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Some coin forecasts hit the target

Editor’s note: The following was written in early 2006. It was not published then. Now it looks like both a forecast of what was to happen and a time capsule. See how a hobby veteran saw the hobby’s near future in light of its historic past.

The Congress has just provided us with a batch of new coin programs to consider over the next few years. Everyone will not be happy with the situation, but there is little that can be done about it now as it is now the law of the land and we will be looking at a lot of new coins, which usually means a lot of new opportunities.

The fact is there is a good deal of history to suggest that the Congress rarely understands what it is doing when it approves new coins. Congress historically seems to go to extremes either approving everything and anything or nothing. It is probably only appropriate that the current Congress, which has been accused of approving just about any project a member might want no matter how ridiculous, would lump together Presidential dollars, First Lady gold coins, a special new bullion coin and special issues for the centennial of the Lincoln cent while at the same time keeping the Sacagawea dollar as part of the $1 coin production, giving us five dollar coins each year where no one is using the one we currently have.

If that sounds a bit like a numismatic Christmas tree of goodies, it is probably because it is, as this has been one of those congressional sessions where apparently the word “no” is not in favor.

The ups and downs of congressional interest in coins have a very long history and the recent Congress and its sudden generosity in terms of new coins fits right in. Back in 1792 when lawmakers first attempted to tackle the matter of coins, they cheerfully authorized the first denominations of the United States and then engaged in a lively debate about whether to put George Washington as the President on them. Washington was finally forced to break the stalemate himself siding with the House of Representatives against the Senate in opposing the use of the President’s portrait on the coins. It is interesting as the current Congress has now gone full cycle in opting to have $1 coins featuring every deceased President no matter what their record was in office.

After figuring out what should be on the coins in 1792, there were a few modifications especially regarding the cent and half cent, which were initially too large, but after that Congress would be in one of its negative periods where members apparently wanted very little to do with coins and new ideas for them. A 2-cent piece was floated as an idea in the early 1800s, but it was simply put on the back burner as the Mint had its hands full with the denominations that had been authorized. The last thing it needed was still another denomination that it had neither the copper for nor the spare time to produce. Otherwise, the Congress was basically silent on what coins there should be for decades, letting the Mint take care of changing designs and other routine matters.

Getting Congress to do anything regarding the coins was not easy. The gold coins were slightly too heavy and in the 1820s virtually none were circulating as if you received a gold coin you simply sold it to a broker who would in turn export it for a small profit. This went on for years and is one of the reasons why half eagles of the period are so scarce as they were basically exported, but the Congress wanted no part of the problem, but was finally forced in 1834 to take action by slightly reducing the weight of the gold coins.

2012 U.S. Coin Digest: Dollars

Pulled directly from 2012 U.S. Coin Digest, the most complete and detailed color guide to U.S. coins!

With that action, Congress would once again basically get out of the coin business except to approve new branch mints in New Orleans, Charlotte, N.C., and Dahlonega, Ga., which sounded good to members as they would provide federal jobs in key places.

Then the discovery of gold in California in 1848 forced a change in attitude. All that gold had to be used for something and the Congress was immediately confronted with a flurry of proposals for new gold coins.

With the benefit of over 150 years of history since, it appears that the Congress at the time approached the situation with some thought. Initially, a gold dollar and double eagle ($20) were approved. While they were probably uncertain of the actual commercial need for new denominations, there was so much gold in California that the idea probably seemed like one that could do no harm. In fact, the gold dollar and double eagle actually proved to be popular. At about the same time the Congress failed to approve gold $25, $50 and $100 coins, which were being requested by some in the West. It is hard to know just what might have happened with such denominations, but in fact it is hard to second-guess what the Congress did at the time.

It is probably a little easier to second-guess the next action in 1851. When Congress was faced with a situation where the cost of producing silver coins was rising to the point where the metallic value was more than face value, the Congress took a somewhat peculiar approach to addressing the problem by authorizing a 75 percent silver 3-cent piece.

From today’s perspective, it looks like an attempt to stall in the hope that the problem of expensive silver would go away and in the best spin of the day the 75 percent silver 3-cent piece was claimed to be a public service as it would make it easier to buy stamps at the 3-cent first class rate.

Just how often the average American was buying a stamp at the time is subject to question, but members of Congress had their story and they were sticking to it.

Finally, in 1853 the Congress took the action it should have taken earlier by reducing the amount of silver slightly. The Congress also made the 3-cent piece 90 percent silver like the rest of the silver issues.
Also authorized was a $3 gold piece and that denomination as well is suspect. Perhaps feeling that stamps were the major purchase in the lives of most Americans, the $3 could enable you to buy an entire sheet of stamps instead of repeatedly buying a single stamp with your 3-cent piece. Did the country need a $3 gold piece?
Probably like the gold dollar and double eagle, with all the California gold being mined and sent east, the denomination would do little harm, but the fact remains the $3 was a denomination that was not really needed and never really explained.

