U.S. Mint Idiocy Continues
The U.S. economic system continues to look like a disaster. The government is bankrupt, our currency has lost almost all of its credibility, the housing market continues to show weakness, we have an inverted yield curve, U.S. manufacturing jobs have disappeared and Ben Bernake is over in China begging them not to diversify away from our Federal Reserve Notes. With all this economic insanity going on it is difficult to believe that things could get anymore ridiculous. Unfortunately they have gotten more ridiculous courtesy of a new press release from the U.S. Mint. The U.S. Mint is now prohibiting the melting of pennies and nickels as well as imposing other regulatory non-sense on U.S. citizens. Below is the press release in its entirety.
United States Mint Moves to Limit Exportation & Melting of Coins
The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation. The United States Mint is soliciting public comment on the interim rule, which is being published in the Federal Register.
Prevailing prices of copper, nickel and zinc have caused the production costs of pennies and nickels to significantly exceed their respective face values. The United States Mint also has received a steady flow of inquiries from the public over the past several months concerning the metal value of these coins and whether it is legal to melt them.
"We are taking this action because the Nation needs its coinage for commerce," said Director Ed Moy. "We don't want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers."
Specifically, the new regulations prohibit, with certain exceptions, the melting or treatment of all one-cent and 5-cent coins. The regulations also prohibit the unlicensed exportation of these coins, except that travelers may take up to $5 in these coins out of the country, and individuals may ship up to $100 in these coins out of the country in any one shipment for legitimate coinage and numismatic purposes. In all essential respects, these regulations are patterned after the Department of the Treasury's regulations prohibiting the exportation, melting, or treatment of silver coins between 1967 and 1969, and the regulations prohibiting the exportation, melting, or treatment of one-cent coins between 1974 and 1978.
The new regulations authorize a fine of not more than $10,000, or imprisonment of not more than five years, or both, against a person who knowingly violates the regulations. In addition, by law, any coins exported, melted, or treated in violation of the regulation shall be forfeited to the United States Government.
The regulations are being issued in the form of an interim rule, to be effective for a period of 120 days from the time of publication. The interim rule states that during a 30-day period from the date of publication, the public can submit written comments to the United States Mint on the regulations. Upon consideration of such comments, the Director of the United States Mint would then issue the final rule.
Those interested in providing comments to the United States Mint regarding this interim rule must submit them in writing to the Office of Chief Counsel, United States Mint, 801 9th Street, N.W., Washington D.C. 20220, by January 14, 2007. The interim rule appears on the United States Mint website at www.usmint.gov. The United States Mint will make public all comments it receives regarding this interim rule, and may not consider confidential any information contained in comments.
I thought the U.S. Mint's recent press release regarding the Liberty Dollar was stupid, but this one is filled with even more stupidity. They claim that they are imposing these rules because they don't want certain individuals who melt down coins taking advantage of the American tax payer. It isn't the people who are melting down the pennies and nickels that are taking advantage of the American tax payer. Those people are just trying to protect themselves from the stupidity of the Federal Reserve that continues to destroy our currency. The Federal Reserve is the very reason why the melt value of these coins has risen beyond their face value. Federal Reserve Notes have lost over half of its value in terms of gold and silver since 2000 because they have dramatically increased the money supply over this period of time. The Federal Reserve has taken advantage of the American tax payer not the people who are melting down these coins. It is complete rubbish that the U.S. Mint would make scapegoats out of individuals who melt their coins to be the ones who are screwing over American taxpayers. The press release should be blaming Alan Greenspan for taking advantage of American taxpayers because he was responsible for creating the excessive amount of credit that has since decreased the value of the currency.
What is going on with pennies and nickels is an exact repeat of what took place in the late 1960's. Back then the U.S. Mint made melting silver coins illegal. At that point in time the melt value of silver coins became worth more than their face value. As a result, these coins began to disappear from circulation because people realized what was happening and kept them. Why would people use a coin to pay for something if the face value of it is worth less than the melt value? That's why the coins stopped circulating. I believe that the same exact thing is going to happen to the currently circulating forms of pennies and nickels. Even if Jim Kolbe's draconian Coin Act legislation fails to be passed into law, we will begin to see people hold on to their pennies and nickels just like people did with silver coins in the late 1960's. In addition, the U.S. Mint will be forced to use a cheaper material to make low denomination coinage. This will help to further accelerate the eventual disappearance of the pennies and nickels that circulate today.
Considering that the melt value of silver coins began exceeding their face value in the late 1960's, we can make an educated guess as to how much longer this commodity bull market has to run. If we assume that we are basically at the same stage as the late 1960's or early 1970's in this bull market, we have about a decade to go before this thing tops out. However, that is a conservative estimate because there are many things fundamentally different this time around. In today's commodity bull we have China's population consuming all sorts of raw materials, we have a huge trade deficit with China, the U.S. government's debt can never be repaid, Western governments have since adopted all sorts of regulations on the mining industry which helps limit the production of raw materials and American citizens are using their homes as piggy banks to finance their continued standard of living. With all of these factors and many others not listed to consider I believe we are at the very beginning stages of this long term commodity bull market. The way I see it, this bull market could easily go another 20 years when you add in the factors that weren't present in the 1970's but present today.
Either way, this press release from the U.S. Mint is ridiculous. The U.S. Mint will not be able to stop pennies and nickels disappearing from circulation by threatening people with fines and prison time. People will melt down these coins, hoard them or do what they think is in their best interest if the market creates the conditions for them to profit by doing so. The Federal Reserve was responsible for facilitating these conditions to take place and people are just reacting to what they see happening. On top of that, I don't see how the U.S. Mint would be able to enforce any of the regulations stated in the press release. Maybe they can have the Mint police at Fort Knox investigate the evil criminals who dare defy the U.S. Mint and melt the government's pennies and nickels. Or better yet they can investigate the thought criminals who dare rebel against the establishment and take $5.01 in pennies with them when they travel to Europe. After all, it is quite possible that the Fort Knox Mint police aren't guarding anything of value. There hasn't been an audit of the Fort Knox gold in decades, so the Fort Knox Mint police may actually serve no useful purpose. If there hasn't been a recent audit of the Fort Knox stolen gold supply, how do we know its there? We don't, but they tell us that we should just shut up and trust the criminally insane people who run our government. What a joke. I'll give the U.S. Mint some credit though, at least they have asked for feedback from the public regarding their latest leap into a new realm of idiocy.
December 17, 2006
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