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Viewpoint: Response to 'Mint's Unintended Consequences'

By Ron Thompson

In the March 17 issue of Numismatic News, an anonymous writer suggested: “The U.S. Mint Enters the Land of Unintended Consequences.” I would disagree, but first, let me correct a common misconception. As a general rule, accountants (pejoratively called “bean counters” in the letter) don’t make the financial decisions that the writer attributed to them. They may do analysis work to support the decisions or fact-finding for middle managers and/or financial executives that actually make those decisions or recommendations to upper management. So, put the blame where it resides with the Mint management. As a CPA who has spent his entire 50-year career in various levels of accounting work, eventually in management and in diversified industries (none of it working for the Mint, however), I can say with confidence that unless they are in a tiny company, accountants don’t make those decisions. So, stop blaming accountants and stop calling them “bean counters” – I have never counted any beans in my career.

As to the Mint, the writer’s contention is that the Mint, by selling unsold current-year proof and mint sets in subsequent years until sold out to mitigate Mint losses, actually destroyed the secondary market. First, remember that the Mint is a business and that Congress wants them to make a profit. Congress doesn’t want to subsidize them like it subsidizes the Post Office. For every product from the Mint, the buyer is paying a premium necessary to generate that profit and cover losses on the minting of the cent and the nickel. Congress does not require the Mint to ensure a viable secondary market.

Second, the reality is, and has been for many years, that the Mint produces so many proof and mint sets that practically all the demand (potential buyers) for their products is fulfilled with current year sales in the current year. Why should there be a premium in the secondary market if all demand was filled with current year sales? Don’t confuse the premium in the secondary market with any increase caused later by inflation.

Think about other similar enterprises like the Franklin Mint. They also produced to demand. In 100 years, their products might have a value other than melt value. Also, the extras sold after the current year are relatively minor compared to the current year sales and are not what destroyed the secondary market. The Mint destroyed and still destroys the secondary market by producing to demand. Unless a set contains a collectible mint error, a special mintmark or special finish in limited qualities or there are maximums required by law, practically all Mint products, and particularly the proof and mint sets because they are just standard issues (other than the packaging), eventually will be cheaper in the secondary market.

Third, part of the reason, but a substantial one, is that in most cases the collector will sell his/her proof and mint sets to a dealer (the secondary market). The collector pays the retail (premium) price from the Mint and the dealer will only pay a wholesale (discounted) price to the collector that leaves them sufficient margin below the current retail price to make a profit when they resell the product to another collector or dealer.

Fourth, there is a reason collectors call numismatics a hobby and not a business. Unless you are brighter and better than most dealers (and the Mint) or luckier, you will have more losses than gains when you sell your items. That is not such a bad deal. You enjoyed your collection for years and you enjoyed the hunt to form the collection. You met lots of new friends through the hobby and you learned a lot about numismatics during that time. You have gone to many new places in pursuit of your collection. While nobody wants to lose money when they sell something, think of numismatics as a lifelong vacation that was fun and not just an expense.

This “Viewpoint” was written by Ron Thompson of Decatur, Ga.

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