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The Civil War would see a flood of congressional action, but realistically the action of the time can all be explained as responses to a major emergency. That makes the new bronze cents of 1864 and 2-cent pieces as well as copper-nickel 3- and 5-cent coins hard to fault.

What happened a decade later is another matter. By the 1870s there were apparently enough votes in Congress to approve just about anything desired by the Western mining interests. In fact there was some logic to the situation as the vast wealth of silver in the Comstock Lode, while certainly good for the nation, was not especially good for the price of silver. Having the government take steps to encourage the use of silver was probably perfectly reasonable, but having the government turn into the major consumer of silver in an attempt to keep the price up was another matter.

It is possible to go into great detail over the motivations and consequences of the silver legislation that started in 1873. The first idea of a Trade dollar was probably a decent idea on paper as a slightly larger silver dollar would use more silver and it would match the silver weight of the Mexican peso, which dominated Chinese trade. Additionally, such a coin was being requested by merchants who were trying to deal in China where only silver was accepted and where the merchants were faced with a situation of having to change their money into Mexican silver, an activity that raised their cost of doing business. Since there was more than enough silver and a group with a legitimate purpose for the 420-grain Trade dollar, that would have seemed like a reasonable idea to most. (The standard silver dollar was 412.5 grains of .900 fine silver.)

It was a few years later when the Congress revoked the legal-tender status of the Trade dollar that things started to become confused. Actually, there was a problem earlier when a 20-cent coin was approved and quickly retired. The 20-cent piece was useful in using more silver, but it caused confusion between it and the quarter in circulation and was discontinued after a few years. The confusion and bad feeling over revoking the legal-tender status of the Trade dollar was much worse as without legal-tender status Trade dollars were starting to trade for their silver value alone and not as dollars. Making matters worse, the silver value fell below one dollar, meaning that people who had accepted a Trade dollar as $1 were suddenly getting only 90 cents when they tried to spend it.

The protests over the Trade dollar saw it discontinued in 1878 only to be replaced by the Morgan dollar. In fact, the Morgan dollar is a great collection but it is possible to suggest it was not the finest hour for Congress as the program was nothing more than an attempt to bail out the Western mining interests as it required silver purchases that would be used to make silver dollars no one needed. There was some use of the massive numbers of silver dollars produced, but realistically the vast majority simply sat in government vaults.

As it turned out, there would be legislation having an impact on silver dollars for an extended period of time. Their merits, or lack thereof can be discussed at length but the point for collectors is that ultimately all the political activity has resulted in a large supply of dollars for collectors to own today.
Interestingly enough it was during the period of Morgan dollar production that the Congress stepped forward in another area that was to authorize the first commemorative coins of the United States in the form of the Columbian Exposition half dollars of 1892 and 1893.

If you want to look at a classic example of a case where the Congress could not say no it would have to be the commemoratives of the United States. In fairness, commemoratives do make money, but the list of coins approved hardly reads like the great events in the history of the nation. Especially during the 1930s it was a classic case of members of Congress getting approval of a coin to help fund their pet projects. Moreover, in many cases a single coin turned into many coins being issued for more than one year at more than one mint. On top of that, the money did not always end up in the place where it was supposed to end up as the coins were privately marketed without much if any supervision.

It is another case of certainly bad execution of programs if not bad public policy, but the result has been a fascinating if not somewhat odd assortment of commemoratives with some being low mintage simply because there were few sales.

The Congress has never seemed to understand that the greater the number of different coins being offered collectors each year, the lower the number of sales of any individual item. It is simply a case where collectors and dealers will only spend a limited amount of money each year on new items. With the Congress approving issues for Norfolk, Va., New Rochelle, N.Y., and many others including Cincinnati as a center of music, which has never been explained, there were bound to be some with low sales.

The reaction to the excess of the 1930s was to move to the opposite extreme. There were a few commemorative programs up to the 1951-1954 Carver/Washington commemorative half dollar, but after 1954 there was virtually no way to get a commemorative idea through the Congress no matter how worthy the topic or the cause that might benefit. Congress simply did not want to hear about more commemoratives and neither did the Presidents as the few bills that did pass were promptly vetoed.

The 1976 Bicentennial of the Declaration of Independence was probably the best example of the bind the situation created. Certainly the Bicentennial of the Declaration of Independence and the events that followed were far more worthy of commemoration than York County, Maine, or Elgin, Ill., or virtually any other half dollar approved in the 1920s and 1930s, but officials did not want to issue official commemoratives. Instead, what was approved was a special dual 1776-1976 date on the obverse and one-year reverses (actually 18 months) for the quarter, half dollar and dollar.

