History repeats when it comes to $1 coins

Be still my heart. At long last I might be able to have a Rutherford B. Hayes dollar. Once seen as a remote possibility, a Hayes dollar, or a roll of Warren Harding dollars are now all within the realm of possibility as the United States is producing dollar coins featuring former Presidents.

In fact, the idea of $1 coins featuring the Presidents is hardly a new concept. They could not do it on coins, but back in the 1950s the company that made the milk that was delivered each morning had a promotion that saw you receive a plastic Presidential token every morning when your milk was delivered. It was great fun for a short time and that may be one of the potential flaws in the new dollar coin program, as everyone was happy with their plastic Presidents until you got beyond Andrew Jackson. The first seven Presidents are pretty well known and respected, but then you hit a run of past chief executives that only above average history students know or care about. My mother was a big fan of the program, figuring it would teach me history but even she balked at Millard Fillmore. "I thought he was a deacon at the church," was her comment. The result of the lesser known figures was that a lot of youngsters lost interest long before the program got to Abraham Lincoln.

This program is will strike some as the sort of thing that has been tried before, usually by some obscure island where the natives do not even know who the current president of the United States is. The lure of the American market and U.S. dollars is just too great for everyone to resist. Of course the program will, in the minds of some, puts the U.S. on a par with past offerings from other lands where the local view is that the most important American of all is Benjamin Franklin since he is on the $100 bank note.

Frankly, comparisons with Finland or Fiji or wherever do not really bother me. There is nothing wrong with the United States putting presidents on coins if that is the desire. It is that way with any approach. From a collector's point of view there is really no such thing as a bad coin. In fact, the bigger the disaster the better the opportunity for the coin to end up rejected, which makes for an interesting story.

The problem with the program is that it will not meet expectations. Just as the plastic presidents of the 1950s tended to lose their momentum, the same thing is likely with the presidential dollars. The real problem, however, is that once again officials think they have figured out how to trick the American public into using $1 coins, and that promises to be entertaining.

In their seven-second analysis of the matter, one major network had it right by suggesting that the new dollar coins were another in a string of attempts to get Americans to use dollar coins. Even non-collectors get it. If that is the goal, the idea will almost certainly fail miserably in its main objective. If the goal was simply to make some extra profits and to teach Americans history like the 50-state quarter program teaches geography, that would be realistic.The $1 coins will make some money and they will teach us all who came after Tyler in the list of presidents.

Unfortunately, however, the network analysis is probably correct. The real goal may well be trying to get Americans to use dollar coins, and that is where the fun begins. Somehow officials may have gotten the peculiar idea in their heads that dollar coins will be used in enormous numbers if you just give people different designs with some type of theme. Now they could have picked great moments in the life of Elvis or winners of last year’s NASCAR races or just about anything, but they opted for Presidents since it looks a bit more serious. What is being overlooked is that the dollar is not the quarter. While the new dollars will do well initially and be heavily promoted on the home shopping network with painted versions and small booklets and everything we have seen with state quarters, the fact is that prior to the state quarter program there was a need for a billion or so quarters each year in the economy. The need for dollar coins was probably closer to 50 million or less. Putting presidents on dollar coins no one wants to use could look good briefly like the Sacagawea dollar did, but eventually the program will falter and the Mint will have a backlog of dollars. Ultimately everyone will question what the purpose of this elaborate program was in the first place.

History is actually very clear about dollar coins in the United States, and those who have high hopes for such programs would be well-advised to spend less time in a study of the life and times of James K. Polk and more time on the history of dollar coins in American commerce.

The Bust dollar, which lasted until 1804, was a logical denomination to be authorized, but even the Founding Fathers were not above using the dollar to accomplish other goals. The Bust dollar was slightly off the weight of the 8-reales coin of the Spanish Empire upon which the dollar was based.

Alexander Hamilton told Congress when it authorized American coinage that 15 ounces of silver were worth 1 ounce of gold. Shortly after adoption of the Mint Act, the value of gold rose to 15.75 ounces of silver. This meant if you traded five silver dollars for a $5 gold piece, a supposedly like for like trade, the gold coins could be sold for $5.25 in silver overseas.That silver could in turn be coined into dollars, starting the game all over again.
Gold coins were exported.

