The International Business of the U.S. Mint
A Director's Forum with Henrietta Holsman Fore, Director of the United States Mint
It is truly an honor to be here with you today. Knowing of the Woodrow Wilson Center over the years, I have enjoyed reading your papers, and being one of your many loyal listeners on numerous international subjects. I carry great respect for the Center’s work. I like your Chairman Joe Gildenhorn very much, and remember very fondly the years I worked with Lee Hamilton and Mike Van Dusen when I was at USAID.
I am pleased to have this opportunity to discuss the business practices of the United States Mint and its status as a leader in international business but, to understand its role internationally, it helps to understand its history.
The earliest American coins were influenced directly by many of the Founding Fathers.
There was no interest in paper money in the early United States after the inflationary experiences of the Revolutionary War. Instead, monetary discussions centered on establishing a monetary system that would allow for service of our revolutionary war debt, and on what standard our nation’s monetary system should be based.
In those days, the new nation was using the currencies of various foreign nations. Paper currency was largely distrusted because it was irredeemable, unlike a coin made of silver or gold.
Throughout the colonial years, much of the young nation had become accustomed to the Spanish dollar, and its fractional components – the real, the half-real or the “medio,” and so on. Three colonies – Connecticut, Massachusetts and Virginia – had even declared Spanish dollars as legal tender.
A variety of other currencies circulated throughout the young nation as well – from the British half-pence to the French sous and various gold coins from France, Portugal, Spain and Britain. With the coins of so many countries in circulation here, America’s money supply was nothing short of chaotic. Recognizing the need to create a unified standard of coinage, Congress adopted a resolution in 1782 declaring the dollar our national monetary unit – based on the
Spanish milled dollar. Because the coin could be broken into eight portions – each a “piece of eight” – in our Westerns and even today, people continue to refer to a quarter as “two bits,” referring to it being equivalent in value to two pieces of eight.
The more complex matter of determining exchange rates, and the value of the new dollar was left to Superintendent of Finance Robert Morris who drafted a proposal that one American dollar should equal 1,440 Spanish dollars. Congress took no action on the matter until 1783, when a young Congressman from Virginia named Thomas Jefferson became chair of the currency committee and eventually designed the monetary system we now know.
However, a monetary system is only as strong as the monetary standard to which it is tied… a topic which Alexander Hamilton focused on as the United States’ first Secretary of the Treasury.
Among his first acts was to propose the establishment of a national mint, to ensure a consistent and uniform national coinage. The foreign coins in use at the time varied greatly in consistency and purity, making them poor choices for a stable monetary standard. He argued for a bi-metallic standard that defined a dollar in terms of silver or gold.
Gold and silver coined by a national mint would engender confidence among the business community in the emerging government and its national banking system. Congress agreed, and passed an act creating the Mint on April 2, 1792.
From humble beginnings in a single building in Philadelphia 211 years ago, the United States Mint has grown into a world-class manufacturing operation with nearly 2,300 employees in four time zones, and a reputation worldwide for artistic excellence, integrity and security.
In its more than 200-year-history, the United States Mint has fulfilled its obvious economic and monetary role but it has filled a more significant role in asserting our nation’s independence.
It is customary for emerging nations to establish mints, not only to regulate their coinage, but as an act of sovereignty… of independence… of national pride… and so they could trade for goods with other nations.
But United States coins are more than just money. They are reminders of the values Americans share. From the poorest of the poor to the richest of the rich, coins are a common touchstone for all Americans.
Coins are, in a very real sense, history in your pocket.
The words and symbols that define us as Americans have a permanent place on our coins. “Liberty”… “In God We Trust”… “e pluribus unum”… the profiles of our country’s greatest leaders… the
bald eagle, symbolizing America’s freedom… Each is featured on our coins.
These elements make United States coins unique. They are small declarations of our beliefs. They are images of how we see ourselves, our sense of sovereign identity… and they are beacons of
inspiration to the world.
United States coins have been silent witness to the American experience. Our coins went with Lewis and Clark as they explored the Louisiana Purchase to the Pacific Ocean. Our coins were the target of trainrobbers and stagecoach bandits throughout America’s westward expansion, and our coins have gone everywhere Mankind has…
But few know that the United States Mint has spent years building a relationship of trust with its more than 3 million domestic customers. An organization is only as successful as its customer loyalty, and we work very hard to maintain it.
