have the
same amount of economic activity instead of having your 95--
instead of being 97 cents, you have 95 cents with a nickel on
the end of it and two pennies--you will just have 95 cents if
you round it down. Or if it goes to the upper--the next nickel,
it would be the dollar. So I don't know why we would have more
nickels. Can you explain to me why we would need more nickels?
Mr. Bosco. Certainly. What we do know is when countries
have retired their lowest denomination coin, there has always
been an increase in the usage of the new lowest denomination
coin. In the case of Australia, there was an increase in the
number of 5-cent coins that were minted once the 1- and 2-cent
coins had been retired.
The motivation for our analysis really centered on the
testimony or the answer provided by the Mint's then-acting
Director in 2006 to a question posed by the subcommittee: What
would happen to the United States coinage and the costs to
create that coinage if the penny were to be dropped at that
time? And the acting Director responded in part by saying that
there would be an increase in the production of nickels to
compensate for that. And the challenge that was faced was that
the nickels were being made at a loss at the present time.
Mr. Luetkemeyer. I understand that part of it. I was just
kind of curious about the increased usage. I really would have
to have somebody sit down with me and go through the
transaction and show me how we were going to be using more
nickels. I really have a problem with that. But that is neither
here nor there.
Mr. Weber, in your written testimony, you said something
about the Canadian Mint investigating issuance of special
digital currency. Can you tell me what digital currency is?
Mr. Weber. Yes. That wasn't actually in my testimony, but
there was an announcement recently that the Canadian Mint is
investigating a product that they call Mint Chip and it is e-
currency. And it is something that they are looking into, but I
do not have a lot of details on that. I can have someone from
the Canadian Mint provide a statement to the committee if that
would help.
Mr. Luetkemeyer. I was kind of curious what digital
currency would be, how you--what it would look like--how it
would interact, and what--it is kind of interesting. Everything
else has gone digital. Why not currency, I guess.
I guess the next question I have is with regards to the
amount of money that seems to be coming out of circulation. One
of the comments that was made or some of the discussion that
was had was how much of the money that comes out of circulation
is due to collecting and loss and things like that.
How much--every year we produce more, I guess, coinage to
be able to supply more activity. How much of it is--or do you
have any research that shows why we are producing more? Is it
because of loss--just dropping in the back of your seat of your
car or something or, it comes out of--are people collecting it?
Why do we need to continue to do more?
Mr. Weber. We haven't conducted any studies about the
reasons for coinage leaving circulation. At the time that the
Mint was completing the 50-State Quarter Program, it did
provide what it believed to be an estimate that approximately
half of the coins that it had minted for the program were
likely held by collectors because of the unique collector value
of those coins at the time. I don't believe that would
necessarily apply to the other denominations. But as I
mentioned, we have not studied that issue.
Mr. Luetkemeyer. Okay. I see my time is up. Thank you, Mr.
Chairman.
Chairman Paul. I thank the gentleman. I yield 5 minutes to
Ranking Member Clay.
Mr. Clay. Thank you, Mr. Chairman, for yielding. And thank
you for conducting this hearing.
Let me ask Mr. Weber--as a consultant to the Royal Canadian
Mint, in your experience, did Canada face higher manufacturing
costs as a result of the replacement die they had to use?
Mr. Weber. Actually, Canada not only advanced their coinage
material, but concurrently came up with technology to improve
tool-and-die life. And the Canadian Mint actually markets that
technology internationally to other mints.
So in fact, with the transition to multi-ply and
improvements in their tool-and-die manufacturing, they actually
saw an improvement in tool and die.
Mr. Clay. Time-wise, how long did the process take from
start to finish?
Mr. Weber. The approval for multi-ply came in 1996, and the
coins were introduced in 2001. But the majority of that time
was taken up with the construction of a manufacturing facility
in Winnipeg, so all of the technology in and around the multi-
layer plating process had to be developed. And equipment needed
to be purchased and installed.
So from initiation to introduction was a period of 5 years,
but that is primarily due to the fact that the manufacturing
facility had to be constructed.
