History of Gold in the US – Part VI

Receiving economic and financial news on a weekly basis has, perhaps, even a certain advantage in that it tends to encourage a more reflective outlook concerning current events. One must avoid succumbing to the emotional contagions that are in- escapably a part of daily news reporting. The gold-coin investor should take a much longer view of things than the typical stock market or commodity speculator. For the really serious and sophisticated student of investment and finance, the weekly Commercial and Financial Chronicle contains highly technical articles by the world’s leading economists and bankers, covering current developments in domestic and inter- national finance. But it is expensive; better read it at your library or broker’s office if you can. In general, it would probably not be worthwhile to subscribe unless you have other sizable gold or silver investments, such as stocks or futures. But no one, no gold-coin collector-investor, can be excused from a thorough reading of the weekly numismatic press. Coin World, published every Wednesday at Sidney, Ohio, has been in print since 1935, has a large circulation, and is generally available at the larger newsstands or through coin dealers. Numismatic News is another excellent journal. Both are available by mail at a modest subscription rate if they can’t be obtained locally. The numismatic press not only gives complete coverage of general numismatic interests, but also reviews all important political and economic developments that might affect the price of gold and silver, or the price trends of various coins. There are also several good monthly magazines devoted to numismatics, with Numismatic Scrapbook being an outstanding example. I would also suggest that from your newspaper reading you begin and maintain a clipping file or scrapbook of the more important and informative articles on gold and gold coins. It will become a valuable and always-current reference, and will be a great help in sharpening your numismatic and investment skills. It may provide an interesting diversion as well. The numismatic investor will find that building a modest private library on the subject will prove not only personally rewarding, but eventually financially profitable.

Out-of-print books on numismatics, investment, economics and monetary history have grown quite valuable in recent years. Old coin catalogues, for example, that sold for a dollar or so in the late forties were worth $15 to $30 twenty years later, and have become collector’s items in themselves. Books on gold and gold mining also form a special category of interest for rare book collectors. Old books about speculation and investment; economic crises, the history of money, financial delu- sions of the past, and virtually every other economic or monetary subject are always wanted by professional speculators and investors. Professional stock market speculators and traders number among them some of the most literate and cultured people in the world of business—or any other field, for that matter. Some of the better literature, some of the more profound philosophical appreciations of life, and some of the shrewder observations about the nature of man and his problems often can be found in the writing devoted to speculation and investment.’

Therefore, if you are investing in gold coins or considering such investment (or any other form of investment or speculation), and are not already doing so, I strongly recommend that you: 1. Read the numismatic press. 2. Read the financial press. 3. Become familiar with the basic outlines of economic and monetary history. From Caesar to Napoleon 73 4. Read and collect books on numismatics, coin catalogues, magazines, etc. 5. Build your own personal reference library. Reading and study are one of the requirements and one of the rewards of successful gold-coin investing. As for starting a personal reference library, the brief bibliography in this book will offer some suggestions, but few if any firm recommendations. After all, a personal library should be personal; it should grow primarily from the natural inclinations of the individual investor. The Coin Debasers We have already touched upon the propensity of peoples in the classic and medieval worlds to hoard good coin in the fear or anticipation of subsequent issues of the same face value being re- duced in intrinsic value. Why they were so often compelled to this view can be readily realized from even an abbreviated review of the history of coin and money after Gyges.

From the primitive mints of Gyges and Croesus, the institution of coinage spread with great rapidity throughout the Mediterranean world. As it was the Greeks who emerged to dominate that world, it was the Greeks who first experienced the complications and trials of a money economy. The widespread use of coined money brought a great boom to the area. The convenience and abundance of coin released men from the tedious and awkward economy of barter and brought new and seemingly unlimited opportunities for the expan- sion of trade and commerce. The money economy also provided new and unlimited opportunities for going into debt. Cities began to flourish as never before and, just as in our own time, there was a vast exodus from the rural areas into the trading and shipping centers, which held the promise of affluence and ex- citement. Banks were established and the money changer, previously unknown, became a powerful factor in the economic life of the world. A distinct creditor and debtor class appeared—with the debtors naturally becoming far more numerous. In ancient times it was possible, and not uncommon, for a borrower not only to pledge land and livestock as security for a loan, but to offer his wife, his children or himself as collateral. If the loan was defaulted, these human “chattels” were subject to being sold into slavery to satisfy the debt. At the end of the first century following the general use of coined money, the Greek civilization was not only no longer prosperous, but bordering everywhere on complete collapse.

