The Wasted Potential of Missed Opportunity..

[RockMyAmadeus]

So, I finished reading "Illegal Tender: Gold, Greed, and the Mystery of the Lost 1933 Double Eagle" a while ago, and it was thoroughly enjoyable.

 

Of course, I cannot help but consider the wasted opportunity that the United States Mint, and by proxy, the US Gov't, let pass by when melting endless millions of already coined gold and silver in the 20th century.

 

Just in terms of gain/loss, we need look no further than the great silver dollar dispersals of the 60's and 70's to see how the US Mint could have turned billions of dollars in profit on otherwise useless coins

 

After all...all those millions of Carson City dollars that were sold at a whopping $15/ea (when they were against the ledgers as "$1") was a tremendous boon.

 

Considering the cost of melting after coining (not insignificant), how many billions of dollars did the US Gov't lose by melting millions upon millions of 1920S, 1921, 1927D, 1932...and even 1933...$20 Double Eagles....thousands of Lafayette Dollars...other thousands of commems....

 

After all...the gold was moved to Fort Knox...would it really have made that much difference if the gold was stored in the form of coin, rather than bars...?

 

Short-sighted bureaucracy at its finest.

 

And then think how radically different the coin market would be had all those tens of millions of Morgans been melted, too....

 

$100,000 1903-O BU Morgans...?

 

Possible. Even likely.

 

Orrrr....the coin collecting explosion of the 60's never happens, and coin collecting remains a niche collecting field, akin to stamps. No modern commem program, no bullion program...

 

Who knows....

[cpm9ball]

Rocky,

 

It merely proves that some things never change. Politicians back then didn't mind wasting our money, and they still don't mind wasting it today.

 

Chris

[Conder101]

The thing is until the market made a radical change the bulk of those coins they were holding really weren't worth that much. Most of the silver dollars distributed in the 60's by the government had been worth just a dollar for nearly a hundred years. Even the circulated miscellaneous dollars sold in the GSA sales were only $3 each. How long do you expect them to wait to collect on their "windfall" profits. Can you tell them which of the small dollars they have in storage are going to be rare collectors items in 2257 so they can cash in on them?

[cpm9ball]

The thing is until the market made a radical change the bulk of those coins they were holding really weren't worth that much. Most of the silver dollars distributed in the 60's by the government had been worth just a dollar for nearly a hundred years. Even the circulated miscellaneous dollars sold in the GSA sales were only $3 each. How long do you expect them to wait to collect on their "windfall" profits. Can you tell them which of the small dollars they have in storage are going to be rare collectors items in 2257 so they can cash in on them?

 

Good point, Conder! Me? I just like bashing politicians when the economy is bad and I can't get a job because I'm too old.

 

Chris

[RockMyAmadeus]

The thing is until the market made a radical change the bulk of those coins they were holding really weren't worth that much. Most of the silver dollars distributed in the 60's by the government had been worth just a dollar for nearly a hundred years. Even the circulated miscellaneous dollars sold in the GSA sales were only $3 each. How long do you expect them to wait to collect on their "windfall" profits. Can you tell them which of the small dollars they have in storage are going to be rare collectors items in 2257 so they can cash in on them?

 

But here's the problem....the gold that was formerly 1933, 1932, 1927-D Double Eagles...?

 

It's still in Fort Knox to this day.... (for the most part, at least.)

 

It wasn't an issue of "well, we have to wait until these are worth something." They were going to store the gold anyways. They didn't need to do anything.

 

I can understand the Pittman Act, since that silver actually went somewhere other than US vaults...but, other than a relatively small difference in storage capability, the gold melted in the '30's that has remained in US possession could easily have remained in coin form. They didn't really need to melt them (and, it appears, Mint Director Ross was either incredibly naive about the rarities she was creating, or just eager to destroy the coins.)

 

I suspect, but do not know for sure, that the cost of the storage of bags, rather than bars, would have been offset by the lack of the cost to melt the millions and millions of coins, which surely had to be substantial.

 

 

[BillJones]

I can understand the Pittman Act, since that silver actually went somewhere other than US vaults...but, other than a relatively small difference in storage capability, the gold melted in the '30's that has remained in US possession could easily have remained in coin form. They didn't really need to melt them (and, it appears, Mint Director Ross was either incredibly naive about the rarities she was creating, or just eager to destroy the coins.)

 

 

Back when FDR issued the Gold Surrender Order, the coin market was so lousy it didn’t matter. Most people were barely able to put food on the table and keep a roof over their head let alone consider a hobby like coin collecting, which was limited to nerds and academics. Further more, the formation of a collection of gold coins represented a major investment even if you were getting the coins for close to face value. Very few collectors could afford to set aside that kind of cash, which earned no interest or dividends. Finally think of it this way. In 1933, how many collectors would have been turned on by a 1932, 1933 or 1927-D double eagle? The coins were new and common place.

