The U.S. Mint, by sparking a boom in coin collecting, is making a mint.
Thanks largely to the popularity of the Mint’s state-themed quarter program--adding tens of millions of Americans into coin collecting--the government agency posted a $2.6-billion profit in fiscal 2000. That money goes to fund government programs and reduce the national debt.
Moreover, 2001 is gearing up to be even bigger as the Mint forges partnerships and licensing agreements with a host of brand names, from National Geographic and Scholastic Books to H.E. Harris & Co., an 85-year-old manufacturer of coin and stamp-collecting products.
The Mint and H.E. Harris launched a series of licensed retail products Wednesday that will appear in 6,000 to 8,000 retail stores nationwide, from Barnes & Noble to Michael’s. The Mint expects mass merchandisers, such as Target and Wal-Mart, to also offer the products within months.
Each time one of these Mint-licensed books, coin binders or bookmarks is sold, the Mint makes a profit.
“This doesn’t sound very traditional for a federal agency,” said David Pickens, associate director of the Mint. “But I think this is an example of the government acting responsibly to provide both assistance and support to the [coin-collecting] hobby, education to the public and profitability to reduce the national debt.”
And although the idea of the government stepping into turf normally reserved for the private sector can be controversial, the Mint’s forays aren’t generating much criticism. Experts say that may be because there are numerous opportunities to make a buck for both government and private industry--due largely to the new quarter program, a 10-year effort that will introduce five redesigned quarters each year to honor each of the 50 states.
Many government agencies are self-supporting, like the Mint, but few produce profits, according to government officials. Normally, that’s by design. The Securities and Exchange Commission, for example, charges the brokerage firms it regulates fees to cover its costs. When the agency posted strong profit, brokers complained that the agency was gouging.
Only the Mint and other government agencies that literally make money, such as the Bureau of Engraving and Printing, are profitable on a fairly consistent basis, according to officials at the Treasury Department.
For the Mint, the bulk of its profit boom has come from “seigniorage.” Seigniorage boils down to this: It cost about 5 cents to make a quarter, but when that quarter is “sold” to the public, it brings in 25 cents. The 20-cent difference is seigniorage, a temporary profit.
State Quarters Spur Demand
The profit is temporary because, although durable, even coins wear out. When they do, they’re returned to the Mint and destroyed. At that point, the government must report “reverse seigniorage.” But because coins generally last 30 years, the government gets to use the minted billions for a long time.
Moreover, coins that are collected are taken out of circulation and consequently don’t wear out and get returned. And the Mint’s state quarter program has spurred collectors’ interest like nothing ever minted before.
Mint surveys, conducted by Peter D. Hart Research, estimate that 2 million Americans collected coins before the state quarter program was launched in 1999. Now, as many as 125 million adults--about 64% of the nation’s adult population--are collecting the quarters either for themselves, a child, a grandchild or a child they hope to eventually conceive, according to the Hart research.
To keep up with demand, the Mint boosted the number of quarters produced from the pre-1999 average of 1.5 billion annually to 6.5 billion in 2000. That’s caused seigniorage income to soar.
“This has definitely ignited America’s passion for looking through their pocket change for something to keep,” said John McDowell, president of H.E. Harris in Atlanta.
That makes everyone happy, even though the Mint’s foray into retailing has got the Mint competing with private industry.
Harris, for example, had been selling its own line of paper and plastic products--from maps to plastic coin holders--to help collectors store coins. The products Harris created for the mass market--companies such as Target, Sam’s Club and Michael’s as opposed to traditional coin dealers--will now be phased out in favor of the official Mint-licensed variety, McDowell says. The profit margin is smaller when paying a licensing fee to the Mint, McDowell says, but Harris is nonetheless enthusiastic about the partnership.
“There is a comfort and safety factor with an official U.S. Mint product,” McDowell said. Besides, the increase in collecting provides nearly endless opportunities. “I’m sure there are about 100 million collectors out there who want to put a few quarters away and need a place to store them,” he said.