All over Attica, stone pillars inscribed with the amount of a loan, the rate of interest, the date of maturity, and the name of the lender dotted the land- scape; it was a rare farm that did not exhibit one of these monuments. As for the nonpropertied population, the greater part of the working class, rural and urban, was already in danger of being sold into slavery. Everywhere there were suffering and discontent; armed insurrection seemed imminent. The immediate cause of the problem was a general and severe depression, which had settled over the land after decades of un- precedented prosperity and expansion. The opening of a vast new trade in grains, wine and manufactured goods with the more primitive Italian states led to a drastic undercutting of domestic prices and drove thousands of small farmers and artisans into bankruptcy. The trouble was compounded by the previous decades of “easy money” credit inflation. The friendly neighborhood moneylender was always ready to make a loan—after all, what better security could there be than the very life of the borrower? (How much like today, when men are induced to forfeit so much of their freedom and pledge most of their working lives to the yoke of 30- and 35-year mortgages.) The Athenian economic crisis, like that of our own Great Depression, was so severe that it could only be met by the most direct and drastic action. Fortunately the Athenians were able to select the right man for the job: the learned and aristocratic Solon, who took the office of Archon in 594 B.c. Assuming extra-legal powers, Solon issued a decree called Seisachtheia (“shaking off the burdens”). This decree cancelled at once all outstanding agricultural and personal debts. The hated mortgage pillars were pulled From Caesar to Napoleon 75 down and all persons in bondage from previous debt defaults were ordered released. The legality and morality of the Seisachtheia were widely ques- tioned but never seriously challenged, although the landlords, 1/4 bankers, and other creditors were deprived of property and assets without due process and without opportunity for redress. Many of them, also having obligations to meet, were forced into bankruptcy themselves. Partially to relieve their condition and to restimulate the economy and to renew the movement of money, Solon also devalued the drachma by 27 percent, from 73 to 100 to the mina or ancient Greek pound.

Perhaps the most remarkable thing about the Solonian reform was that it was never necessary to repeat it. The clear-thinking Greeks of the classic age, perhaps the most intellectual people in all history, learned well the lessons taught by the crisis and resolved never to let similar conditions occur again. Speculative enthusiasm and excesses were discouraged if not cured, and the Greek mind saw that the limitations of a cash economy were far more accept- able than the evils of excessive credit. The remainder of Solon’s program forbade the pledging of persons as chattels for loans, ex- panded the opportunities for citizenship, dissolved the oppressive oligarchy (which included in its body some of the more rapacious moneylenders), and negotiated new commercial treaties guarantee- ing more equitable prices. Throughout the remainder of classical Athenian history, currency depreciation was never resorted to again. In fact, in the subsequent Athenian democracy, the diakists or leading judges and legislators were required to take an annual oath to maintain the purity of the coinage. It was upon this new soundness of their currency that the Athenian state built a new and greater commercial system, which eventually ruled the whole Mediterranean basin. The new basic coin of Athens was the silver drachma (66 grains of 99 percent pure silver), originally adopted from the silver coin of Aegina. Although gold coins were frequently struck, silver was available in much greater quantity and remained the monetary standard of the Hellenic world until the Macedonian conquest. Then Philip II and Alexander the Great introduced their small gold “staters” and these coins remained the prized money of the Near East long after the armies that brought them were gone. The long and honored tradition of sound intrinsic-value money established in the Hellenic world after the reform of Solon, and spread, to the Near and Far East by the armies of Philip and Alexander is in sharp contrast to the Western experience with money. To this day we still do not recognize the enormous depth of feeling for gold and silver that exists in the Levantine world, in the Middle East, and in Asia—for ours is the heritage of Rome. Sincere admirers of Roman civilization, who rightfully appreciate the West’s lasting inheritance of Roman law and justice, political administration, engineering, literature, and innumerable minor arts, are invariably surprised and confounded by the almost total in- ability of the Roman administrators to cope with the institution of money.

The earliest money of the practical Romans was neither gold nor silver but an ingot of copper—the as—weighing one pound. At first the as was passed by weight, but later it was stamped with the seal of the state, broken into smaller pieces and passed by sight. By the fourth century B.C., the as had evolved into a heavy round stamped copper slug, the as grave. With so large a coin passing by sight, the temptation surreptitiously to debase it by reducing its weight proved irresistible to the authorities. By the middle of the third century B.C., the weight of the as had dropped to four ounces. By the end of the First Punic War, around 240 B.C., it had shrunk to a mere two ounces, and by 70 B.C. it weighed no more than half an ounce.2 The Roman denarius fared somewhat better at first. Originally introduced in 277 B.C. to compete with the trusted Athenian drachma, the denarius was minted at the same weight and fineness (66 grains of 99 percent pure silver). At the time of the ascension of Julius Caesar, the denarius had declined in weight only slightly, to 60 grains—a tribute in a way to the general virtue and integrity of the Roman Republic. But in the Empire things were indeed different. Caesar and his From Caesar to Napoleon 77 successor Augustus began what could have been the foundation for an efficient and reliable monetary system. The value of all coins was determined by weight and based on the ancient Roman measure, the libra or pound. The principal coin was to be a new gold aureus, 126 grains of fine gold, minted at the rate of 40 to the libra. The silver denarius was continued at 84 to the libra and valued at 25 to the aureus. All went well when the emperors were, in the words of Shakespeare’s Brutus, “honorable men”—but unfortunately they were not honorable men for long, at least not long enough. However, Caesar’s gold aureus did remain undisturbed for 75 years (not a bad record at that, considering that the U.S. gold dollar lasted just short of 100 years before encountering its first official devaluation). Fittingly, it was the infamous Nero who took the first fatal step by reducing the weight of the aureus from 40 to 45 to the libra, and the denarius from 84 to 96 to the libra. Under successive administrations the degeneration became much more marked.

