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/ C i r c u l a r No. 3 7 6 5 )
'S e p t e m b e r 2 8 ,1 9 5 1

C O I N

S H O R T A G E

To all Banking Institutions
in the Second Federal Reserve District:
On
from
of

the

THE N e w Y o r k

coins.

shortage
already

T hi s

scarce

winter

an d

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1951 o n

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appropriations

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coin

24.

in s o m e

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for

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September

explains

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the

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a valuable public

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SIjjc N mfjork Si
V
Copyright, 1951, b y The N ew Y o rk Tim es Com pany.

*8S 48J «S K S r-

U. S. Becoming Penny-Poor;
Mint Lacks Metal and Funds

M A K IN G M O N E Y : A n employe feeding blanks to penny
coinage press at the Mint in Philadelphia.
B y GEORGE A . M O O N EY
The United States, like so m any K orea last year, arises from the
o f its individual citizens, is running later in flationary
developm ents
throughout the United
Stat s.
ou t o f money.
in
circulation.
which
N ow , when the G overnm ent is M oney
spending a t the greatest rate in its amounted to $27,026,000,000 i
history, w ith the daily pay-ou t June. 1950. now totals 528,140,000,
a vera gin g tw o hundred m illion dol­ 000. Retail sales are up and prices
lars, the U nited States is su fferin g are higher. Odd-penny prices, re­
from a sh ortage o f small coins, flectin g cost increases, sales taxes
and the increased use o f parking
especially the lo w ly penny.
m eters and vending machines,
The man on the street m a y not w hose cash boxes im m obilize coins,
have noticed the shortage, but i t is all are factors in the situation.
M etal shortages and the copper
so a«u te th at the United States
strike have intensified the prob­
Treasu ry’ s Bureau o f the M int is
lem . L a rg ely because o f the strike,
o p eratin g double shifts t o increase n ot one pound o f the M int's Sep­
production, w hile in N ew Y o rk the tem ber cop p er has yet been deliv­
Federal R eserve B ank is rationing ered. T o m eet tlris situation, the
its supplies o f pennies, nickels and M int has been stretch ing its
A u gu st supply b y cu ttin g produc­
quarters.
tion o f pennies and nickels, which
The shortage, firs t observed really contain 75 per cen t copper.
♦after the outbreak o f hostilities in Only a small alloy o f cop p er is re­
quired in the m anufacture o f
dimes, quarters and bnlf-dollars,
and the bulk o f the M i l l ’ s produc­
tion is now concent, ated in these
pieces




NEW

Y O R K , M O N D A Y , SEPTEM BER 24, 1951.

Nevertheless, even the silver
coins are becom ing increasingly
scarce, and last week the Federal
R eserve Bank o f N ew Y ork began
restiictin g the requests o f banks
fo r quarters to 50 per cen t o f their
1950
requirem ents.
Silver,
of
course, presents no supply problem
and the Governm ent, w hieh buys
every ou nce o f silver mined in the
continental United States and
Alaska, n ow has about 2,000,000,000 ounces. O f this total, about
160,000,000 ounces or n early $150,000,000 o f the m etal is so-called
“ fre e ” silver and is available for
coinage.
N or is there a n y shortage of
currency. The Bureau of E n gra v­
ing, w hich turns out dollar bills
and oth er “ foldin g m on ey” f o r the
Treasury, reports adequate inven­
tories on hand. R ecen t sim p lifica­
tions in en gravin g m ethods, it
says, have elim inated any possi­
b ility o f its failure to sa tisfy the
national requirements.
T he la ck o f small change, h ow ­
ever, is becom in g increasingly
acute, as the nation’ s fall and w in ­
ter shopping season "gets under
w ay. N orm ally, during the slack
sum m er m onths, there is a h eavy
return flo w p f coin in to the Fed­
eral Reserve Banks, w hich is then
fed b a ck in to circulation as the
Christm as trade reaches its peak.
This year there has been no such
flow . The Federal Reserve Bank
o f N ew Y o rk ’s a verage daily re­
ceip ts in pennies last yea r a t this
tim e am ounted to $28,000. This
yea r the average is on ly $2 ,000.
Shortage Grows Worse
A lthou gh the shortage w as first
noticed a fter the K orean outbreak
last year, and n ow is w orsening,
C ongress thus fa r has done nothing
about it. Despite its apparent re c­
ognition that “ the M int m akes
m oney m akin g m on ey,” and shows
a trem endous p ro fit on its opera­
tions, C ongress has seen fit to re­
duce the M int's appropriations.
Thus, unless em ergen cy funds are
granted soon, the M int w ill be re­
quired to curtail its operations—
even assum ing that it can obtain
the necessary copper.
In the fiscal year ended June 30,
1950, the Mint, w ith an approprial o n o f $1,417,000, issued coins
w ith a face value o f $31,261,000,
w hile in the fiscal year ended in
June, 1951, the appropriation w as
$1,873,000 and the coins issued
w ere w orth $32,170.000. D uring the
first sixs m onths o f last year, the
post-w a r return flo w o f coin was
la rgely com pleted, dem and fo r new
coins w as a t the low est level in
a decade^ and the M int cu t back
its production. In the second half,
how ever, the Korean outbreak,
panic buying and inflation renewed
the dem and fo r coin.

