Devaluation, Inflation, and Currency Manipulation

The Treasury Department has taken a number of important steps in recent years to improve its efficiency and cut costs. We've increased the use of electronic transactions through our “Paperless Treasury” campaign, significantly reduced energy consumption, identified ways to use existing workspace more effectively, and implemented other critical savings initiatives.

But there's more work to be done to build on that progress. In June, President Obama issued an Executive Order establishing the Campaign to Cut Government Waste, charging federal agencies with scouring their operations from top to bottom for further ways to streamline government and cut costs. And Vice President Biden has been leading the effort to make government more efficient and effective, ensuring that we are responsible stewards of taxpayer dollars.

One area where there's an additional opportunity to cut taxpayer costs is reducing the current surplus inventory of $1 coins. That's why we're announcing today that – effective immediately – the United States Mint is suspending the production of new Presidential $1 Coins for circulation.

To understand why we are taking this action, it's important to start with some background on the issue.

In 2005, Congress enacted the Presidential $1 Coin Act. That law mandated that the United States Mint issue four new Presidential $1 Coins each year from 2007 to 2016.

When each new Presidential $1 Coin is introduced, Federal Reserve Banks order enough coins from the United States Mint to meet initial demand from financial institutions. For a variety of reasons, however, the demand for each of the new Presidential $1 Coins usually drops significantly soon after they are introduced. As a result, financial institutions have ended up returning a substantial amount of the $1 Coins that were initially minted – about 40 percent – to Federal Reserve Banks.

At the end of the most recent fiscal year, the Federal Reserve Banks held nearly 1.4 billion surplus dollar coins in their vaults – enough to meet current levels of circulating demand for more than a decade. Based on current trends, the Federal Reserve estimates that its surplus inventory of $1 coins will grow to 2 billion by the end of the program in 2016.

More inflation will increase the unemployment problems we have by killing coins (which have physical AND neumismatic value) and printing more paper currency (which has no physical value). Large value coins actually help to level economies. Less coin and more paper will result in a weaker currency, and less economic stability.

Reducing the Surplus Dollar Coin Inventory, Saving Taxpayer Dollars

As expected, Ben Bernanke provided a rational for more quantitative easing Friday, declaring: "Inflation is running at rates that are too low relative to the levels the [FOMC] judges to be most consistent with the Federal Reserve's dual mandate" of price stability and full employment.

Predictably, Euro Pacific Capital president Peter Schiff wholeheartedly disagrees with that - and just about everything else Bernanke says.

"It's scary how clueless Bernanke is," Schiff says, noting the dollar is at or near record lows vs. several major currencies and commodities from agriculture to zinc are soaring.

"That is inflation," he says, dismissing this morning's tame CPI data as hedonically adjusted government fiction. "As money loses value prices are going to rise because you need more diminished dollars to buy goods and services."

Moreover, Bernanke's suggestion that more inflation will spur employment growth is the really "crazy thing" in today's speech, Schiff says. "You don't create jobs by creating inflation," he says. "You create jobs by reducing regulation and lowering taxes."

A pure libertarian and devote of the Austrian school of economics, Schiff expressed two main concern about Bernanke's policies:

One, the government is trying to prop up an economy based on debt-fueled consumption, rather than letting it "restructure," albeit from much lower levels.

Two, more quantitative easing will lead to more big government.

"What Ben Bernanke is saying to Congress is 'run up the deficits because I'm going to monetize it for you,'" Schiff says. "He is enabling the government to get bigger, which is going to make employment worse, not better. He's throwing gasoline on a fire."