During the reign of Trajan, the purity as well as the weight of the coin was reduced. Under Severus (A.D. 193-211) the de- preciation reached a point where the fine silver content of the denarius was only 26 grains, with the coin being more than 50 percent base metal. Caracalla (A.D. 215) officially reduced the aureus again, from 45 to 50 to the libra, although this was purely an academic exercise —the imperial mints had long since been surreptitiously issuing the gold aureus with a base metal content as high as 40 to 50 percent. As for the denarius, it had already sunk so low in weight and silver content that it was little more than a copper penny. Consequently, Caracalla introduced a new silver coin, the antoninius, weighing about 84 grains. But this new coin soon began the same sickening downward spiral that had destroyed the denarius. By the end of the reign of Gallienus (A.D. 268) the antoninius was no more than a base metal token with a thin plating of silver (the first clad coinage!). About the period after Gallienus, the great classical historian Theodor Mommsen was moved to write: “In the last half of the third century there existed no longer in the Roman Empire any 78 HOW TO INVEST IN GOLD COINS money having an intrinsic value corresponding to its nominal value, not even a piece of brass or billon.”3 For a while the imperial treasury demanded taxes be paid with sound gold or silver, while it made its own payments with debased coin or copper, but this soon proved impossible to enforce. What gold and silver were left rapidly fled beyond the borders of the Empire. Price controls and legal tender laws were passed in profusion, to no avail. The decline of Rome and the decline of its money went hand in hand. Rioting and lawlessness, dishonesty and corruption were aggravated by the spectacle of emperors and governments that were little more than liars and embezzlers themselves. At last, with its treasury empty, its farms rotting in neglect, industry stagnant and mired in financial disorder, trade reduced to almost a barter level and a frantic speculation devouring the last vestige of organized commercial activity, the mightiest empire the world has ever seen drifted helplessly into barbarism. It never recovered from the monetary madness of the third century. Long before the Huns and Vandals set foot within its boundaries, the Roman Empire committed suicide by monetary debasement and inflation.

During the long dominance of Rome, the Greek tradition of sound coinage was subdued but never really extinguished. Follow- ing the agonizing decline and final collapse of the Western Roman world, there arose from its ashes a new empire in the East, Greek by language and custom, Roman by tradition and heritage. The coin of this strange hybrid, the so-called Byzantine Empire, was the gold solidus or bezant, perhaps the most significant coin of all time. Its history deserves more than a brief statement. The gold solidus was first minted by the founder of the capital of the Eastern Empire, Constantine. His immediate successors main- tained the coin without significant alteration, except to improve its uniformity and purity until its weight became fixed at 65 grains of fine gold.’ It was minted at this standard for eight hundred years —undoubtedly the most outstanding achievement in the history of money. The bezant became the unquestioned standard of value from the From Caesar to Napoleon 79 raw camps of the Huns along the Danube to the opulent courts of the Moguls of Western India. Through most of the Middle Ages, the princes and feudal lords seldom if ever bothered to mint gold for their own uses, but kept their accounts and made payments in bezants. The Byzantine Empire survived as a political entity for over twelve hundred years. Its rulers were regarded with awe from the Baltic to Ceylon, and its commerce extended from the lonely coast of Northern Europe to the warm seas south of China. It raised and equipped vast armies and launched great fleets, built stately churches and magnificent palaces. Its emissaries were received with honor in the farthest reaches of the medieval world. During the Dark Ages in Europe, Byzantine culture and wealth flourished. Assault after assault upon its frontiers was repulsed; for nine hun- 4 dred of those twelve hundred years its capital was never seriously threatened by an enemy force.] All these things were impressive, but what really excited the wonder and respect of the medieval world was the bezant. An Egyptian merchant of the sixth century, one Cosmas Indi- copleustes, who travelled widely and recorded his observations in a book called Christian Topography,’ gave this testimony regarding the power of the bezant: “With their gold piece all nations do trade; it is received everywhere from one end of the earth to the other; it is admired by all men and every kingdom, for no other kingdom bath its like.”