Mint Seeks More Funds
In F ebru ary o f this year, while
the Mint w as attem ptin g to m e e t '
this u nexpected developm ent, it
asked C ongress f o r a deficien cy
appropriation o f $330,000. It was
n ot until June, w hen the fiscal year
w as alm ost ended, that Congress
granted $130,000, and o f this total
$50,000 had to be used fo r auto­
m atic sa la ry increase.3. In this
year's budget the M int requested
$5,190,000 fo r its operations to
produce 1,700,000.000 coins. In ­
stead it received an 'appropriation
o f $4,600,000, which, it is esti­
mated, w ill perm it production o f
1,400,000,000 coins. Again, h ow ­
ever, the appropriation w a s de­
layed until A u g. 13, and the
authorities at the M int w ere
unable to schedule the necessary
production
until
the
financial
m eans w ere a t hand.
N ow the M int, stripped o f its
inventories, is g oin g all out within
the lim its im posed b y th e sm aller
appropriation, and the shortage o f
cop per and nickel. It has the plant
and productive ca p a city to make
all the coins needed and has pro­
duced as m any as 4,000,000,000
coins in a year, as it did in 1945.
N orm ally it uses p a rt o f its excess
ca p a city to m ake coin s fo r foreign
countries.
O f the nation’s three m inting
o ffice s th at a ctu a lly m ake coins,
one in Philadelphia has been oper­
a tin g on a sixty-h ou r week, but,
because o f the stretch -ou t policy,
this has been cu t t o f ift y hours.
T he D enver M int has been running
tw o shifts on a fifty -h o u r week,
w hile the m int in San Fran cisco
w as holding to a fo rty-h o u r week
schedule because the high cost of
coin shipm ents confined its pro­
du ction to W est Coast use.
D espite the em ergency, and the
special e ffo rts being made, the
M int even now is operatin g a t less
than 50 per cen t o f its capacity.
U nder the General A ppropriations
A ct o f 1951, G overnm ent agencies
are required ^ o apportion their
funds equally over the year, un­
less unequal apportionm ent will
n ot involve the need fo r a deficien ­
cy appropriation. But. obviously
there is no w a y fo r the Mint to
kn ow h ow lon g the present de­
mand fo r coins w ill continue. A nd
even if it is granted em ergency
funds, the m aterial shortage re­
mains.
F or its Septem ber production,
the M int asked fo r 1,000,000
pounds o f copper. The National
P roduction A u th ority cu t this re­
quest 30 per cent, and agreed to a
total o f 700,000 pounds. A n d as
yet, not a pound o f this has been
delivered. Meanwhile, the M int an­
ticipates that its future alloca­
tions, n ot on ly o f cop per but o f
nickel, w ill ba below average
needs.

U. S. Becoming Penny-Poor; Mint Lacks Metal and Funds

V.