Mr. Clay. Thank you. And Mr. Bosco, your testimony
discusses significant raw material cost savings associated with
a transition to copper-plated steel, but does not address the
concerns outlined by former Mint Director Moore that the
savings incurred from using steel could be offset by higher
manufacturing costs. Is this something that you can address?
Mr. Bosco. Not at this time. Our study did not look at the
costs associated with transitioning the penny to plated steel.
So I am not in a position to address that--
Mr. Clay. What factors should Congress consider in order to
mitigate the impact that changes to composition of the penny
and the nickel could have on existing coin-operated devices?
Mr. Blake?
Mr. Blake. Yes. I think I can answer that for you. I
strongly encourage the establishment of a subcommittee with
Congress involved with all stakeholders in trying to make these
kinds of decisions. They are not easy. There are a lot of
considerations that need to be made. And I think that is the
best approach.
If I could go to the example of what has happened in
Canada, when they were working on the $1 and $2 coin changes,
Cummins Allison was involved very early in the process. We were
given test coins before the coins were introduced to make sure
that whatever impact it had on our equipment, we could manage
and minimize costs.
The same thing happened with the introduction of the euro
coins back in the early 2000s. Again, we were involved early.
The Mint engaged us early in that process to make sure that
what they were doing was something that was more compatible
with what would be taking place when they introduced those
changes in industry and in the marketplace.
Mr. Clay. In Representative Stiver's bill, the Steel Nickel
Act includes a provision to ensure that the Secretary of the
Treasury sets specifications of the 5-cent coin in a way that
would ensure that not more than one change would have to be
made to coin accepting and coin handling equipment. Should a
similar provision be included in the bill he introduced to
change the composition of the penny?
Mr. Blake. I think anything you can do to reduce the cost
of the penny and the nickel is something that Cummins supports.
However, I still strongly--I don't know how you could simply
say, ``It is only limited to one change.''
I think you have to go through a series of investigative
activities with stakeholders and try to arrive at an acceptable
solution that quite honestly works. And whatever those changes
are, the objective should always be to try to minimize the
societal costs and the cost of making those changes to existing
equipment and machines that are installed in the vending and
anybody who is processing coin and currency.
Mr. Clay. Thank you for your response. And Mr. Chairman, I
yield back.
Chairman Paul. I thank the gentleman. I yield 5 minutes to
Mr. Huizenga from Michigan.
Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that.
And having a formerly Canadian wife, I am very familiar with
the ``loonie'' and the ``toonie'' as they are dubbed up in
Canada.
But at this time, I am actually going to give my time to my
good friend and colleague from Ohio, Mr. Stivers. If that is
okay, I will yield to him.
Mr. Stivers. Thank you for yielding me time. I do want to
address one thing that has come up a couple of times from the
gentleman from Missouri and the gentlelady from New York about
the study that is going on.
Congress has a constitutional mandate to regulate security
in Article I, Section VIII, Clause V, which I would like to
read, since it is only one sentence long: ``Congress has the
responsibility to coin money, regulate the value of foreign
coin, and fix the standard weights and measures thereof.''
So, I don't think Congress should cede its authority and
constitutionally mandated requirement to deal with currency.
And while I consider the folks at the U.S. Mint to be experts,
it is Congress' job to do this. That is why I have introduced
these bills and that is why I think it is important.
The first question I have is for Mr. Blake. It is pretty
simple. When you suggested that counterfeiting may be a
problem, do you expect that is a high likelihood or a low
likelihood with the 1-cent and 5-cent coins?
Mr. Blake. Let's face it. We are talking about going with
materials that are lower cost and more readily available.
Whenever you do that, you always open yourself up to the
possibility--
Mr. Stivers. I understand that. I am asking if you think it
is a high likelihood or a low likelihood that the 1-cent and
the 5-cent coins--
Mr. Blake. On low-value coins, it is probably less likely.
Mr. Stivers. Thank you. That is all I needed there.
