Christmas $

This year Christmas was a simple affair enjoying salmon steaks at Fr. Vin’s place and the most delicious apple pie I’ve ever had courtesy of his neighbor who’s a real artist in the bakery.  Fr. Vin also entertained us with such gag gifts as an orange (all wrapped up fancy, even with ribbon and bow), no doubt inspired by a gag gift from his neighbors in which they gave him a stocking housing an actual lump of coal.  My favorite gag gift was a whiskey flask (given of course to the one family member who, with the possible exception of the occasional annual glass of wine, never goes near liquor.)  One thing you immediately notice about a flask is that there’s no way to clean them; so they really cannot be used for anything other than alcohol.  It’ll be fun to keep it on display or take it to parties and make everyone think I’m a boozer. 

           Fr. Vin’s favorite gag gift was a series of five $1 presidential coins, the authenticity of which I immediately questioned since they do not have the traditional markings of real U.S. coins.  I was certain they must be party gag coins, the only thing challenging that suspicion being that it is a violation of federal law to make play money that is not clearly marked “Not Legal Tender.”  No such marking on these coins.  That is why both Fr. Vin and Marijo were both convinced they must be real.   But there were also none of the other required markings such as year of issue, mint of issue, and the all important denomination descriptor that is alpha-spelled out “One Dollar”.  Instead, the only descriptor on these coins was a simple numeric “$1”. 

            So I stood alone as the skeptic who thought it was probably play money.  “Don’t try to buy something with it, Fr. Vin.  You don’t want to get arrested.  Take it to a bank first,” was my advice.  But, arriving home, it took about 30 seconds on the Internet to confirm they were indeed legitimate U.S. coinage.  The reason I was thrown off was because they are being minted as collectible coins and so deliberately designed to look different from coins intended for currency. 

So as I was reading about this presidential coin series that was authorized by Act of Congress in 2005 (and of which I had never seen a one, another reason for my skepticism), I was also reminded of all the arguments behind the age-old controversy surrounding the long fought battle from the Bureau of Engraving and the Congress to eliminate the paper dollar. 

For quite a long time now, there have been committees in Congress lobbying for the passage of a bill to stop making the dollar.  There have been something like seven GAO studies done on the economy of changing to coinage for the dollar, the most recent submitted to Congress just a few months ago.  They all come to the same conclusion:  if Congress was to stop authorizing the making of dollar bills, it would save the federal government some $200 million dollars each year.  Why?  Because paper dollars wear out and have to be replaced every five years or so whereas a coin would last six times that long.  So the minting of dollar coins and the elimination of the paper dollar has long been touted as a very simple and effective way to reduce the deficit. 

What is wrong with this picture?  Quite simply this - it assumes the American public will choose to use the coins.  But we already have a very long history proving otherwise.  It’s not like the Susan B. Anthony Dollar (a total fiasco) and its replacement the Sacagawea coin (another complete flop) were the first dollar coins every issued by the U.S. government.  Dollar coins have been made and circulated since the beginning of the republic.  In a long ago forgotten time when the dollar actually had real purchasing power and Americans distrusted paper money, these coins were used abundantly.  But not for a very long time.  In modern times, Americans have repeatedly shown their preference for paper dollars and rejected the dollar coins.  Now, about the only times you’ll even see a dollar coin is for change from a vending machine. 

The fallacy in the government’s whole argument about saving $200 million dollars a year is that the American public simply doesn’t want and won’t use dollar coins.  We like the paper dollar.  For one thing, over 40% of all currency in circulation is dollar bills.  That means we use a lot of dollar bills.  If we were forced to switch to coinage, we’d all need a knapsack (and a personal trainer) to lug it all around.  If the Congress were to pass a law to force us to abandon the paper dollar, pity any elected official’s chances for reelection who vote yes on that one. 

But here’s the thing.  It’s a totally unnecessary controversy since, in fact, these coins have proven to pay for themselves anyway, and do so many times over.  The fact that the public rejects them has actually given the government a big advantage because, with them not being used as legal tender, they become collectibles instead.  As collectibles, they generate huge profits for the mint.  For instance, it costs five cents to make a quarter.  If the quarter is used to purchase something, it simply becomes a medium of exchange with no profit, no loss.  But if it’s purchased and then immediately taken out of circulation as a collectible, the government now makes a 400% profit.  They have just sold something for 25 cents that cost them 5 cents to make.  That’s a pretty darn good business to be in. 

