Texas (Kitco News) -- Rep. Ron Paul, R-Texas, has one question for the U.S. Mint: why is there a coin shortage?
He is aiming to get to the bottom of this during a scheduled April 7 hearing of his U.S. House Subcommittee on Domestic Monetary Policy to examine the bullion programs at the U.S. Mint.
“We are going to try and find out what the Mint has done so they can give us a better answer as to why there is a shortage. Why can’t they keep the supply of coins up?” said the congressman in an exclusive interview with Kitco News.
Demand for precious metals in the futures markets and in physical gold bullion coins increases as the dollar weakens, which often leads to coin shortages.
Part of the problem lies in manufacturing the blanks, said Paul. The blank planchets are not made at the Mint, which hasn't had the production capacity for this stage of the minting process since the budget cuts of 1981.
“Looks like we don’t even get (all) blank coins made in the U.S. – there is a contract with a foreign company, which makes no sense at all,” said the congressman.
Today there are three refineries that supply planchets to the Mint: VennerBeck Stern Leach in Rhode Island, Sunshine Minting in Idaho and Goldmark in Perth, Australia.
Paul said that a U.S. company may appear at the scheduled hearing with a solution.
“They can help relieve the shortage by providing these blank planchets for the Mint,” he said, not revealing the company.
“I think there is a huge demand and it is being provided by a bureaucracy, and the bureaucracy isn’t responding very well -- but I can’t believe there is any excuse for this,” he said.
The Mint is planning a major overhaul of the metals composition of coins and how they manufacture them. The Coin Modernization, Oversight and Continuity Act of 2010 gives the Mint greater flexibility in meeting the demand for bullion coins as well as meeting the demand for gold and silver numismatic items.
Give Them a Choice: Paul
Paul is a strong advocate of currency backed by precious metals
Paul wants competition in currencies, and to do so, he said the tax on coins needs to be done away with. “Money shouldn’t be taxed with sales taxes or capital gains taxes, that would be my goal,” he said.
In March, Paul introduced H.R. 1098, the Free Competition in Currency Act of 2011, which would repeal legal tender laws in order to prohibit taxation on gold, silver, platinum, palladium and rhodium bullion. The bill has been referred to the House Committees on Financial Services, Ways and Means, and Judiciary.
A staunch critic of the Federal Reserve, Paul said that instead of arguing his case for the Fed to close down tomorrow, he’s arguing the fact it should not hold a monopoly. “They have a monopoly on a type of money that isn’t even constitutional,” he said.
“We would use no force, nobody has to use gold and silver coins,” said Paul. Rather, he said the Fed does use force. “They are a cartel and they make us use Federal Reserve notes,” he said.
The market provides a competition; however, he said there is always the threat of being taxed or the gold and silver being taken away as in the 1930s.
Paul explained that ideally, we should allow the market to pick the currency. “If you deal with international finance, people can use different currencies. Within the U.S., I believe you literally could, especially in this age of computers, that you could calculate two different currencies without difficulty.”
Return to Gold Standard
A common assumption is that Paul is calling for a return to a gold standard. He clarified, saying he is not so inflexible.
“I wouldn’t be overly rigid and say, ‘you must have a gold standard, you must go back to what we had.’ Our gold standard was imperfect, even though it worked better than the paper standard,” he said.
Lawmakers in several states, including Tennessee, Virginia, New Hampshire and South Carolina, have introduced bills to look into minting their own currencies in the event of a complete breakdown of the U.S. Federal Reserve. In Georgia, a bill to make the state only use gold and silver is in committee.
Utah has received the most media attention on this subject as the House and Senate have passed HB317, which would recognize gold and silver coins as legal tender and exempt them from certain state tax liability.
“Governments over the many, many centuries have always demanded monopoly control over money. Even when gold and silver were principally used in the economies, they still wanted monopolies,” Paul said.
Hence, he is not confident that any Utah law would be allowed to stand. “Well, they are going to fight it tooth and nail. They are not going to go along with this even though we have the law and Constitution on our side and it should appeal to all Americans to have competition.”
Interest Rates
Regarding U.S. interest rate hikes, Paul said they are going to be gradual and steady but they are indeed coming. “The next big shoe to fall will be interest rates going up on municipal bonds -- that means a lot of these bonds will start defaulting,” he said.
Presidential Run
Paul has not ruled out a run at the presidency but has not confirmed it either. When asked what would stop him from running, he said: “minimal support.”
“So if there is a receptive audience out there, that is going to influence my decision,” he said. “I have to have a good sense that the message I have will be received well. Last go-around I kept talking about the dangers of the financial and housing bubble. This go-around, I’ve been concentrating on the dangers ahead for the dollar.”
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