If you favor paying by telephone or with a debit or credit card instead of cash, you probably give little thought to where dollars and cents come from before spitting out of an ATM. This tale is for those who prefer the look and feel – even the smell – of cold, hard cash.
The armored car is an integral part of the story.
You hear the low rumble of idling outside your bank or grocery store. You see the imposing, reinforced steel body ringed with mirrors affixed to a heavy-duty chassis. Darkened windows on the sides of the truck provide inside-out visibility. If someone is watching, you don’t know who.
An armed guard cautiously steps from the truck, one hand close to his sidearm. The other clutches a large canvas bag. A second guard, sometimes toting a shotgun, may shadow the first. You instinctively shy away, allowing unimpeded access to the bank or store. Chatting up a uniformed guard on the job for Brink’s (NYSE: BCO) or Loomis AB (OTC: LOIMF) is a bad idea.
Thousands of times every day, strategically timed cash deliveries foil those who would lie in wait to ambush the guards. It happens, of course, but less frequently than TV and movies would lead you to think. There’s a good reason why armored car companies shun media attention.
Once in a while, a made-for-TV scene plays out in real life. In May 2018, the rear door of a Brink’s truck flew open during rush hour on Interstate 70 near Indianapolis “blowing bags of cash onto the highway,” according to the New York Times. State troopers scooped up most of the $600,000, but not before dozens of people helped themselves to fistfuls of $20 bills.
The U.S. Treasury produces the nation’s paper currency and coins. U.S. mints in Philadelphia and Denver make pennies, nickels, dimes, quarters and half-dollars. The San Francisco mint is dedicated to proof issues and collector coins like silver bullion dollars. Some commemoratives come from West Point, New York.
The Bureau of Engraving prints currency notes up to $100 in Washington, D.C. and Fort Worth, Texas. The $500 bill was discontinued in 1969.
After production, the paper money is shipped to the 12 Federal Reserve banks and their branches. The Fed releases the currency to commercial banks based on public demand, which varies by the day, week and season. Cash-oriented businesses arrange for their own deliveries, typically by armored truck.
The U.S. Mint continually revises how it estimates demand. It uses long-range economic indicators and historical seasonal trends, such as Christmas, to decide how many coins to manufacture. It is tough to nail the exact amount. Banks need inventory but not too much.
Despite advance planning to mix newly minted coins with those in circulation, shortages occasionally occur. In an emergency, the Fed can work around advance shipping schedules to get more coins. Armored cars, along with registered and express mail, fill bank orders.
Armored trucks usually transport dimes, quarters and half-dollars. Tractor-trailer trucks carry pennies and nickels, each of which cost more to make than their face value. The comparatively low metal content of higher denomination coins offset low-end losses, said Patrick Heller, former owner and now communications officer at Liberty Coin Service in Lansing, Michigan.
The Mint purchases the plain metal discs called a planchet from which it strikes pennies. In September 2016, a tractor-trailer hauling millions of copper-plated zinc planchets en route to the Philadelphia Mint struck a concrete median barrier on I-95 in Delaware and burst into flames.
For 13 hours, clean-up crews used hand shovels and truck-loaded vacuums to recover the planchets scattered along the northbound lanes. Unlike the Brinks’ free-for-all in Indiana two years later, the public didn’t get close to the would-be pennies. Delaware State Police diverted traffic off the interstate at the exit before the crash site.
All other coin denominations come from coinage strip. The mint punches its own raw blanks to convert into finished planchets for production.
Banks returned badly worn or bent coins to the Mint, which melts them down and makes them into new coins. They also remove foreign and counterfeit coins from circulation. More than 20 billion coins worth in excess of $2 billion passes through Mint coin processing units each year.
The dollar bill, officially known as the $1 Federal Reserve Note, makes up about 45% of all paper money in circulation. For fiscal year 2018, banks ordered $2.2 billion of the bills that have borne George Washington’s portrait since 1869. The first $1 notes issued by the federal government in 1862 featured a portrait of then-Secretary of the Treasury Salmon P. Chase.
The Federal Reserve banks tell the Comptroller of the Currency each summer how much they think they will need in $1, $2, $5, $10, $20, $50 and $100 denominations. They pay only for the production costs. The currency itself is a claim on a given Federal Reserve Bank’s assets, making them a U.S. Government liability.
To get the money, each Federal Reserve Bank must have at least 100% collateral for the currency it requests. Typically that is U.S. Government securities. Gold certificates, foreign government securities and promissory notes also count.
The pace of U.S. currency production in 2020 will slow to its lowest level in at least a decade, approaching 5.2 billion notes valued at almost $146.4 billion, according to Coin News.net.
When a Federal Reserve Bank receives $20 bills, they come strapped in plastic-wrapped bricks totaling $320,000. The $100 bill ships in bricks of 100, or $10,000.
“When these bundles get to the banks and into circulation, some small percentage of them have production errors,” Heller said.
The Bureau of Engraving is supposed to error-proof the bills. The Mints are only expected to count the number of coins and their weight. Coin collectors react with glee when a Mint error is found because the scarcity drives up the coin’s value.
“The Mint really is just an industrial production plant,” Heller said. “The creators are more concerned with being cost-efficient and practical as opposed to being artistic or historic.”