The second question I have is for Mr. Weber. You talked
about an alloy recovery program that over 6 years has been in
place in Canada. What percent of the previous coins have been
recovered? Do you have any idea?
Mr. Weber. I am really not sure, but I could get that
information for you, Congressman.
Mr. Stivers. Okay. That kind of goes to the question that I
had for Mr. Bosco. You suggested that maybe a third of the
coins could be recovered. I didn't know if that was--what you
used for that or how you came by that number. that is why I
wanted to compare it to the experience that Mr. Weber might
have seen in Canada.
Mr. Bosco. It was essentially--it was judgment. We looked
at the dollars retrieved in Canada and tried to back into what
that might translate into in terms of number of coins. But that
number is subject to refinement, clearly.
Mr. Stivers. Sure. And obviously, that money can be used
to--for any capital expenditures and the balance could be
returned to the U.S. taxpayers or to pay down the national
debt. Obviously, we would have to do that legislatively.
The next question I have is actually for Mr. Blake. We
talked a little bit about the impact on the vending machine
industry and that is what I want to get to next. What is the
cycle for capital expenditures on vending machines? And over
what period of time would they typically update or replace
their machine through capital expenditures? Obviously, that
varies a little bit, but can you give us an idea?
Mr. Blake. Cummins Allison is not involved directly in
vending machine devices and so forth. We make machines that
count currency and handling, so I am not in a good position to
speak on that regard.
Mr. Stivers. Okay. My understanding is that it is a 5- to
7-year cycle that they update and replace most of their
machines. And I guess the point of that is that as long as we
work within that cycle, we can help ensure and limit the cost
to these folks.
And that is, I guess, my question for Mr. Weber. What did
the Royal Canadian Mint do to pacify the vending machine
industry's concerns? Obviously, you had a 5-year window of
phasing in. Did that help? What else did you do? Obviously, you
limited some of the changes. Could you help us understand how
you worked with the vending industry in Canada? Or how they
worked with the vending industry?
Mr. Weber. I think the more relevant experience is the
introduction of the $1 and $2 coin. As I mentioned, in the
first 5 years, a lot of that time was taken up with the
construction of the plating facility. So what Canada did was
they invited all of the stakeholders in. And these are the cash
handling people, cash transportation folks, charitable
organizations, national banks, and of course, the vending
machine people.
And what Canada did was actually delayed for 1 year the
introduction of these coins to allow the vending machine people
more time primarily to upgrade software, because essentially
the shape of the coin didn't change. And with that allowance of
additional time and great communications and getting samples
into people's hands early, the impact on the vending industry
in Canada was minimal.
I don't think you can eliminate it. There is going to be
some expense there, but I think it can be managed. And it is
managed through education and communication.
Mr. Stivers. Thank you. I yield back the balance of time to
Mr. Huizenga.
Chairman Paul. I thank the gentleman. And now, I yield 5
minutes to the gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman. I thank Ranking Member
Clay. I also thank acting Chairman Cleaver. I thank the
witnesses for testifying as well.
I would like to make mention of a few things that I believe
are important as it relates to this effort, to the effort
itself. Obviously, we all agree that we should not pay 2.4
cents to produce a penny, and we should not pay 11.2 cents to
produce a nickel.
The question becomes, what is the approach that we would
utilize to remedy this? And in seeking an approach, I would
like to acknowledge some of my colleagues who have been
associated with this endeavor. Of course, our former chairman,
the Honorable Barney Frank, and Mr. Gutierrez introduced a
piece of legislation. I would like to note that this piece of
legislation passed the House in 2008. It did not make it
through the Senate, but the House has acted on this issue. And
I want to thank the current Members, Representatives Roskam and
Castle.
I think everyone is trying to move in the same direction.
It is just that there are different approaches. I think it is
important to make mention of Representative Watt, because he
did pass a bill in the House that made it to the President's
desk and did receive the President's signature. This bill gave
authority to conduct R&D on all circulating coins.