S. Is Rapidly Becoming Penny-Poor;
Demand for Small Change Tops Supply

The nation's h istory has been
m arked b y period* w hen lack o f
su fficien t coins has caused serious
difficulties. P rio r ’ to 1853, when
the silver content o f coins w as re­
duced w henever the bullion value
becam e equal to fa ce value, the
public would m elt the coins foi
their m etal content, and trade su f­
fered.
In the Civil W a r th ere w as *
tim e when coins w ere n o t in circu ­
lation and to m eet the need socalled paper "sh inplasters” wert
issued and circulated in amounts
as low as 3, 5, 10 and 15 cents.
Use o f postage stam ps to make
ch ange was also authorized by
C ongress in ord er to ease the
situation. D uring the last war,
when fo r a tim e m etals w ere un­
available, several cities th at w ere
short o f coins issued certificates
and tokens as substitutes f o r coins.
U nder th e coin -rationing p r o ­
gram now in e ffe c t here, th e F ed ­
eral Reserve B ank o f N ew Y ork
has been lim itin g supplies o f pen­
nies since O ct. 16, 1950. A t that
tim e, the bank im posed a 70 per
cen t quota on dem ands f o r coin,
and the rate has since been ad­
ju sted in a ccordance w ith the
ch angin g supply picture. A t pres­
ent banks are being lim ited to 25
per cent o f their penny require­
m ents o f a yea r ago, w hile nickels
and quarters are being rationed at
a ^0 p er cent rate. In oth er areas,
the regional
Federal
Reserve
Banks have sim ilar rationing poli­
cies.

Appeals Ignored
Everyw here, the authorities con­
cerned have asked loca l banks ana
m erchants to lim it their ow n needs
to an absolute minim um and to
urge th eir patrons to em p ty their
cookie ja rs, p ig g y banks and oth er
household savings repositories so
that the situation w ill be eased. In ­
stead, it appears that as in other
ca*?es o f shortage, these appeals
h p v - » som e tim es tended to increase
'.'Or rdin?, thereby in ten sifyin g the
problem.
A ccord in g to som e inform ed ob­
servers, the situation verges on the
absurd. The need is great and the
requirem ents are small. Plant ca ­
p a city exists to supply the fulh de­
m and for coin. The M int's consum p­
tion o f cop per and nickel is insig­
nificant b y com parison w ith other
industries and it is the m a jor cus­
tom er fo r the silver, w hich the
Governm ent, undei the law, m ust
bu y from dom estic producers. F i­
nally, it is one o f the m ost p r o f­
itable o f G overnm ent agencies.
T he follow in g table show s the
M int’ s recent consum ption o f metal
for coins:
Fiscal Fiscal Fiscal
1949
1950
1951
tons tons tons
S ilv e r ..............
967
370 1,061
Copper .......... 2,269 1,484 3,100
N ickel ............
215
98
56
*Zinc and tin.
85
63
148
•Small quantites are used in man­
ufacture o f pennies and nickets.

A ppropriation s gran ted f o r the
M int cover on ly m anufacturing
co s ts and do n ot include paym ents
fo r m etal. This ch a rge is covered
b y a revolvin g T reasu ry fund, and
expenditures fo r m etal purchases
are not show n in th e M int’ s
budget. The 1,061 tons o f silver
used in the last fis ca l year
equaled 30,954,984 fin e ounces,
w orth about $45,000,000 in coins.
G overnm ent purchases of. newly
mined dom estic silver in the same
period totaled 40,559,730 ounces,
fo r w h ich th e T reasu ry paid the
sta tu tory price o f 90.5 cents an
ounce.
U n til recently, w hen the M exi­
can G overnm ent undertook a new
sales policy, the m a rk et price of
silver w a s about 80 cents an ounce.
N ow th e price is 90.4 cents, ju st
under the 91 cents level, at which
the U n ited States T reasu ry’s non­
m onetized silver cou ld b e sold to
the public. In recen t years, virtu ­
ally none o f this silver supply has
been sold. Thus, th e M int has been
the only m a jor cu stom er fo r the
silver, w hich the Governm ent has
had to b u y and hold in accordance
w ith the law.
B u t the p ro fit w h ich accrues to
the G overnm ent through th e m int­
in g process arises fr o m the pro­
duction o f all types o f coins. A c ­
cord in g to data presented in A pril
o f this year, in hearings b efore
the subcom m ittee o f th e Senate
C om m ittee on A ppropriations, the
m an ufactu rin g cost o f 1,000 pen­
nies, w orth $10, am ounts to $1.32,
w hile th e co st o f m etal w as $1.34.
The follow in g table, subm itted at
th at tim e, snow s the breakdow n
for all types o f sm all coin s:
D enom ination

1
5
10
25
50

FIRST OPERATION IN
I COIN PRODUCTION!