Development of the Internet, and an increased web-friendly commercial environment has shifted consumer behavior away from dealers by allowing customers the opportunity – and ease – of purchasing directly from the United States Mint.
And this is the market we are now focusing on internationally – direct sale to direct individual customers, and direct delivery to their door… throughout the world. This will change the distribution of mints. I encourage you all to visit us at usmint.gov to see what I mean.
The United States Mint was ranked among the top 30 online retailers in the world and, In FY02, the United States Mint earned more than $100 million in online sales. Using the Internet in this way is not just good for business… it is good for government services and customer satisfaction.
Government should be measured like business. It inspires organizations to provide better value to customers, better management of funds, and more conscientious spending.
We are also committed to continually improving the coinmaking process – such as extending die life, ensuring machine availability, and improving packaging and shipping.
We are exploring ways to reduce costs – from shortening cycle time to centralizing distribution and eliminating multiple warehouses -- to improving the quality of these coins we produce, as well as the quality and safety of the work environment for Mint employees.
Last year, the United States Mint contributed more than $1 billion to the Treasury General fund and produced nearly 15 billion coins. We make money in several senses.
We have introduced businesslike government practices, and we think more government agencies in the United States and around the world would benefit from this approach.
We have improved the safety of our work environment by reducing lost-time accidents by 42 percent.
We streamlined our manufacturing operations to reduce the cost of circulating coinage, and slashed our “cycle time” – the time it takes to turn raw material into a coin – from 300 days to 117.
As a businesslike government agency, the United States Mint places great weight in the opinions and beliefs of its customers.
We strive to provide world-class customer service and, according to the American Customer Satisfaction Index, the United States Mint is number 1 among government agencies, and is in the top ten of the business world -- standing with industry leaders like Pepsi, Mercedes-Benz and Heinz.
With tools like customer satisfaction surveys, we believe government services and agencies can – and should – be measured in the satisfaction of our many stakeholders.
Whether they be taxpayers, Congress, the Federal Reserve Bank or any of the other interests we serve, we look forward to continuing to find new ways of providing world-class service.
We are in a renaissance of coin redesign and coin collecting in America. It is a new century and we are embarking on an endeavor to begin a redesign of our nation’s coinage.
American coinage has gone through many variations throughout the nation’s history, most significantly at the turn of the last century when we changed designs every seven to eight years.
However, America in the 20th century saw comparatively little change.
As President Teddy Roosevelt remarked when he set out to improve the look of U.S. coinage, “A beautiful country like ours deserves equally-beautiful coinage.”
We at the United States Mint are pleased that Congress authorized -- and the President enacted -- a four-year series of changes to the nickel to commemorate the bicentennial of the Louisiana Purchase and the Lewis and Clark Expedition.
American collectors and educators look forward to such coin redesign initiatives as exceptional vehicles of education and the numismatic collectors industry.
We look forward to this renaissance, and are working closely with Congress to ensure this process continues.
In a year’s time, I meet with thousands of coin dealers, hobbyists and enthusiasts… and the overwhelming opinion is that reinvigorating American coinage with new designs is a good idea.
But should they be bimetallic, like the euro and Canadian coinage?
Should they change in shape, like Japanese and Indian coins? Should we change denominations like the euro – which has a 2 cent, and a $2 version? Should the penny and nickel be smaller than the dime? What metals should be used in coinage? There are many questions that ask for further consideration.
It is a new century and it is a good time to relook at America.
While our role in making United States coins is familiar to most Americans, few know how strong we are in the international marketplace.
We are leaders internationally. This year, we are beginning to expand our customer base abroad. The United States Mint will make its popular numismatic products – proof and uncirculated sets, rolls and even bags of certain coins – available to individual private citizens abroad, rather than limit sales only to foreign dealers.
The United States has a long history of producing circulating coinage for other nations. Over the past two centuries, the United States Mint has produced coins for 41 nations. We produced
foreign coins as recently as 1984 when we minted coins for panama and the Philippines. In fact, we were minting coins in manila for the Philippines during President Wilson’s administration.