The sound coinage of Byzantium was of course only one of several factors that contributed to the commercial success and social progress of the Empire, but that its importance was early recognized can be judged from the following regulations concern- ing Byzantine banking: all bankers and money changers were required to take oath never to file, clip, or in any way debase the coinage, never to issue false coin and never to allow any of their servants to take charge of the business during an absence. The penalty for any violation of these canons was drastic: the offender’s 11 hand was cut off. The decline of Byzantine power and influence coincides with the decline of the bezant. In the reign of Alexius Comnenus (1081— 1118), the eight centuries of trust were irrevocably destroyed when this unpopular monarch reduced the gold content of his coin, in order to pay debts incurred by his corruption and extravagance. Alexius employed the old Roman strategy of paying the public debts with his own debased coinage, while demanding that taxes be paid in the pure coinage of his predecessors.? Although the Byzantine state managed a precarious survival for two hundred fifty years after Alexius Comnenus, it never recovered its former glory. Further debasements and official dishonesties followed with increasing frequency, and with them came political and social unrest, military and court intrigues, cheating and corruption in all walks of life. When the final act came and Byzantium fell before the onslaught of Islam, the name which had once been renowned as the standard of honesty and integrity was in total dis- grace; “byzantine” had become synonymous with corruption and debauchery.

One of the most interesting lessons that can be learned from the Byzantine monetary experience is that despite the constant and free export of bezants to all parts of the medieval world, there was never any “shortage” of gold. During the 800 years of sound coinage, bullion from the mines and hoards of Asia and the Near East freely flowed into Byzantium to be sold and exchanged for the prized bezants. As for those bezants that travelled so far from the Empire, most eventually returned to be spent again with Byzantine merchants. Quite a contrast with the latter days of Rome, when neither the edicts of Caesar nor the swords of the legions could bring forth a single ounce of precious metal, and the base Roman coins were so universally despised and rejected that the once ex- tensive foreign commerce of the Roman Empire all but perished. The final eclipse of what was left of the old Hellenic world by the Islamic conquest left the West without any stabilizing influence, and the general reintroduction of money into Europe during the late Middle Ages was unfortunately redirected almost exclusively to the Latin example.

History of Gold in the US – Part IV

“The history of money is the history of civilization.” -Alexander Del Mar

Anyone who becomes interested in gold coins whether as a numismatist-collector or as an investor, will find that a fair amount of study and reading is involved. As was pointed out in the first chapter, successful investment in gold coins requires at least a general knowledge of numismatics and, as with any other serious investment program, a working knowledge of economics and finance. Bernard Baruch, the great speculator-financier and adviser to presidents, recommended the reading of economic history, and particularly the study of the great financial delusions of the past, to all who would succeed at any sort of investment or speculation. It is common enough advice, that anyone who proposes to employ any significant amount of money in the stock market had better be prepared to spend at least one hour a day in study and research— and I assure the reader that a great deal more time than that is involved if one is really serious about making the stock market a consistently profitable venture. How much time the gold-coin collector-investor should spend in study and research will depend probably on the extent of his collection and the amount of money involved. It will not be arbi- trarily fixed by this writer; the ancient lure of gold and the fascination of rare coins will draw whoever possesses them willingly enough into the study of their nature and meaning. As for understanding contemporary economic trends, which admittedly shift and evolve with bewildering complexity, reading the financial press is helpful. The Wall Street Journal of course is the daily paper devoted exclusively to finance and always well worth reading. However, if one hasn’t the time or the inclination to read the Journal every day, a conscientious review of a good financial weekly is recommended. Barrons is one of the best-known weekly news- papers devoted to investment and finance and its news coverage of national and international developments affecting gold and silver is excellent.

History of Gold in the US – Part III

The granting of such licenses is to be subject to the usual criterion of judgment. No gold coins struck after 1959 will be admitted, except for those issues already granted exemption by ODGSO prior to April 30, 1969. (A list of the exempt post-1959 gold coins will be found on page 286.) The 1969 modifications of the Gold Regulations bring a wel- * It appears, however, that there still may be formidable difficulties to contend with. Some of the early reports from collectors who ordered coins by mail from abroad, subsequent to the April 1969 modifications of the Gold Regulations, are hardly reassuring. They tell of lengthy delays while coins are held in customs houses pending “inspection,” and worst of all there have been reported incidents where rare coins were mutilated by having their “authenticity” tested by means of a metal punch wielded by some thickheaded or vindictive customs or postal inspector. I do not know whether these indefensible practices are yet widespread, are destined to become so, or merely represent isolated cases. In any event, I feel that collectors should be alerted to these possible dangers. The Color of Gold 65 come breath of fresh air into the bureaucratic smog that has shrouded the rulings and statements of the Treasury and ODGSO since 1961. However, one can only regret the arbitrary cut-off date of 1959, which automatically excludes such highly desirable numismatic treasures as the Canadian $20 centennial gold coin of 1967, and most of the post-1960 commemorative gold coins of Israel. Fortunately, past history has demonstrated that common sense eventually triumphs, even in the Treasury; we can therefore con- tinue to hope that the absolute 1960 cut-off ruling will also be re- considered one day. By contrast, however, British gold collectors were apparently dealt a severe blow when in 1966 the Bank of England issued regulations requiring the registration of all coin collectors and limiting collectors to no more than four gold coins minted after 1837.

