The United States Mint has a gold problem. As demand for precious metal in the futures indexes and in physical gold bullion coins increases as the dollar weakens, there’s been a run on the Mint. Don’t worry, there’s no shortage of gold. It’s just that the Mint doesn’t have the resources to make it into coins due to outsourcing and budget cuts decades ago.
The problem lies in manufacturing the blanks. The blank planchets are not made at the Mint, which hasn’t had the production capacity for this stage of the minting process since the budget cuts of 1981. More…
This is a rush transcript. Can you help us out and proofread the transcript while you watch the video? Go to our writeboard (password: gold). Then click the “Edit this page” button to make changes. We check all writeboards daily and will update this post with your proofread transcript ASAP. Thanks!
Ron Paul: Thank you, Mr. Chairman, and welcome panel. I remain opposed to the Mint’s current effort to gain greater power in determining the composition of circulating coinage. It is unconstitutional to delegate the determination of the metal content of our coinage to the Secretary of the Treasury. Under Article 1, Section 8 of the Constitution, the Congress is given the power to coin money and regulate the value thereof. It’s a shame the Congress has already unconstitutionally delegated its coinage authority to the Treasury Department, but that is no reason to further delegate our power and essentially abdicate Congressional oversight. While I sympathize with the aim of saving taxpayer’s dollars by reducing the cost of coinage, it is disappointing that our currency has been so greatly devalued as to make this step necessary. At the time of the penny’s introduction, it actually had some purchasing power. Based on the price of gold, that one penny would have purchased, in 1910, what requires 57 cents today. It is no wonder that few people nowadays would stoop to pick up any coin smaller than a quarter. One of the witnesses on our second panel mentions the importance of the Mints production of bunion coinage and the danger of counterfeit collector coins that may or may not minted from silver or gold. It’s a shame that instead of protecting the value of the dollar to insure that precious-metal coins could still circulate as money, or enforcing counterfeiting laws to stop the flow of clearly fraudulent coins, the federal government insists on printing trillions of dollars out of thin air and prosecuting individuals who attempt to create precious-metal currencies to compete with the devalued U.S. dollar.
The topics discussed in today’s hearing exemplify how far we have fallen, not just since the days of the founders, but only in the last 75 to 100 years. We could not maintain the gold standard nor the silver standard. We could not maintain the copper standard, and now we cannot even maintain the zinc standard. Paper money, inevitably, breeds inflation and destroys the value of the currency, which harms all Americans. I wait for the day that we have a committee hearing when we talk about once again reinstituting sound money for our people.
I yield back.
Ron Paul: Chairman, I want to follow up on that very subject with Mr. Moy because I had some questions myself.
Has the Mint ever made planchets or is that something they’ve never done?
Mr. Moy: Yes, the Mint has made plantchets in its past, but it got out of the business a decade ago mainly because of the extreme cost of doing it, the environmental hazard for doing it, and it was determined at that time that there were other private entities who could make it more cheaply and safely than the United States Mint could.
Ron Paul: Okay. And because of the shortage that you didn’t have and you had a mandate, you had to put it in to the non-proof coins. That is correct? And you’re asking now for authority to say that you could take some of that money out or coinage out and make proof coins. Now is this the first year that you’ve missed making proof coins, in 2009?
Mr. Moy: Yes, this is the first year that we have missed
Ron Paul: If the problem were corrected, is there such a thing as minting coins a year late? Because some of those collectors, I’m sure, are going to say, “Oh, why can’t I have a 2009 coin?”
Mr. Moy: The Mint is required to basically sell the coins that are minted in the year that they’re made. So if the date is 2009, we sell 2009 coins in 2009.
Ron Paul: So the 09 will be missing.
Mr. Moy: Is missing.
Ron Paul: Yes.
Mr. Moy: And what we’re trying to do is prevent 2010 from being missing.
Ron Paul: Now it still baffles me that we can’t make a plantchet. I don’t know anything about the equipment or what is necessary. But doesn’t this country take jewelry and make complicated jewelry out of gold? Isn’t this just pretty simple? This just really, you know, is confusing to me why this can’t be accomplished. Instead of looking for more plantchets you’re saying, “Well, let’s give me more authority so I can make a few of these proof sets rather than bringing this out.” I mean, what would a businessman do about this? Would he always resort to going to Australia to do this? This just seems so bewildering that for a problem that seems rather simple, we couldn’t have had an easier solution for this. I mean, right now we don’t even have a solution.
