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.