Digitized for Silver strips coming from a r o l l i n g machine being placed on
FRASER
http://fraser.stlouisfed.org/
conveyor by a worker at mint in Washington.
Federal Reserve Bank of St. Louis

la ce value
o f 1.000
pieces

c e n t .......... $10.00
c e n t s ........ 50.00
c e n t s ........ 100.00
c e n t s ........ 250.00
c e n t s ........ 500.00
Total ....$910.00

Cost o f
m etal in
1.000 piece*

$1.34
2.81
33.75
84.39
168.79

$291.08

S eign iorage is the difference b e ­
tween the circu la tin g value o f a
coin and the co st o f bullion and the
m inting (b ra s s a g e ). B rassage is
the ch arge levied to cover the cost
o f coinage.
M in t's Plans fo r 1951

a

A t the beginning o f the fiscal
yea r 1951, the M int had 416.000,000
coins on hand, and planned to
produce 650,000,000 in the tw elve­
m onth period, M rs. N ellie Tayloe
Ross, the M int’ s director, told the
H ouse Su bcom m ittee on A pp ropri­
ations in February.
“ W e have a lready in the first
six m onths produced 655.000,000,'’
she continued. “ This production and
the reserves we had on hand have
gone
in to
circulation
totaling
1,050,000,000 coins. A s you w ill see
this w as a very unexpected de­
velopment.
“ Th at being true, and in view of
the conditions o f the m om ent, the
large progra m o f defense on which
the G overnm ent has em barked, it
is p erfectly clear th at w e cannot
exp ect in the n ext year, 1952, that
w e are g o in g to be able to get by
w ith a production o f 675,000,000
coins, w hich is ju s t about w h at we
have a lready sent ou t in the first
six m onths o f this year.”

It w as on th at occasion that she
asked fo r a supplem ental appro­
priation o f $330,000. She got
$130,000.
8
A t the Senate hearings in April,
w hich considered the 1952 appro­
priation, M rs. Ross pointed out
that last year, prior to the Korean
outbreak, dem and fo r coin w a s a t
a low point, and the M int had been
enabled to cu t its s ta ff 25 p er cent,
and return $ 1 ,000,000 o f its appro­
priation.
“ Ordinarily, there is a sharp de­
cline in coin dem and a fte r Christ­
m as; p ra ctica lly none are requi­
sitioned b y the banks f o r a period
o f tw o m onths o r m ore,” M rs. R oss
explained in asking fo r an appro­
priation o f $5,190,000. "T h is year,
however, an a ctive dem and has
continued in the three months
since Christm as. W e have, in fa ct
sent ou t in January, F ebru ary and
M arch, fou rteen times as much
coin as w e did in the sam e period
last year.
"U nless the full am ount o f ap­
propriation w e request is granted
— th at is to say, unless you restore
the cu t th at w as m ade b y the
House— it is ou r opinion th at we
shall be unable to m eet the call o f
the cou n try fo r coin .”
Mrs. Ross’ Plea Futile
Senator Carl Hayden, D em ocrat
o f A rizona, com m ented th at he
could n ot “ understand w h y an
operation th at w ill pa y a t a hand­
som e p ro fit should be cu t dow n.”
N evertheless, Mrs. R oss g o t only
$4,600,000.

Seisniorage
per 1.000
pieces

M anufacturing cost P rofit to th«
paid from appropri- Treasury
ated funds per
per 1.000
1,000 pieces
pieces

$8.66

47.19
66.25
165.61
331.21

$1.32
3.37
2.33
5.40
8.70

$7.34
43.82
63.92
160.21
322.51

$618.92

$21.12

$597.80

A n d the dem and f o r coin s con­
tinues unabated.
A s banks and
m erchants began to realize that a
shortage w as developing, m any
started ord erin g extra stock s “ just
in case.” Meanwhile, as the postK orean inflation continued, odd
penny prices have becom e more
com m on, and sales taxes requiring
paym ent o f additional sm all change
are p la cin g an additional strain on
available supplies o f coins.
P a rkin g m eters, now slated fo r
operation here, and especially auto­
m atic vending machines, which
som etim es tie up coins fo r long
periods, are another g ro w in g prob­
lem in the situation. A lso, cash
payrolls, w ith the various deduc­
tions for social security, w orkm en ’s
com pensation, etc.. these days rare­
ly perm it even-dollar paym ents.
N ow Christm as and the holiday
season, w hich brin g a peak demand
fo r coin, are approaching, w ith no
relief o f the shortage in sight.
Clearly, the nation, despite its in­
com e o f alm ost $ 1 , 000,000,000 a
day, has becom e penny-poor.