Richard Giedroyc -
April 25, 2000
Debasement. When coins in circulation are comprised of precious metal and the amount of that precious metal in the coins is reduced or removed we call this debasement.
The ancient Romans debased their coinage as inflation took its toll on the economy of the empire. The United States debased its coinage in 1838 out of necessity when it was found there was too much gold and silver in our coins. This made the coins worth more than their face value and encouraged their melting or export.
What most people today don't realize is that the United States debased its coinage much more recently. In fact, it debased its coinage twice during the 20th century.
Prior to 1933, gold coins primarily circulated rather than paper money. If you had $10 in your pocket you probably had a mixture of gold and silver coins with perhaps a few dollar bills, which were payable to the bearer "on demand" in gold.
The economic crisis caused by the "crash" of 1929 and the subsequent Depression that followed led President Franklin D. Roosevelt to stop the production and issuance of gold coins by executive order. This sent many coins back to the Mint to be melted and many more into the underground economy. Among the coins entering the underground economy were a handful of 1933 Saint-Gaudens $20 double eagle coins released early unofficially by the Mint. According to some "street" rumors there may have been as many as eight specimens released.
Most coin collectors today can cite chapter and verse on the debasement of 1933, resulting from the withdrawal of all gold coins from circulation.
The debasement of 1965 is generally unrecognized for what it is--another debasement. It is interesting to note that although gold was removed from our circulating coinage beginning in 1933, silver remained almost as a barbaric relic of the past. If you stop and think about it, there was no logic to withdrawing one precious metal while continuing to issue coins with the other. All that was really done was to remove the United States from a gold standard in favor of a silver standard. Even our bank notes now reflected this, now inscribed with an assurance each note could be redeemed in silver "on demand."
A repeat of 1838 was at hand during 1964. The Hunt brothers from Texas had succeeded in cornering a significant amount of silver, which forced the price to reach astronomical figures. Thieves were said to be stealing silver from homes and melting it for the bullion value (also destroying the evidence in the process). People were sorting silver from their change, then turning it in to dealers who gave significantly more for it than face value. The logic of the announcement our circulating silver coins were to be replaced with coins comprised of copper-nickel beginning in 1965 was apparent. What wasn't apparent was why the half dollar was to retain some debased silver content, which it did through (and including) 1969.
What was overlooked in this process was the fact our coinage (and paper money) was finally reaching the point of full debasement. Our coins and paper money were no longer comprised of or redeemable in silver. It effectively became "fiat" money, something only redeemable because of our faith in the government. This currency was no longer backed by anything--not real estate, durable goods or precious metals. The amazing part is that the entire world followed this example. Today no one anywhere in the world uses precious metal coins in circulation. Such coins are made strictly for collector consumption.
This doesn't mean the modern coins beginning in 1965 are not collectible. They are not only very collectible, but in many cases they are difficult (Do I dare use the word "rare?") to find in very high grade simply because initially all collectors ignored them.
Here we are 35 years later and now people are beginning to realize just how hard it is to find Mint State 65 and better circulation coins from particularly 1965 to 1970.
Our coinage is debased. There is no other way to describe it. It doesn't appear to bother anybody simply because debasement is practiced virtually everywhere in the world.
Trust is the key factor in accepting the so-called currency of today. Our currency isn't backed by anything other than "trust" in the governments of issue.
If you stop and think about it, the facts are actually quite interesting. Our money is backed by psychology, not by hard assets. This really is a strange economy with which we live.
Richard Giedroyc is a numismatic writer, researcher, auction cataloger and coin dealer. He has been in the hobby and business most of his life, now having more than three decades’ experience in this fascinating hobby field. During this time Giedroyc has been the owner of Paris Bergman Galleries, owner of Classical Coin Newsletter, international editor of Coin World and owner of Giedroyc-Anderson Interesting World Coins. He is currently a numismatic consultant. He has written more than 2,000 byline numismatic stories and contributed to several coin catalogs.