The Mint Strikes Out
Susan B. Anthony, the $2 bill, and other bureaucratic fiascos
When the Treasury Department and the Federal Reserve System began an unsuccessful effort to force the now-notorious Susan B. Anthony, or "mini-dollar," coin into circulation, they continued a tradition of trying to force government theory into the marketplace that dates back to the early Lyndon Johnson administration. Since 1964, various elements within the Treasury Department's bureaucracy have managed to take a traditional government function—coining money—and shape it to fit views that ignore the demands of the store counter, vending machine, and purse. Widespread complaints about the new dollar's similarity to the quarter, and its subsequent failure, make up only a small chapter in that story.
By early 1963 it was obvious that the Treasury would soon run out of silver if it continued to use that metal for money. The prospect encouraged widespread hoarding of silver coins. That, in turn, aggravated a growing shortage and led to even more hoarding. Pending legislation that would permit a substitute for silver, the Mint's only recourse was to try to keep production high enough to meet demand.
In late 1963, when President Johnson called for a new half-dollar design to commemorate John F. Kennedy's assassination, the Mint stepped up production of the old Franklin-Liberty Bell design then in use. The public's immediate response was to hoard all it found. By the end of 1963, 92 million halves had been coined—and promptly removed from circulation by hoarders.
The Mint Bureau released the first Kennedy half-dollars in March 1964. Again, people squirreled away the coins. Although by August over 100 million had been struck—an all-time record—the Kennedy still didn't circulate. Eva Adams, who was then director of the Mint, responded by continuing heavy production of halves. By the end of December, over 205 million had gone to the banks. By the time the Mint stopped making 90-percent silver coins in early 1966, a total of 433,460,212 Kennedys had been made.
But the coins were useless because they didn't circulate. When the government began an active effort in the late 1960s to withdraw the 90-percent silver coins that remained in circulation, it pulled in mainly dimes and quarters. The half-dollar—thanks to the Kennedy craze and Mint mismanagement in promoting that issue—had vanished from circulation long before.
The silver alloy put into noncirculating halves, which the Mint struck in complete disregard of what was happening, could have produced nearly 867 million quarters or well over 2 billion dimes. Those were the denominations the public used. By the early 1950s, it had become obvious to anyone who went shopping, bought gas, or used vending machines that the half-dollar had lost popularity. Most people preferred two quarters. Indeed, one of the best ways to exasperate small store owners was to pay for a purchase with several halves.
After the Kennedy craze died down, the Mint continued to pour out that denomination in a cheaper alloy, containing only 40 percent silver. In 1971, when the price of silver was rising and there was no need for even token government support of the silver-producing lobby, the Mint secured legislation to permit coining of half-dollars in base metal, like the quarters and dimes. By that time, the half was virtually extinct as a circulating coin. The public didn't hoard the cheaper silver halves or the nickel-plated-copper ones. Those coins simply sat in banks, because most people wanted dimes and quarters.
Yet the Mint continued to produce halves. One of the most amazing justifications for this came in a Treasury spokesman's claim that the half was needed to operate coin changers. A four-year-old could have told that official that people put halves in change-makers because they want other coins that will work in most vending machines. Evidently the veil of officialdom managed to hide that fact from the Mint.
By 1978 the Mint had cut down on half- dollar output, finally realizing that the half was too large and unsuited for most vending machines. But even then it continued production, using the strange argument that it needed congressional approval to quit making it. Evidently, nobody at the Mint knew that on numerous occasions in the past, when demand for a certain denomination was low, the Mint had simply suspended coinage. The law only said that the half-dollar had to be of a specific weight and metal content—it did not prevent the Mint from suspending half-dollar production in 1922, 1924, 1925, 1926, 1930, 1931, and 1932. There were also years when no nickels, dimes, or quarters were made because the supply was adequate. The Mint, however, continued to turn out unneeded and unused halves.
In 1971 the Mint began coining the large, copper-nickel-clad Eisenhower dollar, supposedly for general circulation. The only satisfactory theory for that coin's existence (other than an excuse to honor a dead president and give the Mint staff something to do) was to provide a coin that would work in slot machines in the Nevada casinos. But the Mint was foiled again: the silver dollars began to disappear into hoards, and casinos had to buy privately made tokens.
The Ike dollar circulated even less than the half did. Although it had become obvious as far back as the 1880s that people did not want to walk around burdened with silver dollars, the Mint Bureau made over 570 million such coins from 1971 through 1978. (That did not include silver pieces made solely for sale to collectors.) The Mint Bureau, which had obtained a huge new plant in Philadelphia in 1969, evidently felt it had to keep its presses running.
In 1976 the Treasury reintroduced the two-dollar bill, after having stopped production a dozen years earlier. The "deuce" went out of production in 1965 because the public did not like it. The principal use of that denomination was to show civilians around military bases how much their economy depended on the Army/Navy/Air Force payroll: personnel paid in cash often got the two-dollar bill, which quickly returned to banks, to repose there until the next payday. (The National Guard also used this gimmick.)
The public disliked the deuce because it was too easily confused with a five or a one and because it wasn't necessary. As with the half-versus-quarter issue, most people preferred two singles to a two- dollar note.
Using the bicentennial celebration (and a new reverse design) to get additional publicity for the unpopular currency, the Treasury decided to resurrect the two. Within a few months, however, after the craze to get a bicentennial bill died out, it was obvious that the public didn't want the denomination any more than they had back in the early sixties.