This sent a message to the American people who had just lost a small fortune accepting Continental Currency and other forms of paper during the Revolution. It sent a message that the early United States was a country not to be trusted with coins. Of course Americans, being the enterprising people they have always been, promptly exported gold coins at a profit. With the nation having a terrible coin shortage and the Mint working nearly full time just producing dollars for the silver speculators, action had to be taken for the public good. That meant suspension of the dollar and gold eagle, which saw the nation survive roughly 35 years without a dollar coin.

The silver dollar returned in 1840 for no apparent reason except that the capability to produce them was now in place and the silver was available. In fact, it is hard to find any real domestic use of the Seated Liberty dollar, yet it lasted more than three decades. Large numbers of Seated Liberty dollars produced in the 1840s were used primarily as reserves and gifts. Many ended up melted in the 1850s. The dollar that seemed to see commercial use in the 1850s was not the silver but rather the gold dollar. The silver dollar’s main role in the 1850s was to be exported for use in trade.

This was confirmed in 1873 when it was replaced with the Trade dollar, a seemingly harmless idea. Since it was larger, the Trade dollar would use up more silver at a time when the price of silver was weak. The larger silver Trade dollars were also seen as the answer to opening up better trade with China, where the merchants only wanted silver. Simply put, at a time when there was too much silver the Trade dollar used more and, better still, moved it out of the country.

The Trade dollar was oversold. It gained some acceptance in China but not as much as was expected. The real problem began when Congress started to meddle by revoking its legal tender status. That meant the Trade dollar was no longer a dollar but rather a silver round worth only its silver value, which promptly dropped below 90 cents. People who had accepted them as a dollar lost money. It was a public relations disaster for the government and a financial disaster for anyone who had accepted the Trade dollar. It also might have helped in convincing some that bank notes were no more dangerous than silver dollars in terms of security. No one had lost any money with bank notes of the United States in decades and that could not be said of silver dollars because of the Trade dollar.

The Morgan dollar followed. It was a classic case of a dollar coin issued primarily for a reason other than helping out in commerce. There was use of silver dollars, especially in the West. But the Bland-Allison Act that authorized the Morgan dollar required the purchase of millions of ounces of silver every month, and that was the purpose to prop up the silver market. By 1904 when production was finally suspended there were perhaps 50 million Morgans in circulation, primarily in the West. There were more than 10 times that total sitting in government vaults.

The Morgan was replaced by the Peace dollar for one basic reason. Some 270 million Morgans had been melted under the terms of the Pittman Act in 1918. The Morgans that were the backing for Silver Certificates needed to be replaced. Silver dollar production took place from 1921-1928 with a small additional total in 1934 and 1935.

After 1935 it could be suggested that the old era of $1 coins had ended. In fact, the silver dollar had seen use primarily on a regional basis in parts of the country where paper dollars were not accepted. In areas east of the Mississippi, the silver dollar would be seen but it had never really established a strong place in circulation. With growing acceptance of bank notes, there really was very little if any future for silver dollars long before the last one was produced and released.

More than 35 years later would dawn the modern era of dollar coins with the introduction of the Eisenhower dollar. The Eisenhower dollar was really a political creation. Presidents Franklin D. Roosevelt and John F. Kennedy had been put on coins immediately after their death. Two things separated them from Dwight D. Eisenhower: they both died while in office and they both were Democrats. There is little doubt that Richard Nixon, who was president at the time of Eisenhower’s death, owed his political career to Eisenhower and felt the Republicans were owed a circulating coin design. The political reality of the situation was that the only way to put Eisenhower on a coin was to bring back the dollar, as no other denominations were possible.

The Eisenhower dollar was reasonably successful in its brief time in circulation, especially considering that the version for circulation contained no silver. Forty percent silver was only used in the special San Francisco BU and proof issues that were sold to collectors for a few years. However, the Eisenhower dollar was never a fixture in circulation. By 1971 the American public trusted Federal Reserve Notes. That situation did not change, which prevented the Eisenhower dollar from seeing even wider use.