And it is important to note his bill, titled the Coin
Modernization Oversight and Continuity Act--it is important to
note that this authority has been accorded the Treasury.
Actually, it requires the Mint to report to Congress. And that
report is due by December 14th of this year. It is important to
note this, because he seems to have taken a rather holistic
approach without giving a sense of direction--simply said,
``Help us with our sense of direction.''
And that report, I would assume, was thought to be
something that would be beneficial at the time we passed the
law that required the report. And if we thought it would be
beneficial to have the report, it would seem that we would
think it beneficial to utilize the report that passed in the
bill that passed the House, passed the Senate, and was signed
by the President.
So I do express a desire to know what the report will
contain, such that we will have an opportunity to get some
additional sense of direction. Let me just ask each of you to
respond to the concern that we hear by way of the report, some
of the needs thought to be associated with this issue. Mr.
Blake?
Mr. Blake. Again, I commend the Members of Congress for
taking the steps to try to reduce cost. I think that is a step
in the right direction. We are all looking for direction in
this matter. I think it is an important matter. And if we can
start to get some direction from the report that is due later
in the year, then that would be a good thing.
I also encourage the establishment, again, of a committee.
What we don't want to happen is something in the report and
then act on it in haste. So I think we are all interested in
what is going to happen in December with this report.
Mr. Green. Because my time is about to elapse and I would
like to hear from the other two--let me just simply say this to
you, sir, and to all of you--do you think that, given that the
bill that requires the report passed the House, passed the
Senate, and was signed by the President, should we look into
the report before we take action? Or should we simply ignore
the fact that a bill passed the House, passed the Senate, and
was signed by the President calling for information, calling
for intelligence on how to do this--required an R&D research be
done? Do you think that we ought to honor what we required--the
House, the Senate, signed by the President? Is that of no
consequence?
I will start with Mr. Blake, again. Mr. Blake, let me just
go to the next person now, because my time is up. Go ahead,
sir.
Mr. Bosco. We certainly are not in any position to direct
Congress with regard to the timing of approaching this issue.
The purpose of our studies, which predated actually the bills
that--
Mr. Green. Because my time is about up, your position is
that you would not direct Congress. Thank you. And I don't mean
to be rude, crude, and unrefined; it is just that I would like
to hear from others.
What is your position, Mr. Weber?
Mr. Weber. I think there is--certainly, waiting for the
report is a good idea. But I think in the interim, you continue
to lose money on these coins. So I think the committee needs to
be aware of taxpayer losses on an ongoing basis, so that when
the report is issued, you can act relatively quickly to make
whatever changes are necessary.
Mr. Green. So your position is to use the report, but start
a process now. Okay.
I thank all of you for your time. And thank you, Mr.
Chairman, you have been more than generous. I yield back.
Chairman Paul. I thank the gentleman. We will have time for
a second round of questioning.
I would like to direct my question to Mr. Weber.
You are not with Jarden Zinc Products at the moment. Is
that correct?
Mr. Weber. That is correct.
Chairman Paul. Does that company do any blanks or
participate in any private mintage? Or is this always blanks
and different things for governments?
Mr. Weber. Jarden produces blanks for a number of different
countries that are struck for circulating coinage. They do not,
to the best of my knowledge, participate in token programs and
things of that nature, though they have some, I believe,
capacity for striking coins--it is very limited.
Chairman Paul. So it is mostly government, then. I am
interested, obviously, in the nature of money and our finances.
And there is a private coin that is issued now and it is an
ounce of copper. And it is a large coin. It reminds me of the
big penny that we had many, many years ago.
That coin today, because it is one ounce--my estimate--it
is probably worth about 25 cents. So in reality, in real money,
it is worth about a quarter. What is your opinion about more of
that coming up? One of my answers to our dilemma is not so much
to close down the system we have, but just allow some
competition out there--competition with our current monetary
system, instead of trying to doctor up and tinker around and
make this money work that is constantly losing value, where we
can't even afford steel in our money.
What is your opinion about maybe encouraging private
alternatives, say in coinage? There is a lot of resistance in
the government, because governments like a monopoly on coinage.