But we no longer mint coins for other nations. Public and private mints provide this service for other nations. For example, who wins the bids to mint for India is important: the British Royal Mint, the Royal Canadian Mint, La Casa de Moneda de Mexico, and the mints of many nations stand to generate substantial revenue in this way.
One part of the United States Mint is a monopoly on legal tender coins in the United States. Besides ensuring sufficient coinage to support the needs of U.S. commerce, the United States Mint has developed a strong international presence… And here it is wide open competition for the world markets.
Many Americans would be surprised to learn that the United States mint is the largest seller of gold, silver and platinum bullion coins in the world.
According to the London-based World Gold Council, who conducts surveys each quarter to assess sales of gold bullion coins... as of the last quarter, the United States Mint is number 1 in sales of gold bullion in North America with nearly 70 percent of the market. We also lead the world as a whole, with 48 percent of the market.
We are also the world leader in the silver bullion and platinum bullion market, based on sales. The volume of our production of these precious metals products is far larger than those of any other mint.
Some of the largest corporations in Japan – like Tanaka – and the largest banks in Hong Kong, South America, the United Kingdom and the Middle East – like the Hang Seng Bank and Hong Kong Shanghai Bank, United Overseas Bank of Singapore, Arab Bank of Egypt, Commerce Bank, United Bank of Switzerland and DeutscheBank – have sold our bullion and numismatic products.
In 1994, The United States Mint made history when it opened china – to American coins. The United States Mint began selling in China prior to the summer Olympics in Atlanta in 1994. Once we opened that market, the mints of other nations soon followed suit.
We are currently exploring means by which to achieve deeper market penetration for our gold American eagle Products in China, as well as India.
With high profit potential, the uncertainty of the stock market is making bullion and collectible, commemorative coins, increasingly desirable as investment vehicles. As a result, the international coin market is a dynamic one. With vibrant trade in investment-grade coins in cities like Tokyo, Frankfurt, Zurich, Riyadh, New York and Chicago, international coins are helping to draw some of the world’s financial centers together.
I should add that the United States Mint has sold coins on every single continent – including Antarctica. In 1996, we sold United States Olympics commemorative coins at Pole Station Antarctica, giving new meaning to the term “cold cash.”
One coin that caught the eye of the international community recently was the 1933 gold double eagle. Since the year of its creation, it has been the coin of legend. It boasts both rarity and an epic history.
In 1933, when President Roosevelt limited private ownership of gold, the United States Mint did not distribute the 445,000 $20 gold double eagles it had produced for that year. In 1937, they were destroyed.
However, the mint’s chief cashier had stolen 10 of the coins, substituting gold blanks in the bags in the vaults, and sold them to various collectors around the world. Federal agents recovered nine of them, but the tenth wasn’t discovered until 1944 in the collection of Egypt’s King Farouk. In 1952, the United States Government officially requested the return of the coin, as it was stolen property – but its whereabouts remained a mystery, and vanished for 45 years. It appeared and disappeared on the London coin markets over the years. When it surfaced again in 1996, a British coin dealer was arrested while trying to sell the coin in a sting to undercover agents in New York City.
While the ownership of the coin was debated in court for several years, the coin was kept in what was thought to be a secure location – the World Trade Center.
The coin escaped harm once again when the coin was moved to Fort Knox in a settlement agreement reached out of court only weeks before the twin towers of the Trade Center were destroyed by terrorists on September 11, 2001.
The coin was sold at auction in 2002 for a record-shattering $7.6 million. It is the allure of such coins that makes the international coin market so exciting. This is the most valuable coin in the world, and the capstone of the world coin markets.
Nearly 100 different countries are impacted directly by the United States Mint’s operations – from Argentina to South Africa, from Iceland to Jamaica.
In countries as wide-ranging as Great Britain, Honduras and the Antilles, the United States Mint has customers, suppliers, representatives, authorized purchasers and distributors.
The key to our success internationally will be our commitment to our brand, our quality, and our sound, proven business practices. The United States Mint makes the legal tender coinage of the nation, with top quality and, when we say “mint condition,” we mean “mint condition.”
As the largest mint in the world, we have a responsibility to foster and maintain solid relationships with, and to set a good example for, our sister mints in other countries.