So far, Harris has created nine licensed products with the Mint, but there are dozens more in the offing. The company, which is privately owned and refuses to give sales projections or terms of its licensing agreement, is contemplating everything from paperweights to banks.
Scholastic Books also has signed a deal to produce children’s books on each state in conjunction with the Mint’s issue of each state quarter, says Pickens, the Mint’s associate director. This deal is not expected to produce a profit but will provide the Mint with 200,000 books, which it plans to offer to libraries and reading programs nationwide, he says.
The Mint won’t disclose other details of the program until it’s officially announced this year. However, it is the second time the Mint has teamed with a children’s publisher. Late last year, the Mint partnered with National Geographic’s youth publication, World Magazine, for a 25-city bus tour. The partnership was aimed at using state quarters to teach geography and civics in schools around the country.
And although the Mint says it does not specifically target children, the agency hired affable Muppet Kermit to be its “spokesfrog.” Jim Henson Co., the Los Angeles-based creator of the Muppets, has been hired as the Mint’s official licensing agent. Reader’s Digest also recently signed a licensing agreement to create a kid’s coin-collecting kit, complete with magnifying glass, coin folders and Kermit stickers.
Traditional coin-collecting groups are ecstatic.
“I would be lying to you if I pretended that I wasn’t excited that we’re creating a whole new generation of coin collectors,” said James L. Halperin, co-chairman of Heritage Rare Coin Galleries in Dallas. “But the short-term benefit is educational. I have a 5-year-old and an 8-year-old, and I love the idea that they’re collecting state quarters rather than Pokemon cards.”
Coin Collecting Gets a Boost
It also has given the traditional coin-collecting industry a shot in the arm. One piece of evidence: The American Numismatic Assn.'s annual money show, which normally draws about 5,000, had a 100% boost in attendance, with 10,000 people registering at the Salt Lake City show last month.
“This has brought attention to not only what the Mint is doing, but to the whole hobby of coin collecting,” said Steven Bobbitt, spokesman for the association.
Halperin and other high-profile collectors, including Sen. Phil Gramm (R-Texas), are lobbying for additional coin redesigns modeled after the state quarter program.
One of the draws of the state quarter program has been that each quarter is issued for only a limited time--10 weeks--before the Mint retools to produce the next quarter in the series, Halperin explains. That’s part of the reason people collect so avidly, because if they miss a quarter, it won’t be issued again. The quarters also are being issued in the order that each state joined the union, which provides a civics lesson for children, he says.
Halperin wants the government to do something similar with U.S. presidents and with constitutional amendments. However, the Mint cannot redesign coins without enabling legislation. At present, no such legislation has been introduced, but Gramm has vowed to support redesign efforts.
Meanwhile, even some old foes of coin redesign have changed their tune.
For instance, bankers were once adamantly opposed to redesigning coins. Bankers groups even lobbied against the creation of the dollar coin, complaining that it would require costly retrofitting of coin machines and cash registers and cause work-related injuries when bankers were forced to lug around heavy dollar coins rather than paper currency. No longer.
“We love the dollar coin!” said John Hall, spokesman for the American Bankers Assn.
“The golden dollar is attractive, and we wish more were in circulation.”
Part of the reason for the banker’s enthusiasm: Banks now sell coin proof sets in their lobbies.
“Banks love offering money as collectibles,” Hall said. “We are seen as the money store, the place to get money. It’s a natural fit for us.”
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Making a Mint
Whenever the U.S. Mint makes money, the U.S. government earns money. Why? It costs just 5 cents to produce a quarter, but the government gets 25 cents for it. The 20-cent difference is “seigniorage” income. Now, largely because demand for newly designed state quarters has surged, the Mint is making more money than ever.
U.S. Mint net earnings, year by year, in billions:
2000: $2.6 billion
Source: U.S. Mint