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.