Go to a coin show and price the following 1921 U.S. coins: the S-mint nickel, the P- and D-mint dimes, the quarter, all three halves, and the Peace dollar. What do they all have in common? Low mintages and high prices. Why is that? Because the state of the economy plays a very important role in the production of our currency.
The post-World War I years saw a slowdown in the economy of the United States. The decade before World War I, however, had seen booming economic growth unmatched in history. This amazing economic growth continued during the war, when many nations mobilized their national resources into command economy structures.
Recession reared its ugly head in 1921. The economy of North America took a nosedive and shrank by a much larger percentage than it did during the Great Depression. What caused the recession? The sudden halt of wartime production was a major reason. U.S. manufacturers had large inventories of goods that the consuming public simply could not absorb. American exports fell sharply at the end of the war. Add to that a massive influx of labor due to the returning troops.
The Federal Reserve (hereafter ?Fed?) played a major role in bringing about the recession. The rapid inflation that developed during the war accelerated after the Armistice of Nov. 11, 1918. The Fed wanted to rein in the inflation and protect the nation?s gold reserves. In order to accomplish that, near the end of 1919 the Fed began raising its discount rate on borrowing money. The last increase ? from 4.75 percent to 6 percent ? took place during the first two months of 1920.
What was the result of the recession of 1921? Twelve percent of working Americans were unemployed. The rate of the growth of prices (Consumer Price Index or CPI) took a tumble from 1920 to 1921. In 1920, it was +14.7, while 1921 saw it dip down to -11.5 percent ? in real money the CPI dropped 26.2 percent in two years. Those who kept their jobs saw their income shrink. The result in the drop of prices was bank failures, foreclosures and bankruptcies.
The sector of the economy that was hit the hardest by the recession of 1921 was agriculture. During the war, farmers borrowed heavily to expand their production to satisfy demand for foodstuffs. When the European farm industry returned to full production after the war, however, U.S. agriculture prices plummeted; this resulted in widespread financial ruin that included foreclosures and bankruptcies. How far did farm prices drop? Between 1920 and 1921, the price of wheat fell 62 percent; the price of cotton dropped 81 percent; and the price of hogs dipped 53 percent. When the 1920s began to roar, the farmers barely made a whisper.
It is important for numismatists to understand how history and economics affect the production of coins ? not just the history of the coins themselves. During a recession the economy slows down and millions of people are out of work. One effect of this: fewer coins are needed for everyday commerce. There is also less money available. Thus the government did not see either rising demand for coins from the banking system or tax collections to pay the expenses in 1921.
Our neighbors to the north were also hit hard by the recession of 1921. The unemployment rate of Canadians was 10 percent that year.
The Royal Canadian Mint in Ottawa produced some great numismatic rarities in 1921. The Canadian five-cent piece, a .925 fine silver coin, had an original mintage of 2,582,495. In May of 1921, the government of Canada passed an act authorizing the change of this silver coin to a larger coin made of nickel. Most of these coins ? given the nickname ?fish scales? due to their thinness ? were melted and only about 460 are known to exist. It appears that the silver five-cent piece was a victim of the recession of 1921. The surviving coins were generally found in sets purchased from the RCM. From 1922 until 1942, the RCM used pure nickel to mint their five-cent coins.
The 1921 25-cent piece ? with a mintage of 597,337 ? is considered a rarity in grades VF-20 and above. No 1921 25-cent pieces were melted by the RCM.
During the early to mid-1920s, there was very little demand for 50-cent pieces. Unlike the U.S., this denomination was not a popular coin of commerce. Only 28,000 pieces were released to the public between 1921 and 1929. When greater demand for the coin arose in 1929, the master of the RCM decided to melt its supply of 1920 and 1921 coins. This amounted to a total of 480,392 50-cent pieces. The decision was due to the belief that the public would suspect counterfeits if a large number of coins dated 1920 and 1921 were placed into circulation. About 75 or so of the 1921 50-cent coins have survived from mint sets that were sold at the time.
The economy began to pick up in 1922 and then the Roaring Twenties saw amazing economic growth. Within a few years, U.S. coin production returned to pre-1921 levels. But we will always have the recession rarities of 1921 to ponder and collect.
Landon-Lane, John and Rockoff, Hugh. ?Regional Interest Rates within a Monetary Union: Lessons from the United States,? Oct. 11, 2006, ec.europa.eu/economy_finance/events/2006/arc2006/arc2006_landonlane_en.pdf.
Walter Breen?s Complete Encyclopedia of U.S. and Colonial Coins, Doubleday, 1988.
Krause, Chester L. and Mishler, Clifford, 2005 Standard Catalog of World Coins, 1901-Present, 32nd Edition, Krause Publications, 2005.
?The Fordney-McCumber Tariff of 1922,? E.H. Net Encyclopedia eh.net/encylopedia/article/Kaplan.Fordney.
?Post-WWI recession,? Wikipedia en.wikipedia.org/wiki/Post-WWI-recession.
?Nickel (Canadian coin),? Wikipedia en.wikipedia.org/wiki/Nickel_(Canadian_coin).
?50 cent piece (Canadian coin),? Wikipedia en.wikipedia.org/wiki/50_cent_piece_(Canadian_coin).