The just released 2008 United States Mint Annual Report offers a candid assessment on the performance of the US Mint that highlights both the good and the bad, and mixes in challenges and strategies. At the end of the fiscal year, the agency generated sales of more than $2.8 billion and made history in creating 126 coin designs — both good. But the Mint also earned less than it did in 2007 — one of several disappointments for the year.
2008 proved to be robust for the Mint’s numismatic and bullion coin programs. Each realized an increased net income of 22.7 percent and 295.6 percent. Demand for bullion coins popped with total sales registering an impressive $948.8 million. Collector coins came in second, pulling in $527.6 million.
However, income from circulating and numismatic seigniorage (the difference between coin production costs and their face value) was down 29.7 percent and 17 percent, respectively. Mint Director Edmund Moy attributed the decline to the economy:
"The slowing economy in FY 2008 was the main reason that orders for circulating coins dropped dramatically from the level of recent years. When the economy slows, there are fewer cash transactions. Businesses demand fewer coins from their banks, which in turn order fewer coins from the FRB [Federal Reserve Banks]."
The Mint in 2008 shipped 9.974 billion coins to Federal Reserve Banks compared to 14.021 billion in 2007, cutting the agencies’ circulating revenue from $1.7 billion to $1.3 billion.
The substantial increase in collector and bullion coin sales could not overcome the seigniorage shortfall when combined with the increase in coin metal costs.
The Mint’s earnings consequently declined in 2008, falling 25.7 percent to $806.4 million compared to the $1,085.6 billion it generated in 2007.
Director Moy in the annual report also recognized several not so "rosy" Mint moments by notably recalling the time its online store was offline for several days.
"We sell most of our numismatic coins through our website and that website went down for six days. We did not manage this downtime well and received a lot of deservedly angry calls from our customers."
Moy also noted what most upset collectors — its dated pricing policy, eliminating certain collector coins early, and the on and off again suspension of silver, gold and platinum coins during volatile movements in precious metal markets.
"Instead of maintaining an inventory that would have prepared us to meet the next surge in demand, we were reactive….
We did not live up to our statutory mandate to mint and issue gold and silver bullion coins in quantities sufficient to meet public demand.
Additionally, our precious metal numismatic product pricing formulas are not as transparent as they should be, and the process for re-pricing our products is cumbersome.
As a consequence, when the price of gold dropped, we had overpriced coins that did not sell. When the price of gold rose dramatically, we had to stop sales because our products were under priced."
The US Mint did record sales of silver bullion coins and had a significant increase in gold bullion coin sales despite the negatives. On January 12, 2009, the Mint also implemented a new pricing policy for its numismatic products that makes pricing clearer and mitigates "the effect that fluctuating gold and platinum commodity costs” has on coins.
For many more insightful details, visit http://usmint.gov/about_the_mint/ and click the Annual Report link to read or download the complete 2008 Annual Report.
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