But the whole idea that you can have today a copper coin that
is worth a quarter and the worst thing that could happen to
that is that its purchasing power will probably go up.
Do you have any sympathy at all for private competition in
the use of coinage?
Mr. Weber. I think there is a very, very robust market in
bullion coins. And bullion coins can be purchased from the
Mint. They can be purchased from private producers. They can be
purchased internationally.
To consider copper or nickel a bullion product is a bit of
a stretch. Because what people are doing is, they want to make
that investment. They are not making that investment in the
hopes that they are going to lose money. So it is an investment
vehicle. They are buying it today in the hopes it will go up in
the future. It is different than having coins and currency for
commerce.
Chairman Paul. But overall, the precious metals, they have
obviously, in terms of dollars, gone up in value. The dollar
keeps going down.
Yes, buying bullion coins may be as an investment
protection one thing, but I am talking about permitting
competition. Because the monopoly laws say that if you tried to
use a silver ounce in circulation and use it as money or call
it a dollar, you can get into really serious trouble with that.
The government doesn't like that. The Treasury comes down
pretty hard on an individual.
But I am trying to see a transition period where we would
have more of this. So in your personal view, would you have any
sympathy for maybe permitting a little competition--true
competition--in coinage? Where in a way, it would indirectly
place even a bigger check on government destroying the value of
money--it would be an incentive to say, hey, maybe we ought to
keep up with the private market.
Mr. Weber. I think the real challenge there is interstate
commerce. If I buy a copper coin of some sort minted in New
York, I have no idea what the purchasing power of that coin
would be in California if it is coming from a private facility.
Whereas, if I am getting a quarter from Denver or Philly, it
doesn't matter, I can take it anywhere in the country and use
it. So I think managing that would have some real challenges.
Chairman Paul. But the purchasing power of our dollar is
different in New York as in Texas, also. It varies a whole lot.
Okay. I think we will go on, and I will yield 5 minutes to
Mr. Cleaver.
Mr. Cleaver. Thank you, Mr. Chairman. I actually only have
one question, and any of the three of you can answer, I would
hope. Given the emerging technologies which generate a higher
and higher demand for metals and alloys, and as Dr. Paul
mentioned earlier, that when you have that demand for those
metals and alloys, that then the cost is going to rise. Is
there any benefit in considering non-metallic alternatives?
Plastic? Pigskin? The sky is the limit.
Are there some non-metallic alternatives that--with you,
Mr. Weber--that Canada considered? What are some options? Why
would we go into an area where we know the cost of the metals
and alloys are rising and start using that for new coinage?
Mr. Weber. I am not aware of any attempts to make plastic
coins, for example. There was some discussion of ceramics, but
that looks to be more expensive than the metals. It is
interesting. The human experience is that if you go to a
country that uses aluminum for coins, there is a perception
that those are useless because people want to feel the weight
of a coin. So generally, the heavier metals have been the coins
that have gotten the most viability in the commercial
marketplace.
Mr. Cleaver. Okay, maybe I am out here by myself. We know
that the cost of the metal will rise. We have new technologies
coming out every day and they are demanding more metals. And
so, am I way out there to assume that the cost is going to
continue to rise for metals and alloys?
Mr. Weber. I think it is a reasonable assumption that
demand could drive prices higher. I think that is why it is
really incumbent to have ongoing development programs and
ongoing research programs to stay ahead of the curve. It is one
of the things that Canadians have really done a very good job
at--very innovative--very research-driven. And they have a few
things on the shelf that look very promising.
Mr. Cleaver. Thank you, Mr. Chairman.
Chairman Paul. I thank the gentleman. I want to thank the
witnesses today for their testimony. And our hearing is now
adjourned.
The Chair notes that some Members may have additional
questions for the panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for Members to submit written questions to these
witnesses and to place their responses in the record.
[Whereupon, at 11:13 a.m., the hearing was adjourned.]
A P P E N D I X
April 17, 2012