It’s like the same specious controversy over the wisdom of continuing to mint the penny since the value of the copper in the penny now exceeds one penny.  (Has anyone considered that perhaps the penny could be made from a cheaper metal and simply clad in copper, thereby negating this whole issue?)  But the reality is it doesn’t matter one damn anyway that the copper is worth more than a penny.  It doesn’t matter what the penny is made of.  It can be made out of wood, or it can be made out of gold.  If used strictly as a medium of exchange, it’s still just a penny. 

Obviously my examples here of wood or gold are for demonstration purposes only.  If pennies were actually made out of wood, they’d be much too easy to counterfeit, the economy would then be flooded with them and subsequently collapse.  The same with gold.  Pennies made from gold would be hoarded and melted down for their bullion value, thereby also collapsing the economy.  But both counterfeiting and hoarding are illegal.  For coinage used strictly as a medium of exchange as coinage is intended, the value of the material in the coin simply becomes a pass-thru item that is continuously recycled and therefore irrelevant to the exchange with no consequences to the economy. 

Since dollar coins are virtually identical to quarters in terms of size, materials, and process, now we’re looking at a far more lucrative opportunity for the government to profit.  The dollar coin also costs just a nickel to make so if the public buys them for one dollar and then immediately takes them out of circulation as collectibles, the government has just made a 95 cent profit from something that cost 5 cents to make. 

Coming back to Fr. Vin’s Christmas gag gift of the presidential dollar coins and why I doubted their authenticity, when my research revealed that they are used almost exclusively as collectibles, suddenly it made a lot more sense.  We don’t need to discontinue the paper dollar in order to save $200 million a year on the deficit.  All we need to do is continue to supply the American people with as many collectible dollar coins as they’re willing to buy.   With billions of them in private coin collections, that alone generates many times more revenue than could possibly be had by eliminating the paper dollar. 

That is why the decision by our ever so wise Congress to stop making the presidential coins makes no sense.  The claims that it’s a big waste of money to mint these coins since no one’s spending them is a complete failure to see the Big Picture.   With roughly 2.4 billion coins minted to date and half of those in the hands of the public, the other half in government vaults, the original plan was to keep making them until 2016 when all the Presidents through Jimmy Carter would have been covered.  (By congressional statute, no living president can have their image on a coin.)  But they have now stopped making the coins with our 24th president, Grover Cleveland, being the last.  That was November 2012 when the last coins were minted.  This is actually a first.  Never before has a coin series been halted.  I mean if they can complete the run of the series of the 50 states and all U.S. territories, why can’t they complete the run of our first 40 presidents?  There are billions of dollars of potential deficit-reducing revenues to be had here but, as is so often the case, the decision makers are simply looking at the cost-side of the equation and ignoring (or being ignorant of) all other considerations.  The solution:  keep making the coins.  In fact, take those 1.2 billion coins that are currently vaulted and put them out there or, as I said, as many as the public are willing to buy. 

In the case of the presidential series, there is one other particularly compelling reason to keep it going.  There were a number of errors made in the minting of the first few coins, thereby making them very valuable.  Some of these faulty coins are selling on eBay for hundreds of dollars, which is yet another source of tax revenue for the government.  It was two years ago last week that the Treasury announced the coins would no longer be made.  A quick Internet search has produced a number of articles discussing this issue and the general controversy over the debate on eliminating the paper dollar, with abundant public comments on both sides of the issue, many arguing we’re way past due for eliminating the paper dollar, many others that the public has made their position on this very clear and it simply would not work.  But there was one public comment in particular that really caught my eye and seemed to sum up the whole problem in one very concise statement:  “Congress claims the government will stand to save $3.4 billion dollars over a 30 year period by eliminating the paper dollar.  This government currently spends $3.4 billion dollars EVERY YEAR hunting down, arresting, prosecuting and incarcerating people who smoke pot.  I have a suggestion ... “ 

I’m sure the paper dollar will be with us for a very long time.  Meanwhile, I recommend that Fr. Vin take a good close look at those five gag coins he got for Christmas and see if any of them bear the flaws that make them valuable as collectors items.