These special issues are still popular with many, but the fact remains they were a poor substitute for the commemoratives that should have been approved, but with officials reacting to the excess of an earlier era, a real opportunity was lost.

Ironically, it appears that a strict Congress in terms of commemoratives evolved into another Congress that could not say no about 20 years later. The initial modern commemoratives such as the 1982 George Washington half dollar, 1983 and 1984 Los Angeles Olympics silver dollars and 1984 $10 gold piece and 1986 Statue of Liberty coins were watched closely.

For a time, it seemed like Congress had things under control despite carping by some that the Los Angeles Olympics program was too much. It would seem like a modest program about a decade later.

The 1990s arrived with another attitude in Congress where it could not say no. We saw the approval of the massive Atlanta Olympic program of 1995-1996. This cast a pall over more worthy programs – at least more worthy in the minds of collectors – such as the Civil war Battlefields and Smithsonian Institution.

The result as is usually the case was that all programs suffered with reduced sales. That was good for buyers as most of the Atlanta coins have increased dramatically in price as have the Smithsonian issues and some of the commemoratives that followed as a flood of too many new coins tends to hurt the market for a number of years and it did, resulting in the uncirculated Jackie Robinson $5 having terrible sales, but a current price of $3,000.

Perhaps realizing what the lack of restraint had done, the Congress has been more limited in terms of commemorative programs in recent years with just a couple a year and those being smaller in size, with one or two coins. That said, we are only ever one weak moment away from another commemorative program that damages the market and other programs as well.

At least for the time being, that weak moment may not come with commemorative authorizations as the Congress has found another option and that was seen in the recent legislation. It is not just one but a group of authorizations that is the equivalent of a massive commemorative program in terms of potentially causing problems.

It starts with a new gold bullion coin to feature the famous James Earle Fraser Buffalo nickel design. Why America needs still another gold bullion coin is anyone’s guess. Sure, collectors love the Buffalo design, but weren’t the nickel and the silver dollar commemorative enough? This one will be a different fineness at .999, but an ounce of gold is still an ounce of gold in the minds of most. Giving the popular Buffalo nickel design its third incarnation will be of interest to a few, but ultimately very few buy bullion coins for their designs. They buy bullion coins because they want gold, silver or platinum and that suggests that the sales of the new coin will be lower than they might be or that American Eagles sales will suffer or both.

Much the same can be said of First Lady gold coins. Precisely where this program fits in terms of American numismatics is anyone’s guess. There is nothing wrong with putting a First Lady on a coin, but an entire set in gold is something really without any historical basis in U.S. history.

Sales potential is certainly suspect, which could make some or perhaps all of the First Lady gold coins potentially interesting in terms of later prices as with the Robinson coin, although the real question will be demand. In many respects it looks like another Atlanta Olympic program with far too many coins costing far too much, but without the official designation as a commemorative program. That said, calling a cow a barnyard animal does not change the fact that it is a cow and expensive gold coins are expensive gold coins whether they are called commemoratives or something else.

The Presidential dollars issued at four per year starting in 2007 will at least be less expensive. Of course, patterned after the 50 state quarter program the Presidential dollars have the potential to hurt sales of the 50 state quarters simply because as has been suggested, the budgets of many collectors and dealers for new coins are limited. Those budgets will not increase simply because Congress makes new coins. It simply means some of the new coins will not be purchased.

People in general are more likely to complete their quarter collections as they have gone this far. The dollars will not be as popular as the quarters simply because quarters circulate and that means everyone was aware of the program and many thought it would be fun. There is no certainty dollars will be seen the same way by potential buyers.

The most difficult thing to understand is that in addition to the Presidential dollars, the Sacagawea dollar will continue to be produced. That is a numismatic first as historically when new designs appear, the old designs are discontinued. It becomes even harder to understand in light of the fact that the Sacagawea dollar is not being used, anyway, but this appears to be a case of not letting logical or reality cloud a good idea in the minds of those promoting the idea.

One dollar coin, or what will soon be five dollar coins a year does not really matter as until the $1 Federal Reserve Note is eliminated there will be only a very limited use for dollar coins no matter what their design and gives this program all sorts of potential to produce lower mintage coins, but perhaps ones where with only limited demand there is little reason for those low mintage issues to increase in price.

The final part of the assorted new ideas is the notion of four Lincoln cents in 2009 to highlight four parts of Lincoln’s life along with a special 2009 Lincoln cent made to the original specifications of the first Lincoln cent back in 1909. This is a nice and harmless idea, which should benefit everyone. In fact, it is enough to make you run out and buy a roll of Mint State 1909 VDB Lincoln cents if you can find one offered.
Certainly this whole program should be good for Lincoln cents and a lot of fun. It is just too bad that in the process of saying yes to this idea the Congress said yes to so many others as well, but of course, with so many new coins there are going to be some that prove to be good buys. The problem is with so many new issues finding the winners may well be difficult.

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