10.01.2008 0

U.S. Mint Running Out of Silver?

  • On: 10/16/2008 09:39:03
  • In: Monetary Policy

  • There is growing buzz that the Federal government is limiting the availability of silver and gold coins due to high demand. The trouble appears to be much greater for silver, however, because more people can afford it—about $20/ounce vs. about $1,000/ounce.

    Even though Federal law states that the Treasury “shall mint and issue, in quantities sufficient to meet public demand” silver coins, it appears that the U.S. Mint is limiting sales of 2008 Silver Eagles because of “continuing high demand in the silver bullion coin market.”

    According to the U.S. Mint, quoted on the blog Silver Owl:

    “[I]n the first six months of 2008 production, the United States Mint produced more American Eagle Silver Bullion Coins (10.07 million) than we did during the entire 12-month period of 2007 (9.03 million). The United States Mint stands ready to continue this high level of production as additional blanks become available from our suppliers.

    “The United States Mint is making every effort to increase its acquisition of silver bullion blanks that meet the specifications and requirements of the law. In our efforts to meet unprecedented demand, the United States Mint is again preparing a request for proposals for additional silver blank suppliers.”

    In the meantime, in its May 23rd edition, the Wall Street Journal quotes the U.S. Mint as stating “The unprecedented demand for American Eagle Silver Bullion Coins necessitates our allocating these coins on a weekly basis until we are able to meet demand.”

    But why such an “exponential” increase in demand? It appears that demand for the coins has more than doubled. And by law, the mint is supposed to increase its production to meet demand, as Bix Weir wrote in an open letter to the Treasury, “even if it means the U.S. Mint drives up the price of silver bullion on the open market in order to obtain the silver needed to produce…”

    One would think the Treasury would be able to take advantage of a rising price of silver in minting these coins. But in the least, as Mr. Weir asserts, the additional cost of the mint buying the silver on the open market to keep up with demand for the coins would be passed on to the consumer, and thus the mint would be able to keep costs in line.

    Perhaps it really cannot keep up with demand, but that seems incredible to say the least. There is no shortage of silver. Perhaps the problem is that it trusts the currency—the dollar—used to purchase those coins even less than the people making the purchase. Or worse, that it is attempting prevent or forestall a run on the dollar that would utterly devastate the U.S. economy.

    Certainly, the weak dollar and inflation have contributed significantly to increasing demand for commodities across the board, including energy, metals, and food.

    At a time when people are looking to put a portion of their assets into hard currency, a reasonable act that protects their own wealth, the government is blocking them from doing so by refusing to sell one of the commodities that allows them to do it.

    The question is, “Why?” Is there really a supply shortage? Or is there something more ominous at play? Time will tell.

    ALG Perspective:
    Whatever the reason for the U.S. Mint limiting sales of the Silver Eagles, it is clear that demand for commodities is vastly increasing. As ALG News has reported, this is because investors are using commodities as a hedge against inflation. More and more, the dollar has been weakening, and the nation’s leaders have only paid it lip service in its defense.


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