But fortunately, as was the case with the original numismatic provisions of our own Gold Reserve Act of 1934, these rules were softened considerably in their administration. Although not spe- cifically stated in the regulations, it has been made known that “collectors may possess two gold coins or sets of any one type or series, that is, two 1887 five-pound pieces, two 1902 two-pound pieces, two 1937 proof sets, etc.—only holders of large quantities of common-date sovereigns will be required to surrender them.”” The citizen of the United States, if interested in acquiring a speculative or investment position in gold, is then limited to gold- mining stocks or gold coins. The citizen of Great Britain has the same options except that he is much more limited in the area of coins. The natives of Canada, France, Switzerland, Germany, South Africa, and innumerable other areas of the world, presumably not as far along on the path of enlightenment as we, are free to do as they please regarding gold. There has been some talk that once gold was successfully de- monetized by the U.S., the free holding of gold by its citizens would be permitted. If this is ever tried, it will be as a last desperate bluff to prove that the dollar is better than gold. But like our former policies of trying to hold down the international price of gold by selling it freely through the London “gold pool” and trying to hold down the price of silver through massive Treasury sales, it will be just another phenomenal failure. By its demented economic and fiscal policies of the last three decades, the U.S. government has forfeited all confidence in its ability to maintain the value of its currency. If U.S. citizens were now granted the right to cash in some of their paper dollars for gold, what is left of our national gold reserve would disappear in a month. In Russia and the Marxist countries of Eastern Europe, there are of course no gold-mining stocks.

If it were not for the Communist ideology, however, no doubt there would be; the Soviet Union is thought to be the third largest producer of gold in the world ( after South Africa and Canada), although the actual pro- duction figures are a closely guarded state secret. It is also reported that the Russians pay production costs equivalent to $100 an ounce for their gold. Despite Lenin’s boast that gold would one day pave the public rest rooms in the worker’s paradise, the Russians seem to have found other uses for it—like buying vitally needed equip- ment and raw materials in Europe, Africa and Asia. But as we have said, private trafficking in gold bullion in the Soviet Union is considered (as in the United States) a most serious crime. Surprisingly, coin collecting, including gold coins, is per- mitted. The state mints occasionally issue gold commemorative coins and medals, and sometimes restrikes of older gold coins. We can assume they are sold on a strict one-to-a-customer basis at home, although some of these restrikes have been widely exported to the West ( and smuggled into the United States) for profitable sale. However, whether a tovarich can acquire a collection of gold coins without arousing the suspicion that he is surreptitiously planning an “economic crime” I do not know, but I imagine the mental hazards are discouraging. The general worldwide availability and popularity of gold coins as an investment and speculative medium, and the rather intense activity of recent months call for diligent, thorough and hopefully objective investigations into the merits, hazards, techniques and problems involved in the purchase and collection of gold coins.

That is the main purpose of this volume. It is hoped that it will also serve an auxiliary purpose by revealing something of the extent of monetary deterioration in the West and by showing the absolute necessity, as well as the advantages, of finding alternative stores of value to rapidly depreciating paper currency. An analysis of the virtues, risks and comparative values of various gold-mining stocks is not within the scope of this work except as it serves to compare the character of gold-mining issues as a group with coins and other forms of investment.