 

Sure there were some rare coins that needlessly went to the melting pot. There were stories of 1915-S Pan Pac $50 gold lying among the coins that were melted. That piece was a collectable item that was legal to hold even then. But somebody turned it in like a good, do-bee.

 

As for storing the gold in coin form, that would have taken up more space and would have complicated things when it came time for the U.S. government to settle gold accounts with foreign governments. Gold bars are supposed to be .999 gold and have a specific weight. Messing around with a bunch of old coins that most people didn’t want made no sense.

 

Sometimes as coin collectors we forget that most people don’t understand or care about our hobby. My brother-in-law is a multi-millionaire and a major executive at a large company. I’ve stopped showing him any of my coins because his only remark when I do is that they don’t earn any interest and that they must therefore be poor investments. I've shown him my 1848 CAL $2.50 and explained the history around that piece, and he's totally disinterested. He thinks that I am a fool. He’ll spend $35,000 on a 10 day vacation, and yet he can’t understand why I spend anything on coins, which do have a re-sale value. Most people just don’t understand us.

 

[RockMyAmadeus]

As for storing the gold in coin form, that would have taken up more space and would have complicated things when it came time for the U.S. government to settle gold accounts with foreign governments. Gold bars are supposed to be .999 gold and have a specific weight. Messing around with a bunch of old coins that most people didnt want made no sense.

 

This is the only real explanation for this. Again, I'm not talking about any sort of "potential profit taking" or any sort of "potential collectibles" ideology.

 

That wouldn't have been required in the slightest. It didn't even have to be in anyone's mind. "Collecting coins? What's that?" Totally not necessary to know.

 

However....the coin market DID exist in the 30's, the US Mint had been intimately familiar with it for a century, and someone, somewhere COULD have said "you know, let's leave these around for a bit. Maybe not spend the money for melting just yet."

 

But, if they absolutely HAD to be, by law, in .999 bars on the chance that they would be paid out, then, ok, I understand. Of course, bags of coins WERE used to settle accounts, so I suppose even that argument doesn't always hold.

 

And sadly, most of that gold is still sitting there, where it's been for nearly 80 years....

[RWB]

Actually, someone DID suggest selling the gold coins to collectors.

 

The details are in my article about the return of proof sets in 1936, but here is a summary.

 

Louis McHenry Howe was a close friend of President Roosevelt and had managed his campaigns for Governor of New York and President in 1932. Howe was a chain smoker, had asthma and emphysema. He was hospitalized in August 1935. While there, he continued to be active and came up with several ideas later used by the administration.

 

Howe wanted to do something with the nationalized gold coins to produce revenue: beyond the revaluation of gold. He was well versed on coin collectors – Sec of Treasury Morgenthau and several other treasury employees had coin collections – and FDR was an avid stamp collector.

 

Howe proposed the idea of setting aside gold coins of possible interest to collectors, then selling them into the coin market as a premium to gold value. This was discussed with Herman Oliphant, Treasury Chief Counsel, who rejected the idea. Oliphant said it would be difficult to explain why the same coins that people once owned for $20 were now worth $33.67 in gold and could be bought back for $45 or $50. It would look bad to nationalize with one hand and resell at a profit with the other.

 

An alternative, suggested by one of Morgenthau’s secretaries was to start making proof sets for sale to collectors. They could be sold at a profit without creating public relations problems.

 

Mint director Ross had nothing to do with the gold decisions.

 

(I hope to find out more about whose idea it was to melt all the gold coins once I have been able to search the FDR Library archives.)

 

[BillJones]

This was discussed with Herman Oliphant, Treasury Chief Counsel, who rejected the idea. Oliphant said it would be difficult to explain why the same coins that people once owned for $20 were now worth $33.67 in gold and could be bought back for $45 or $50. It would look bad to nationalize with one hand and resell at a profit with the other.

 

 

You are darn right that it would have looked bad.

 

You take the coins from the people a $20.50 per ounce, raise the value of gold by government fiat to $35.00 an ounce and then sell, for example, $20 gold pieces to “rich fat cats” for $45 to $50 apiece. That would have been a national scandal and would have cost the Roosevelt administration a lot of political capital, with considerable justification I might add. In modern times this would have been the basis for countless law suits.

 

The difference between the Surrender Order gold coins and the silver dollars was that people gave up the silver dollars voluntarily or never wanted them in the first place. Therefore they sat in Government vaults until they because collectors’ items in the early 1960s. (E.g. the unexpected release of large numbers of 1903-O and other formerly rare date dollars at that time.) The people were never asked to give up these coins, and the government got its windfall in the 1970s by the natural occurrence of the events.

 

[RockMyAmadeus]

Mint director Ross had nothing to do with the gold decisions.

 

Thanks for chiming in, RWB.

 

Of course, she didn't make the decision...that came from higher up the food chain.

 

But...she certainly didn't do anything to stop it....

[BillJones]

Mint director Ross had nothing to do with the gold decisions.

 

Thanks for chiming in, RWB.

 

Of course, she didn't make the decision...that came from higher up the food chain.

