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A Penny for Your Thoughts
Happy 2021 to all our readers! Our Take On Payments posts in 2020 frequently dealt with two aspects of currency, both COVID-related: the hygienic safety of handling currency and the coin circulation disruption. My colleagues also addressed these issues during our year-end "Payments In Review" webinar .
As I've researched the coin circulation issue, I've frequently visited the website of the U.S. Mint, since it's the part of the U.S. Treasury responsible for the production of circulating and commemorative coins as well as precious metal bullion coins (gold, silver, platinum, and palladium). The Mint is also the custodian for the country's gold and silver reserves.
Can you name all the Mint facilities currently operating? Most people I have asked can easily name Philadelphia, Denver, and San Francisco. Would you have included West Point, New York? Better known for the nearby military academy, West Point has a facility that was established in 1938 as a depository for bullion. It began producing pennies in 1973 and became an official Mint facility in 1988. Today, the "W" mint mark can be found on circulating quarters.
What about the conversation that arises from time to time on discontinuing the penny? Canada stopped producing its penny in 2012 and adopted a round-up/round-down phasing-out program in February 2013, when the Royal Canadian Mint stopped distributing the penny. The Canadian government's reasons for the action are similar to arguments made by U.S. penny opponents: pennies are excessively costly to produce relative to their face value, consumers have increasingly hoarded them, they are said to be bad for the environment, and they impose handling costs on retailers, financial institutions, and the economy in general.
According to the Mint's 2019 Annual Report, it cost 1.99 cents to produce and distribute a penny that year. Often overlooked in the penny discussion is the fact that the 2019 cost of producing and distributing a nickel at 7.62 cents also exceeded its face value. It will be interesting to see how workplace modifications in response to the pandemic affected these costs. Overall, however, the Mint makes a profit in its overall operations due to seigniorage, which is the difference between the face value and the cost of producing circulating coinage. In 2019, the Mint transferred $540 million to the Treasury General Fund because of seigniorage.
You can read about all this and more on the Mint website. You can also take a tour of the facilities. While physical tours of production facilities of the Mint are currently closed due to COVID restrictions, the website offers virtual tours of the Philadelphia Mint and the coin production at the San Francisco Mint.
I hope you found this information interesting and that it made cents (pun intended). The Federal Reserve continues to monitor consumer cash usage during the COVID pandemic through various research channels and will be reporting on updated findings later this year. As to the 1¢ piece, a penny for your thoughts!