Said to be the largest single object of gold in existence. According to the ancient Greek historians, Xenophanes and Herodotus. Numismatic specimens of these first coins have been recovered. Robert Friedberg, Gold Coins of the World, 2nd ed. (New York, 1965). A peculiar notion that seems to gain prominence in direct but inverse proportion to the decline in our monetary gold stocks. In 1946, when the U.S. Treasury contained most of the world’s gold, our government was equally insistent on proclaiming that gold was the only real money and that gold must be the foundation of all international monetary arrangements. One is reminded of the old proverb: “Those who fail in an enterprise do not thereafter speak highly of it.”  William L. Graham, Jr., The Coming Gold Crisis (Glenview, Ill.: Hickory Press, 1966), p. iv. Freud has suggested that part of this attraction is derived from the subconscious association of gold with the erotic fantasies of childhood—a notion I find too abstruse to comment on. Gold is not entirely unique in this respect. There are six rare metals I I of the “platinum type”—platinum, palladium, ruthenium, osmium, rhodium, and iridium—that are also immune to normal atmospheric conditions. But they are all considerably more scarce and expensive than gold. Of the six only platinum has been used for coinage in the past. Between 1828 and 1845, Russia minted three denomina- tions of platinum coins. (Recently the island kingdom of Tonga announced plans to mint commemorative coins of palladium.) Most monetary reserves are kept in the form of ingots or bars (the 30-kilogram size is preferred—about 66 lbs.), but considerable quantities of gold coins are also held by many countries, including France and Mexico, as part of their central bank reserves. Statistics on gold production are derived principally from U.S. Bureau of Mines Bulletin, no. 630 (G.P.O., 1965), with embellish- ments by author. 12. In 1966-67 all U.S. silver coins disappeared in just such a manner, with the public probably outreaching the Treasury for most of them. Cynical Frenchmen used to say they could judge the future of the franc by the trend of the antique markets. When the antique busi- ness was booming they knew the franc was headed for devaluation again. (The antique business in the United States is now better than ever.) Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds, 2nd ed. (London, 1852; reprint ed., with Foreword by Bernard M. Baruch, New York, 1932), p. 100. The U.S. dollar is “defined” by law of Congress to be an amount of gold equal to 1/35 of a troy ounce (13.71 grains) of fine gold. The Continental nations have let it be known that any future IMF currency or “drawing rights” must also be defined as a specific amount of gold to get their approval. Those dollars that “buy” foreign coins eventually return as a claim on the American gold stock and the cycle will continue until: a) all good foreign coins are gone, or b) all our gold is gone. Headline of a feature article in Chicago Daily News, February 26, 1968, read: “Gold backing an echo of past.” See John Maynard Keynes, General Theory of Employment, In- terest and Money (New York, 1936), for these and similar ideas. 19. The wealthy and sophisticated can more easily obtain and better judge the value of such things as stocks, real estate, works of art, antiques, etc. Precious metals have traditionally been the “poor man’s” inflation hedge. Witness the popularity of gold ornaments among the masses of India. Occasional accounts in the Soviet press concerning trials and sentences for gold dealing, hoarding and similar “economic crimes” tend to verify this. Prior to and following the banking acts of 1933-34, which in- cluded devaluing the dollar by 41 percent, the stocks of gold- mining companies underwent an enormous increase in price. The The Color of Gold 69 shares of Homestake Mining Co., for example, rose 1,600 percent, reaching their peak in 1936. The Supreme Court in a narrow (5-4) decision ruled otherwise. Until the recent series of gold crises of 1966-69, American gold coins could readily be obtained at the Bank of Nova Scotia and several Canadian banks at a price only slightly over their bullion value. The bureau’s ruling was based on an assumption that nearly all American gold coins were surrendered and melted in 1933-34, and therefore those that remained outstanding were rare. (That was the essence of its original statement, at any rate.) Thomas G. Wolfe, Speech to Professional Numismatists Guild, Coin World, May 21, 1969. 26. Ibid. Information from Spinks, Ltd., Coin Dealers, Numismatic Circular (London, August 1966). III From Caesar to Napoleon

History of Gold in the US – Part II

To have ruthlessly insisted on the surrender of all gold coins extant on or before April 5, 1933, that were still technically part of the circulating medium, and/or not obviously or generally recognized to be of unusual historic numis- matic value, would have been catastrophic indeed, as far as numis- matics is concerned. But the Treasury officials of that day chose to be tolerant, if not amiable, and, except for preventing the importation of large numbers of post-1933 foreign gold coins, did little to disturb numismatic gold activity. Apparently, numismatists, collectors, and even hoarders were too few in number at that time to cause alarm on the Potomac. Whatever the reason, we can feel thankful that the Treasury authorities of the first quarter-century following the demise of gold coinage in the U.S. did not flail about with the typical bureaucratic myopia that has characterized their successors. In any case, the “common” U.S. gold coins (which, as we know now, are anything but common) and most pre-1933 foreign gold coins were allowed to be traded and collected more or less openly during the years prior to 1954. In 1954, the Treasury Department recognized at last that the time had come to legitimize the numismatic gold market.

Consequently, an amendment was made to the Gold Regulations, to the effect that all gold coins minted prior to 1933 would subsequently be presumed to be rare and of recognized special value to collectors, without the necessity of further specific determinations by the Treasury. Coins minted after 1933 were still subject to specific Treasury Department rulings, which were to be based on the advice of the Curator of Numismatics of the United States National Museum. All U.S. gold coins and the vast majority of foreign gold coins were thus freed from the overhanging threat of confiscation, and a new era for American numismatics appeared to begin. It might have been reasonable to expect after 1954 that further relaxations of the Treasury’s Gold Regulations, particularly as they applied to numismatics, would be a natural development in time. But the subsequent course of American economic history ruled otherwise. By 1960, the underlying inflationary instability of the Western world had reached the point where the once seemingly unlimited gold reserves at Fort Knox had noticeably begun to shrink.

