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Incompetence: Losing Money while Making Money

losing money while making money[Today's article comes to us from Steve Sjuggerud, editor of alternative investment advisory service True Wealth.]

How dumb are we as Americans?

More specifically, how irresponsible and stupid is the U.S. government when it comes to our money? And how foolish are we to put up with this?

“Wow, what’s got Steve so riled up today?” you might be wondering.

I just got a reminder that you and I HAVE to diversify some of our wealth outside of the U.S. dollar. The incompetence in government is just too massive.

Let me explain…

I was just reading the Annual Report from the U.S. Mint. These are the guys who produce our coins.

In short, you take a piece of paper, worth one cent… You print the words “Twenty Dollars” on it (at a cost of a couple pennies per bill)… And you make a profit of… well… about $20 (give or take a couple pennies). Right?

Actually, in a few instances… our government manages to LOSE money from MAKING money.

Wow. Losing money from making money… That’s got to be hard to do, right?

In 2012, it cost the U.S. Mint two cents to create a penny. I am not rounding up. It cost two cents. That is actually down from 2011, when it cost 2.4 cents to make a penny.

It’s not just the penny… Last year, it cost the Mint over 10 cents to create each nickel in 2012.

When you add it up, our brilliant government lost nine figures last year alone (that’s a number in the hundreds of millions) simply on minting pennies and nickels last year.

And our government lost more than $100 million on MAKING MONEY – something that should be a guaranteed profit!

Think about it this way…

The federal government takes your money in taxes – one-third of your income. And then it uses that money to mint pennies and nickels – at a major loss… at a cost of twice the face value of the coins!

Your government has an incredible power — to mint money out of thin air. And it is so incompetent, it manages to lose twice the face value of those coins on every one that is made.

Even crazier, this has gone on for years… and your government hasn’t done anything about it. For proof, check out this actual quote from the U.S. Mint’s 2012 Annual Report (emphasis mine):

The costs to manufacture and distribute both the one-cent and five-cent coins exceeded their face value again, just as they have for each of the last six years. This negative seigniorage concerns us, and we continue to explore ways to address it.

Your government has lost money from printing pennies and nickels each year for the last six years… And it is still “exploring ways to address it.”

Your government commissioned a two-year study from an outside company to figure out what to do, which just concluded in December 2012. The result was… nothing! It apparently needed more time to reach a conclusion.

How much time do you need? I can solve this problem in 20 seconds…

You have two choices:

  • Stop minting the coins you’re losing money on (for example, get rid of the penny).
  • Start minting money using a material (like steel for a nickel) that’s worth less than its cost of production.

Done! How much should I get paid for that absolutely correct advice? Didn’t even take me one year!

This is not rocket science. Australia figured this out in 1991 and got rid of its pennies. It’s been done before. Our government is just failing here.

I realize that a loss of hundreds of millions of dollars is nothing for a government that spends trillions of dollars more than it takes in each year. But it is an entirely fixable problem… that has gone on for six straight years. To me, this says something about our government.

And you know what? You and I might just be more foolish than our government…

For some reason, most Americans hold most of their money in American dollars — money “backed” by a government so inept, it manages to lose money making money (in pennies and nickels).

But money flows to where it’s treated best… that is one of the surest things in finance. And right now, our government spends two pennies to mint one penny… and spends trillions of dollars each year beyond its means.

I suggest readers get some of their cash OUTSIDE of the U.S. dollar and into a safer place.

Editor’s note: To learn more about True Wealth – and sign up to receive Steve’s “outside the dollar” recommendation – click here.

Incompetence: Losing Money while Making Money was originally featured on The Project To Restore America, a non-partisan project that aims to fix the underlying causes of our major national problems in the US through better fiscal management. Learn more at www.theprojecttorestoreamerica.com.

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  • JdLxx

    I’m afraid I’m a little confused. The author seems to be advocating minting coins with as little intrinsic worth as possible. Isn’t that the opposite of the desirable goal of making government money represent real value, using metals such as silver and gold?

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