Saturday, August 29, 2015

Coin Debasement - Began With LBJ

July 23rd passed by this year and it's doubtful many people took notice, or pondered the significance. If you asked 100 people if the date had any special meaning to them- 99 would surely give a blank stare and say 'No' or 'Not sure'.  After all, who but a numismatics freak (coin, currency collector) would be aware it was the 50th anniversary of the Coinage Act of 1965 which stripped  all U.S. coins of silver and made legal tender out of base metal slugs.

Don't believe me? Dig into your pockets and pull out quarters. Check the dates on them. If 1964 or earlier they're the real deal.  If you look at the sides of the coins you won't see any copper rim or core to which the rest of the coin is bonded.  Now, take a quarter from 1965 or later and take a good hard look and that nasty copper band will be seen - all around the coin periphery.

For whatever reason we now know the debasement of our coinage began with LBJ. Perhaps it ought to be fitting that the same asshole who engineered the killing of John F. Kennedy, and launched the Vietnam War under a pretext, should also be responsible for passing the single act that debased our coinage.

JFK half dollar from 1964 - before being debased to  80 % silver on the outside and 19 % on the inside

For those not into numismatics or the history of U.S. coins, the original Coinage Act established the U.S. mint and declared the dollar as "the money of account" for the new Republic. It defined the dollar as 371 ¼ grains of silver or the equivalent in gold.  At the same time, the penalty for debasing coins struck under the law was death  (hmmmmm.....too bad LBJ couldn't have been sent back in a time machine to face the music for debasement that he escaped in the assassination.)

That was because since Alexander Hamilton's day our coinage, including dimes, quarters and half dollars, had contained 90 percent silver. When LBJ signed the 1965 Act the value of the dollar was almost the same as it was in 1792, 0.77 ounces of silver.

However, after the 1965 Act, the dimes and quarters would contain no silver - but only be composites: with faces of the same alloy used in nickels but now bonded to a core of pure copper. Debasement! Meanwhile, the new half dollar would have 80 % silver on the outside and 19 % on the inside

What was LBJ's rationale? Clever to say the least! He claimed that on account of "a worldwide silver shortage the only really prudent course was to reduce our dependence on silver to make our coins". He then made more egregious claims such as "silver coins will never disappear or even become rarities".  Really? Then why do so many collect them now?

LBJ insisted the new coins would be used along side the old ones and no one would be any the wiser. Well, not to numismatics freaks, especially as the pre -1965 coins have mostly disappeared from circulation. (Though occasionally, when I check my change, I do pick out an odd 1964 quarter, which I then stow away to save with others- as I want to recall what non-debased coins looked like!)

Meanwhile, those misers who opt to spend silver or gold coins they've hoarded are subject to a capital gains tax.

That's not all. The value of the dollar itself started sinking soon after the 1965 coinage act and by 1980 the dollar - originally valued at 0.77 ounces of silver- had sunk to 0.02 ounces of silver. Today it is valued at just 0.l06 ounces of silver.

Can states go their own way and commence minting their own pre-1965 type coins again? Nope. The U.S. Constitution prohibits states from coining money themselves or making anything but gold or silver coins legal tender. And btw, the coins are taken to be collector's items not the genuine, legit article.

Sadly, LBJ screwed this country in more ways than one. No wonder the Kennedys hated his guts.

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