We are working closely with the international mint community to ensure that all mints can learn from each other – from better policy relationships with financial ministries, to business strategies, to strategic planning, to resource sharing, the United States Mint is a leader in helping all mints improve their position and be a part of the world community.
This is critical, as mints currently face the challenges of three industry trends – increased privatization of minting operations, an aggressive pursuit of foreign accounts… and some mints getting out of production altogether.
Compared to the Dow Jones – which has been off 5 percent in the last 12 months – As of yesterday, platinum prices are up nearly 20 percent over this time last year, and gold prices are up nearly 11 percent. While precious metals products are doing well right now, Demand for circulating coinage is down across the board. This is true in the United States, and it is true throughout Europe.
In a very successful, historic initiative to mint and distribute the new euro, the European mints overproduced two years ago and, now, are in a de facto production moratorium until coin demand normalizes.
With excess production capacity available, these mints have turned to collectible-grade coins usually in precious metals – which makes for more competition for the United States Mint. Though mints may be monopolies in one respect, the competitive markets are at work for those with extra production capacity…
Mints are bidding on each other’s production, which drives down prices and they are focusing on marketing’s capacity to sell more commemorative products in U.S. marketplace.
We have traditionally had a strong presence in the European nations… and their increased reliance on collectible, precious metal coins -- like the Australian gold kangaroo coins or South Africa’s gold krugerands, or any of the many other nations broadening their product portfolios – increases the competition for a limited number of customers.
In this environment, with ever-fluctuating market forces, mints worldwide are employing sophisticated business systems to rapidly adjust to volatile market forces.
I currently serve as the Vice President of the Mint Directors Conference, an association of international mints whose goals are to inspire stronger relationships between them, to discuss the industry, coinmaking technology and areas of possible resource-sharing.
The group – which consists of 42-member nations and a far larger group of private, parastatal and banking authority mints – meets biennially and, next year, the United States will host the meeting in San Francisco.
Among other things, I will be appointed president of the Mint directors conference, which will be a great honor but it will also be an opportunity to continue the group’s progress toward improving coin design and coinmaking processes – and even protection -- the world over. Suggestions on our policy agenda are warmly invited.
We are exploring the creation of an exchange program with other mints from around the world to bring artists together to share ideas and techniques.
Through our United States Mint Police, we are also sharing expertise in high-value asset protection with other national mints and providing liaison to Interpol.
In addition, we are actively recruiting nations with independent minting authority or a ministry of finance to become members of the Mint Directors Conference. Any international group’s success is directly related to its participants.
Next year’s Mint Directors Conference will remind you of APEC Ministerials or World Bank Meetings. It will be the first meeting of the group on U.S. soil in 20 years, and it will be a watershed moment for international coinmakers.
For the first time in history, marketing will be discussed as a subject equal to production, technology and other topic areas.
As mints all over the world are learning, government services are not immune to the need for a solid foundation in marketing.
While we are all legal tender monopolies in our respective nations, we have to fight to attract and retain our national and international customers like any business… and we are all fighting for a part of a very competitive precious metals market.
That marketing is being added to the roster of topics to discuss in this international forum is a very positive sign.
I should point out that, even though we are the world’s largest mint, we can learn much from others.
Many of the smaller mints have been very good at leading research and development and innovative design concepts on coins – hologram coins, coins with edge lettering and so on – that we can draw from.
From increased use of industrial lasers, to cutting-edge customer relationship management techniques – even nanotechnology, which had its own webcast on the Woodrow Wilson Center website Tuesday, will play a large role in tomorrow’s manufacturing world – particularly in energy conservation and clean environment efforts worldwide.
It is more vital than ever for mints to market their activities. Marketing is key to ensuring that customer needs are met, to ensure cost-effectiveness of service offerings and to ensure that customer satisfaction is maintained… or improved, if possible. This is the essence of what it means to be a businesslike government.
And this realization is sweeping the world of minting.
Making the world’s best coins requires a commitment to sound business decisionmaking, strategic planning and state of the art manufacturing processes.
Values are also at the heart of any successful organization. We believe the United States Mint can only achieve its goals if all employees work toward accountability, leadership, respect, teamwork and communication.
With a focused, business-minded approach, the United States Mint will not only continue adding to its rich history, but continue to provide leadership in the international minting community, the international metal and coin markets, and world-class service to numismatists everywhere.