This unfortunate turn of events precluded any possibility of further liberalization of the gold rules, numismatic or other. Instead, in 1961, the Kennedy Administration saw the necessity of establishing within the Treasury Department the Office of Domestic Gold and Silver Operations (ODGSO) , in order to institute a more rigorous control over the import and export of gold and silver, the licensing of jewelers, 1 goldsmiths and industrial users of gold, and the import and sale of gold coins. The most positive accomplishment of the new ODGSO was to reaffirm, as its own policy, the 1954 amendments to the Gold Regulations, which ruled that all gold coins minted prior to 1934 are rare and consequently of recognized numismatic value.” For gold coins minted after 1933, the office required a separate ruling in each case and the issuance of a special permit for the importation or possession of each post-1933 coin approved. (Once an initial ruling on a particular coin was made, however, no further permits or applications were necessary to purchase or hold other coins of the same identity within the United States, although a license to import any post-1933 gold coin is still required, whether it has been previously approved or not.)

By some obscure and tenuous logic, ODGSO also required (until 1969) a permit to import pre-1934 gold coins, even though the 4 purchase or possession (or both) of such coins was unrestricted within the United States. I might add that the majority of applicants desiring to import pre-1933 as well as post-1933 gold coins were invariably refused. The author once applied for a permit to import some pre-1933 Mexican gold coins offered by a Canadian dealer. The license was refused, even though the coins under consideration were the rarest of their series and selling for more than twice their intrinsic value, on the grounds that they were “not of exceptional numismatic value within the meaning of the Treasury Department Gold Regu- lations.” In reply, I could only point out, politely (and in vain), that the Treasury Department Gold Regulations, which ODGSO was supposed to be administering, stated without qualification that all gold coins made prior to 1934 were to be considered of “recog- 44, nized special value to collectors.” The spectacle of federal regu- latory agencies regulating themselves in a circle is at times wondrous 4 to behold.

Fortunately, the 1954 amendments are now a well-established precedent, and they provided at least a basic protection for the numismatic gold collector. Furthermore, although it has required a change of administrations, ODGSO has finally come to recognize that some of its interpretations of the gold rules have been, in the words of its new director, “of dubious merit.”25 On April 22, 1969, the Gold Regulations of the U.S. Treasury Department were amended to correct the obvious and unreasonable inconsistency introduced by Executive Order 11037, issued July 20, 1962, which required, among other things, a permit from ODGSO for the importation of pre-1934 gold coins. The new director of ODGSO, Mr. Thomas Wolfe, appointed by the Nixon Administration, admitted candidly that “it really didn’t make a lot of sense” for ODGSO to prohibit or confiscate a pre-1934 gold coin coming from abroad, when the collector could walk across the street and buy the same coin in the U.S. without restriction.26 Therefore, the provisions requiring a license to import pre-1934 gold coins were eliminated. Collectors and dealers in the U.S. are now free to import such coins, provided they are genuine, subject only to the usual customs regulations and import duties.* Counter- feits or restrikes, however, are subject to confiscation, regardless of a pre-1934 date. The Gold Regulations were further amended to require import licenses only for gold coins struck from 1934 through 1959.

History of Gold in the US – Part I

Gresham’s Law respects no boundaries.

However, it is obvious that the present show of defending gold by Britain and the United States, through various austerity programs, exchange controls, high taxes, etc., is a tactical expedient only. The ultimate goal remains the implementation of some new international paper-money scheme, an eventual total devaluation of the dollar, and the complete demonetization of gold. Therefore, stability in the price of gold and an end to the long-term inflation that has accompanied the ascendancy of the New Economics are nowhere in sight. Additional waves of gold speculation, gold-buying panics and recurrent gold crises are not only probable but inevitable. What part the citizen of the United States and his British cousin What part the citizen of the United States and his British cousin have played in these events has been somewhat restricted, legally at least, by the actions of their respective governments. They have been prohibited by law and regulation from direct participation in the purchase, sale or ownership of gold in bullion or monetary form. In most other civilized lands (and some that are not so civilized) the ownership of bar gold and gold in any other form is not only permitted but, as in the case of France and Switzerland, often tacitly encouraged.

These enlightened countries believe that gold in the hands of private citizens is an aid to internal economic stability and complements rather than competes with the official re- serves of their central banks. By allowing the free use of gold as a store of value, the other Western countries have eased somewhat the burden of inflation upon their citizens. Unfortunately, the in- sidious disease of inflation is, as a matter of record, chronic in every country that practices neo-Keynesian economics. But by permitting the private possession of gold in any form, France and Switzerland at least recognize that the least sophisticated and affluent of their citizens should have the right to defend themselves.’ The only other major nation, besides the U.S. and Britain, that ‘ The only other major nation, besides the U.S. and Britain, that prohibits free commerce in gold by its inhabitants is the Soviet Union. Private holdings or transactions in the yellow metal are considered there to be “economic crimes”—most serious offenses in a Marxist state. Those engaged in them are subject to the firing squad. (Yet it has been reliably reported that a flourishing black market in gold continues to exist in Russia and the other Marxist The Color of Gold 59 states.20) Curiously enough, the writer finds that the parallel pre- sented by the United States and the Soviet Union, regarding the private holding of gold as an infringement on a state monopoly and therefore a crime, is neither unbelievable nor incongruous. Perhaps the “big brother” philosophy of economics is rather easily recog- nized whatever its stage of development. Worldwide, the record of the neo—Keynesian money managers in the area of maintaining the purchasing power of their fiat curren- cies has been deplorable. But perhaps I am too harsh on the proponents of the New Economics; after all, monetary delinquency antedates Keynes by a considerable period; it is of course as old as money itself.