Mr. Moy: Well, a businessman has to weigh two things. On one end, to make the planchets ourselves, we need to make capital investments in order to develop the smelters, the chemical processing, take care of the environmental hazard in getting rid of the chemicals; all of those issues. And on the other side, we have a limited amount of planchet makers around the world who don’t want to increase their capacity unless they get guarantees from government that we’ll continue buying at such high rates for some foreseeable future, so they can spread out their capital investment. So those are the two choices, and right now it is the most efficient choice to be able to expand the quantity of plantchets that we’re getting from the various suppliers.
Ron Paul: No, there are private companies making, you know, not coinage, but they make medallions and I’ve never heard of them running out of plantchet. You think they have that problem?
Mr. Moy: Yea. They don’t because they’re not in the business of being the largest bullion maker and supplier in the world. Last year we sold 28 million ounces of these. This year we’re headed to 32 million ounces. On an average year, the Mint might make 8 million ounces of this. So the other people don’t have to deal with the volume issue that the United States Mint does.
Ron Paul: This is awfully disturbing. What are we going to do when we go on to the gold standard? You won’t even be able to make the gold coins? You can’t even keep up with a few collectors. We’re in big trouble.
Mr. Moy: By that time my term in the Mint will be done and I will start a planchet making companies to pick up the excess.
Ron Paul: Well, it seems to me – I don’t know what it is -but it seems to me that there has to be a market answer for this, and maybe it’s the promise to take these, no matter how many they make. Maybe that would help. I mean, they’re not going to lose their value like it’s a risky thin. But you’re dictated by law that you have to promise these private sources on how many you can take?
Mr. Moy: We’re not dictated by law, but just by business practice. When a company invests in expanding their capacity, they’re going to want to make sure that investment pays off over time and they’re not willing to do it unless they get a commitment from their buyers to buy up all their excesses.
Ron Paul: Seems like they don’t trust the government, I don’t know. Thank you, I yield back.
Ron Paul: I have a question for Mr. Clark. Why do you think the Mint only uses three suppliers to provide these planchets?
Mr. Clark: I’d like to be able to answer that, sir, but I have no further knowledge.
Ron Paul: If you know the business, are there other people who can make them in the country?
Mr. Clark: I believe there are other companies out there that are very interested in offering their services to the Mint.
Ron Paul: And I understand they are not restricted by the law to these 3 individuals.
Mr. Clark: I am not aware …
Ron Paul: You know, if we get the (?) coin, we’re still going to have that same problem. Where are we going to get the planchets from, because they can’t even supply the demand right now? You suggested that we get the GAO involved and take a look at all this and see if we can get recommendations. I’m just wondering how much we really need this. Is there any other way to get some professional or political advice on this without an audit? Or do you see that the audit is something is very, very important?
Mr. Clark: Are we talking about the planchets or the (?) coin, sir?
Ron Paul: Well, you’re recommendation for the audit to review the Mint’s procurement processes for the blanks.
Mr. Clark: We thought an outside agency looking at their process – and to answer your question about why they’re restricting their sources to only 3 separate entities, someone with a separate set of eyes and a kind of fresh look might be able to determine that there is a better way to go about it. That’s why we were making the recommendation.
Ron Paul: And you’re other recommendation was that we require all the planchets be made here in this country.
Mr. Clark: We believe there is sufficient capacity within the United States borders to do so.
Ron Paul: Do you think there is a lot of difference, a net difference, in making these coins if we didn’t require that the gold came from this country? Isn’t gold generally pretty fungible? Does that make a big difference?
Mr. Clark: I think the Congress was interested, at the time they passed that requirement back in 1985, to promote the sale, the job creation amongst American mining companies that domestically produce gold to use for the American buoyant coins programs. But you’re right. I mean, obviously gold is fungible and it conceivably could be acquired anywhere. I don’t think that’s part of the problem. I think there is sufficient gold supply, it’s just the actual fabrication of the plantchets, for some reason that’s limited to three separate sources at the current time.
Ron Paul: Yea. It just seems to me, like I mentioned earlier in our hearings, that this problem seems to be unique to government. You know, if private industry is doing this, they just don’t run into this problem. Some of this, I think, just like the emphasis in 1985 to use domestic gold and all; I can understand that. But it certainly is very long way from a business person adjusting to supply and demand and doing it at the best price. There is no way that the government can compete with private industry in even making a coin these days. I was just wondering about how strongly you felt about that. But I really don’t have any other questions and I’m going to yield back my time.