How can you lose money by printing money?

It seems hard to screw this one up… Take a piece of paper, print “this paper is worth $100” on it, and poof, you made a profit of $99 and change.

[ad#Google Adsense 336×280-IA]Yet our government manages to lose money minting money. As I’ll show you, the numbers are just ridiculous. And there’s an easy way for you to profit on the trend…

In the latest Annual Report from the U.S. Mint, I learned that it costs 1.8 cents to make a penny. And it costs over nine cents to make a nickel. Can you believe it?

Here’s a table from the Mint’s Annual Report showing this:

The profit from minting money (or “seigniorage,” as it’s officially called) is simply the difference between the face value of the coins and the cost to produce them.

Right now, the Mint makes up for its losses on every nickel and penny primarily by minting dollar coins. But since 2007, the U.S. Mint has become less and less “profitable.” It has transferred less and less “profit” from minting money to the Federal Government.

If the trend continues, soon the government will lose money by minting money. Amazing.

The downtrend will almost certainly continue for 2011… With the weakening of the dollar, the cost of the metals to make coins is up. So the government will have an even smaller profit on minting money this year.

What can the government do? The simplest thing would be to change what the coins are made of… But that’s not as easy as it sounds. According to the Mint, “The compositions of five-cent, dime, quarter-dollar, and half-dollar coins are codified by statute. Any authority to change the composition of these denominations requires a statutory amendment.”

What can you do? Seems like you could fill up a dump truck full of nickels and melt ’em down for an instant profit. Heck, pennies from before 1982 would be even more profitable… There’s 2.6 cents worth of metal in pre-1982 pennies. But you can’t. A couple years ago, the government made it illegal to melt money for more money.

So you can’t back your dump truck up to buy coins at face value and melt them at a higher value… But you can buy U.S. coins for their metal content.

[ad#article-bottom]Old silver coins (minted before 1965) have real silver in them. And even though many of these coins are 100 years old or more, you can buy bags of them for a small premium over their meltdown value. The bag is just full of random dimes and nickels and such, measured by weight. (If you want to know the melt value of a particular silver coin, here’s a handy calculator.)

They call bags of these old silver coins “junk silver.” But there’s nothing “junk” about them. Like I said, they contain real silver.

Our friends at Asset Strategies ( have dealt in these junk silver bags for decades. I spoke to them on Friday, and they’re selling bags of junk silver to our subscribers at a premium of less than 4% over their melt value. They’ll extend that price to DailyWealth readers this week.

If you’re looking for a low-premium way to get out of paper money and into precious metals, consider old U.S. money… Consider buying old U.S. silver coins.

Good investing,

— Steve Sjuggerud

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Source:  Daily Wealth