The deuce was reissued on the strength of a fouled-up bureaucracy pretending that it knew how to cut costs. The Treasury claimed that large-scale use of the two would save money by reducing demand for singles. The dollar bill, being the most widely used denomination, has an average life of just about a year. Since it costs no more to print a two, five, ten, or twenty than it costs to print a one, the deuce theoretically would save the government money.
The problem with a two-dollar note, which the theoreticians in the Treasury had ignored, was that getting rid of the one-dollar bill would mean someone using a two for small purchases would be burdened with a lot of metal change. The Treasury then sought to overcome that obstacle with the Anthony dollar in 1979.
When the small dollar coin appeared, the Federal Reserve System had its district banks issue extensive propaganda to merchants, telling them how they could set up cash drawers so they could use the dollar coin and the two-dollar bill instead of singles. The theory behind the one-dollar coin was a good one: it cost about 3 cents to produce and had a possible circulating life of 25 years. In actual practice, however, the Mint Bureau seems to have made a studied effort to avoid any metallic substitute for the paper dollar.
The Mint finally wised up to the fact that the public didn't want to carry around a lot of heavy change, so it made the Anthony dollar small. But in producing a small coin, it made one that was easily confused with the quarter. Merchants and bankers, not to mention the ordinary consumer, hated the piece, and in 1980, the Mint cut back on production after nearly 847 million "Agony dollars"—as many came to refer to the numismatic failure—had been created to fill bank vaults and do little else.
The small size of the Anthony dollar was based on the Mint's observation that the public didn't want a larger coin. But in making a quarter-sized dollar, the Mint ignored the successful practice of many foreign nations: all it had to do was give the piece a distinctive shape.
Mint Director Stella Hackel-Sims, in justifying the Bureau's actions, claimed that "technical reasons" prevented the United States from making a coin that wasn't perfectly round. Yet the Mint Bureau's very own publication, the director's annual report, year after year reports on foreign coin production. In doing so, it includes coins that have scalloped edges or such variations as six, seven, twelve, or even four sides.
Canada, for many years, made a 12-sided nickel. It was first made in 1942, when the country switched to a brass alloy for the five-cent piece and did not want the new wartime nickel to be confused with the cent. The distinctively shaped coin was continued when Canada switched to minting steel coins in 1944.
To avoid confusion with smaller denominations, Great Britain made a brass 12-sided threepence until 1967 when it adopted the decimal system. In 1971, when the country adopted a pound of 100 pennies, it hit upon a seven-sided 50-new-pence piece. Though the new coin was about the size of the 10-pence, it was impossible to confuse them.
There existed other alternatives, as well. For example, the Mint could have coined the Anthony with a central hole, as European nations made nickel coins years ago to prevent confusion with silver currency. The list of nations that have successfully used square, perforated, or odd-shaped coins, for a modern economy, would extend for a full page. The Mint during the Carter administration, however, could not follow that idea in getting a practical dollar coin to the public. Instead, it suggested staining the coins purple, so they wouldn't look like quarters. (Naturally, people could also distinguish the dollar by its purple color as they groped for one in the dark, right?)
Instead of choosing alternatives that would make a mini-dollar practical, the government merely continued to push its quarter-like coin. It unsuccessfully tried to force it on the public through the Postal Service. It also paid American troops overseas with it. The GIs found that they could convert it to foreign currency only at a heavy discount, but it took congressional pressure to stop finance officers from forcing the pariah coin on a captive clientele.
Justifications for a dollar coin stem largely from inflation. The dollar doesn't buy what it used to and therefore may not merit a bill form. A similar problem has plagued the one-cent piece. Here, the Mint Bureau has dragged its feet so that for the past few years, the nation has had a penny shortage, and the coinage mints have had to strike billions of pennies that only go into hoards.
In 1974, when copper prices threatened to force the penny out of production, the Mint secured congressional approval for an aluminum cent. Although aluminum would have provided a substantial cost saving, even in times when copper has been less than 80 cents a pound, the Mint did not pursue that course. Five years later, when copper prices again hit record levels, the Mint had the same problem of trying to keep the cent in circulation. By the middle of 1981, it was considering a zinc cent with a thin copper plating, which would look similar to the familiar penny. In the interim, it has struck billions of copper coins that leave the Mint and go into hoards, as many people believe that copper will skyrocket in price.
A few years ago, the Mint Bureau hired a private consulting firm to tell it how to handle the country's coinage needs. One conclusion was that the cent should give way to a two-cent piece, because a penny now buys practically nothing. Yet no consideration was given to the historical fact that had forced the two-cent piece out of production over a century earlier: two one-cent coins are more practical in making change than is a two-cent piece.
The whole Treasury outlook seems reminiscent of a cartoon showing the writer Henry James surveying the world—peeking warily through the crack of his front door. The Mint Bureau, which supposedly is responsible for meeting the demands of real, everyday commercial life, has instead moved even more deeply into the ivory tower.
In February 1980, Mint Director Stella Hackel-Sims announced a halt to "Agony dollar" coinage, less than eight months after the new coin had gone out to the public. The Mint had managed to change an idea for improvement into a multi-million-dollar waste. But to anyone familiar with the Mint's history, the response was, "What else is new?"
The late Ray Young was a numismatics buff and assistant editor of Commodity Journal until his death last fall.