In fact, the presence of the $1 Federal Reserve Note also stood in the way of greater popularity for the Anthony and Sacagawea dollars as well. The Anthony dollar was particularly humorous as it, like the Trade dollar, was oversold. The Anthony dollar was dubbed the “Dollar of the Future,” which in this case meant 1979-1981 and 1999. It was quickly confused with the quarter by some. In passing the Anthony dollar, Congress had ignored a very important part of the Research Triangle Institute report that suggested how valuable a dollar coin could be in terms of savings.

Congress did not eliminate the half dollar, which was also in the report. The Anthony dollar had to be sandwiched between the quarter and half dollar in size, and that left the Anthony far too close in size to the quarter. Ironically, this happened almost exactly a century after the same mistake had been made with the 20-cent piece.

Like the Eisenhower dollar, the Anthony dollar found a limited use in commerce but it was nowhere near the demand officials had predicted. Just to prove that history repeats itself every 100 years, officials for some reason are overcome by Lewis and Clark mania. Certainly the Lewis and Clark expedition should be remembered, but no other event in the history of the United States each century touches off the same level of numismatic activity. I cannot explain it and I doubt anyone else can, but about the turn of every century it seems like officials and Mint employees have nothing better to do than to figure out what they can do to mark the Lewis and Clark expedition.

Among the efforts this time was the so-called “golden” Sacagawea dollar. Talk about history repeating itself. Once again officials were falling all over themselves explaining how this dollar coin would be different. After all, it had Sacagawea and a gold color. As Q. David Bowers suggests in his book A Guide Book Of United States Type Coins in discussing the Sacagawea dollar, “However, in time the scenario played out similar to that of the Anthony dollars: numismatists loved them, but the public had little interest.”

Bowers hit the nail on the head. A downright stunning show of history repeating itself is evident with the Eisenhower, Anthony and Sacagawea dollars. Each and every time there were large mintages the first two years, and all three times the coins had backlogged to a point where additional mintages were not needed in the third year. Three straight times in basically three decades the public’s acceptance of a new dollar coin for use in regular commercial activity had been vastly overrated. Normally speaking it’s three strikes and you're out, but when it comes to dollar coins some people just refuse to accept the reality: while there are $1 Federal Reserve Notes in production, one dollar coins will have only limited success. Next year is the third year for the Presidential series. Stay tuned.

Every time this happens I end up getting nasty e-mails from people claiming I am killing new dollar coins. I am sorry, but I am not that important. The American people are the ones making the choice, and the track record is as clear as can be. The Eisenhower dollar was released in 1971 and by 1973 they were only being made for proof and mint sets. The Anthony dollar was released in 1979 and in 1981 they were being made only for proof and mint sets. They had a brief revival in 1999. Then the Sacagawea dollar was released in 2000 and by 2002 they were only being made for collectors. Changing the size and then changing the color has made no difference whatsoever and neither will changing designs if the goal is to have the American public use $1 coins instead of $1 Federal Reserve Notes.

It’s sad in a sense. The people who fool themselves every time are usually smart and well-intentioned people who somehow think that they can make the American public do something it does not want to do. In the end, they end up looking foolish. The simple fact is that no matter the dollar coin’s design – whether it’s breeds of cats or even Calvin Coolidge – it would have a much greater demand if the $1 Federal Reserve Note were eliminated.

If the $1 Federal Reserve Note is not eliminated, then demand for the new dollar coin will be limited. By following the pattern of the state quarter program, the business strike production could possibly be extended for a while. But realistically a few years into the program, overly large mintages of the first few dollars will clog the system and there will be little need for new dollars other than coins for collectors.

The Presidential series’ advantage is that it is promoted and there are collectors. That said, it is part of normal demand and all of the previous dollars including the Eisenhower, Anthony and Sacagawea had a regular demand. With promotion and packaging on TV there might be some added demand from people building complete sets. That could add to the yearly total needed for commerce as well as the revenue, meaning Presidential dollars do stand a chance of being more successful than the recent dollars of the past.

If officials are content with a program that does slightly better than past dollars, that is fine. If, however, the goal is to see dollar coins in heavy use in regular transactions all over the land they are in for an unpleasant surprise, but one that is becoming rather normal for those making claims about $1 coins. In the meantime the nation will have a chance to see if anyone has learned anything from the past. Presidential dollars should provide everyone with a history lesson and perhaps a good deal of fun trying to figure out what William Howard Taft and Martin Van Buren are doing on coins.