The coin clippers and debasers caused as much ruin and suffering in ancient times as the paper-money inflationists have in the twentieth century. But holding aside for a time further comments on the great questions concerning future trends of inflation. and the coming rise in the price of gold, let us proceed directly to the problems and opportunities confronting people generally, and citizens of the United States and Britain in particular who might wish to speculate on these possibilities, or who might want to invest in a gold-related activity as a hedge. Since possession of monetary gold (bullion) by citizens of the U.S. and Britain is unlawful, there remain only two (legal) avenues of gold investment open to them: the purchase of shares in gold-mining companies, and the collection of gold coins. The gold coin was once a very vital part, at times the lifeblood, of the economic body. Today it is not so. The lifeblood of the New Economics is credit. The coin of gold, the ancient king of money, was forced to abdicate in disgrace during the depths of the Great Depression and it has been banished from the realm ever since. But the gold coin still has a meaning, and sometimes a very profit- able one, for those who have the eyes to see it. The provisions of the Gold Reserve Act of 1934 and the Execu- tive Orders and banking laws of 1933, which originally demonetized and confiscated all outstanding gold coin in the United States, prohibited the individual possession of gold bullion (or any other recognizable use of gold as a store of value).

However, they made no prohibitions regarding the ownership of gold-mining stocks,” and they also permitted the retention of gold coins of “recognizable numismatic value.” Failure of the original legislation to define adequately what constituted recognizable numismatic value caused considerable confusion for some years, but in general, the parts of the gold regulations concerning numismatics were not rigidly enforced—at least not to the point of harassing collectors of gold coins. It is now obvious that considerable quantities of U.S. gold coin were never surrendered at the time of the original order. Some coin was withheld because it was in the possession of foreign citizens, banks, or governments, and some because its owners chose to defy their government because of what they considered to be an arbi- trary and unjust confiscation.22 Considerable quantities of American gold coin also found residence in Canada.”

At any rate, choice uncirculated U.S. and foreign gold coins were generally available through coin dealers in the United States after 1934 and they sold at prices that from today’s vantage point were fantastically cheap. Unusually strong demand for the more common gold coins, strictly as a speculation on a possible rise in the price of gold or as a hedge against inflation, occurred from time to time, notably in 1946, 1957 and 1961, but in general, the market for the so-called common type of gold coins remained unexciting—until 1967. In the truly numismatic area, however, astute and knowledgeable collectors gradually reaped a tremendous reward for their patience. During the postwar years, gold coins of unusual scarcity or rare numismatic value enjoyed a spectacular and continuous rise in price. In the forties and fifties, the U.S. Treasury held most of the world’s gold bullion, and consequently, the attitude of the govern- ment toward gold-coin collectors was one of indifference, even though the legality of possessing so-called common-date gold coins was somewhat questionable, at least until 1954. Prior to that year, the Treasury held the opinion that it alone had the right to de- teiniine whether or not any gold coin was of numismatic value. Determinations were to be made on the merits of each individual coin presented to the Treasury for ruling. The pre-1954 criterion for judging a coin minted before 1933 was whether or not the coin in question had possessed a recognized The Color of Gold 61 numismatic value on or before April 5, 1933.

Gold coins minted after 1933 were to be judged on the basis of the number issued, the purpose for which they were issued, their condition, mint mark, historical significance and other numismatic factors. However, there appeared to be no great rush of collectors to the Treasury Building to have their coins checked. It must be admitted, however, that the Treasury Department of that era did not rigidly or aggressively enforce a narrow and legalistic interpretation of the “numismatic value” provision of the Gold Reserve Act. Had it done so, American numismatics would have suffered severe and irreparable damage; many fine gold coins which are now the prized possessions of American collectors would have been lost forever. “Numismatic value” is a term of varied and at times subtle meaning. Many regular-issue coins gradually become scarce or even rare, through natural attrition, while they are still technically part of the circulating medium, and these scarcity situa- tions are invariably recognized at first only by the most astute and sophisticated collectors. By the time the numismatic value of such coins becomes common knowledge, it is usually well past the point where that value or the potential for numismatic value was actually acquired. There is also the case of the unusually well struck or prooflike coin which was selected from a regular issue; certainly this type of coin has exceptional numismatic value even though the issue it was taken from was not particularly scarce. And how does one objec- tively judge the roll of uncirculated coins put away by the fore- sighted for the benefit of future generations of numismatists? And specimen coins retained because of their artistic merit or historical associations? Surely the final U.S. gold-coin series designed by Augustus St. Gaudens, one of America’s most noted sculptors, would fall into this latter class.