 

But...she certainly didn't do anything to stop it....

 

More foolish things have happened. Did you that until about 1946 there were a few bags of Lafayette dollars stored at the mint that were melted? At the time they were worth about $10 apiece in Mint State. Coin dealer A. Beebe tried to save them, but it was too late.

[RWB]

Ross saw to it that the Smithsonian got the final gold coins issued by the United States in 1934. She took her orders from Treasury.

 

Quantities of US gold coins remained until at least 1959.

[mtnstyne]

There's no gold in Fort Knox

 

Just wanted to stir the pot...

[RockMyAmadeus]

Ross saw to it that the Smithsonian got the final gold coins issued by the United States in 1934. She took her orders from Treasury.

 

Quantities of US gold coins remained until at least 1959.

 

I was reading in Illegal Tender that the confiscated '33s were around until the mid 50's before they finally saw the melting pot....

 

At that point, they were clearly special.

 

But no, we have to destroy 'em, cause we're from the gubmint. They could have been given to the Smithsonian.

 

 

 

[RockMyAmadeus]

Mint director Ross had nothing to do with the gold decisions.

 

Thanks for chiming in, RWB.

 

Of course, she didn't make the decision...that came from higher up the food chain.

 

But...she certainly didn't do anything to stop it....

 

More foolish things have happened. Did you that until about 1946 there were a few bags of Lafayette dollars stored at the mint that were melted? At the time they were worth about $10 apiece in Mint State. Coin dealer A. Beebe tried to save them, but it was too late.

 

Yeah, I mentioned that in my original post. Yet another example of not having to do anything beyond what had already been done. And $10 each was a tremendous amount in the 40's for coins "on the ledger" at $1 each.

 

And why? Because we're the gubmint. That's why.

 

Sigh.

[Conder101]

In 1933, how many collectors would have been turned on by a 1932, 1933 or 1927-D double eagle? The coins were new and common place.

True, in 1944 the 1933 was only a couple thousand dollars. Back in 1933 before the recall the 1932 and 27-D were nothing special because they could still be purchased from the Treasury dept for face value plus postage.

 

But here's the problem....the gold that was formerly 1933, 1932, 1927-D Double Eagles...?

And if they hadn't melted them down but instead held them until after gold was legal again and then sold them to collectors, how much would a 1927-D double eagle be worth after they released 180,000 coins? Look at the 1903-O dollar. In 1961 an Unc was a couple thousand dollars. Call it 20 to 30 thousand in 2011 dollars Then in 1962 several bags, not the entire mintage just bags, were released and the value dropped to $15 in Unc or less. Even today, fifty years later and with a LARGE growth in the number of dollar collectors, it still hasn't reached the nominative values it had back then not to mention the value in constant dollar terms.

[RWB]

“One cannot judge past actions by future events.” RWB

 

The Treasury was vilified by many for holding huge stocks of silver following nationalization in June 1934. The metal was bought from US mines at above market rates as economic support for states like Montana, Colorado, Nevada, etc.

 

But during WW-II the same “wasteful” silver was used to release millions of pounds of copper for war use, strike coins for more than a dozen countries, and supply industry with the loan of nearly 1 billion ounces for industrial use.

 

This stockpile of silver is also the only reason the US could continue making silver coinage as late as 1965 (dated 194), since it held down the open market price of the metal.

 

[RockMyAmadeus]

In 1933, how many collectors would have been turned on by a 1932, 1933 or 1927-D double eagle? The coins were new and common place.

True, in 1944 the 1933 was only a couple thousand dollars. Back in 1933 before the recall the 1932 and 27-D were nothing special because they could still be purchased from the Treasury dept for face value plus postage.

 

But here's the problem....the gold that was formerly 1933, 1932, 1927-D Double Eagles...?

And if they hadn't melted them down but instead held them until after gold was legal again and then sold them to collectors, how much would a 1927-D double eagle be worth after they released 180,000 coins? Look at the 1903-O dollar. In 1961 an Unc was a couple thousand dollars. Call it 20 to 30 thousand in 2011 dollars Then in 1962 several bags, not the entire mintage just bags, were released and the value dropped to $15 in Unc or less. Even today, fifty years later and with a LARGE growth in the number of dollar collectors, it still hasn't reached the nominative values it had back then not to mention the value in constant dollar terms.

 

All true...

 

BUT...(and it's a big one)....on the ledgers, they were only $1.

 

The market absorbed them, the prices fell...but they didn't need to be $1500 for the government to have profited enormously from them. Just selling them for $3 would have been a minor windfall.

 

I'm just saying that, when you weigh all the costs associated with melting against all the costs associated with storing coin, it would have been a net gain for the goverment (by a lot, only looking at gold values) to keep them in coin from, any and all "collecting" considerations completely aside. That just would have been a bonus.

 

And, indeed, with the dollars, that's exactly what happened. Now, we have an abundant supply of BU dollars floating around the world for collectors to enjoy, all because the government sat on them in coin form, rather than destroying them (all.)