Link Between Value of Money and Gold a Quaint Relic of the Past

This Serial Number 1 Stephen Decatur $20 1878 Silver Certificate, Fr. 306b, is believed to be the first silver certificate ever produced. It sold for $175,375 at a May 2005 Heritage auction.

By Jim O’Neal

In 1961, I was a member of a high-powered bowling team that competed on Tuesday nights at the South Gate Bowling Center in Southern California. We all had 200-plus averages, but only managed to win one league championship in the four years we were together. In February, one of my teammates, Carl Belcher, bowled a perfect game (12 strikes) and received 250 silver dollars from a promotional gimmick the arena used to attract customers. Nobody paid much attention and I personally thought it was an unnecessary inconvenience to lug the sacks to a local bank to get rid of them.

Most of the silver dollars in circulation were probably in Nevada since all the Reno and Las Vegas casino slot machines used them instead of tokens. Even paper currency was printed with the promise to “pay to the bearer on demand … one silver dollar,” which evolved into “one dollar in silver.” For a while, it was possible to get a small plastic bag of silver equivalent to the denomination of the paper currency.

Silver certificates were authorized by two Acts of Congress. The first on Feb. 28, 1878, followed by another on Aug. 9, 1886. These notes are particularly attractive, quite rare and sometimes expensive. At one time, I owned an especially distinguished $20 bill with the head of Captain Stephen Decatur, naval hero of the War of 1812. It was serial number 1 and experts believe that since the Treasury generally printed the $20s first, this note was probably the first silver certificate ever printed. Heritage Auctions auctioned it in 2005 for $175,000 when I sold my currency collection.

However, after Executive Order 6102 of 1933, there were no more gold coins or silver dollars minted in the United States and paper notes were used for denominations above 50 cents. Up to 1964, dimes, quarters and half dollars were minted in 90 percent silver, and half dollars contained 40 percent silver from 1965-70. Even the lowly penny had most of its copper content removed and is now made primarily of zinc, with a thin copper plating.

For 4,000 years, the only period in which civilization has not based its currency on metal, especially gold and silver, is the past 46 years. On Aug. 15, 1971 (“A date that has lived in infamy”), President Richard Nixon announced the temporary suspension of dollars into gold. The White House tapes from the previous week reveal that he thought gold prices would explode after being de-linked since the Federal Reserve would print money like crazy once the currency was not collateralized and this overprinting would affect jobs (unemployment had just gone from 4 percent to 6 percent). And Nixon was “not about to be a hero” (his words) on inflation at the expense of employment.

Then the administration imposed a rigorous regime of wage and price controls, enforced by IRS audits and leverage over federal contracts. The plan failed spectacularly and the 1970s were rife with double-digit inflation, energy shortages and ultimately the “stagflation” that torpedoed both the Ford and Carter presidencies.

Flash forward to today as we are still trying to use monetary policy to solve economic issues and unwilling to even touch the critical fiscal issues that are fundamental to the future economic challenges everyone acknowledges. The only thing that has changed is that there is no need to actually print money when it can be “whistled into existence” via monetary legerdemain called quantitative easing, where the Federal Reserve loans money to the Treasury Department.

Since the financial crisis of 2008, the world’s central bankers have materialized $12.25 trillion by tapping on a computer keyboard. For perspective, the value of all the gold that’s ever been mined, according to the World Gold Council, is a mere $7.4 trillion. The historical linkage between the value of our money and its metal content is a quaint relic of the past.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Ford Viewed his Legacy as Rebuilding Confidence in the Presidency

gerald-ford-presidential-seal-hooked-rug
Gerald Ford’s Presidential Seal hooked rug, used in his home office in Rancho Mirage, Calif., sold for $13,145 at a December 2012 Heritage auction.

By Jim O’Neal

Public opinion polls as early as 1975 indicated that President Gerald Ford would be unlikely to win the Republican nomination for president in 1976. The main competition came from the conservative former governor of California, Ronald Reagan. However, Ford was determined to campaign hard and plunged into an aggressive schedule.

The mass demonstrations at the White House had finally started to wind down, although there was another incident in March 1975. Sixty-two protesters entered the grounds on the regular daily tour and then refused to leave, saying the U.S. should end involvement in the Indochina war and liberate the 200,000 political prisoners in South Vietnam. President Ford’s amnesty offer to those who had avoided the draft expired on March 1, and the protesters also demanded amnesty for “anyone who had resisted the war.” Most were booked and released from jail.

As the president started his campaign trip West, there were some nasty surprises lurking in Northern California. On Sept. 5, 27-year-old Lynette “Squeaky” Fromme, a cult follower of convicted mass murderer Charles Manson, pulled a partially loaded Colt-45 and fired it at Ford when he was two feet away. There was no bullet in the firing chamber and an alert Secret Service agent grabbed the gun before it could be fired again.

Three weeks later, as Ford left his San Francisco hotel (the St. Francis), 45-year-old Sara Jane Moore, a civil-rights activist, fired a 38-caliber revolver at him, but missed. A bystander prevented her from taking a second shot. Both women were convicted and given life sentences. Subsequently, both were released under a federal law that allows parole after 30 years, although “Squeaky” served two extra years for a prison escape/recapture.

gerald-ford
President Ford

At the GOP convention in Kansas City, Ford narrowly won the nomination on Aug. 19 with 1,187 votes to Reagan’s 1,070. He chose Bob Dole for his running mate. The Democrats picked Jimmy Carter and once again the opinion polls showed that the president was far less popular than the Georgia peanut farmer.

Ford challenged Carter to a series of televised debates – the first time an incumbent president debated an opponent. Ford also campaigned hard and nearly caught Carter, but in the November election he became the first sitting president to be defeated since Herbert Hoover in 1932.

In his final State of the Union address to Congress on Jan. 12, 1977, Ford said, “I am proud of the part I have played in rebuilding confidence in the presidency, confidence in our free system and confidence in our future. Once again, Americans believe in themselves, believe in their leaders, and in the promise that tomorrow holds for their children.”

Amen.

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

55 Years Ago, Alan Shepard Became the First American to Travel Into Space

The first photo of Earth from deep space, signed by all 29 Apollo astronauts, sold for $38,837.50 at a June 2011 Heritage auction.

By Jim O’Neal

Space … the final frontier …

● The first U.S. space program was the Vanguard. Out of 11 attempts, only three were successful.

● The initial 1961 flight of Alan Shepard – America’s first astronaut – lasted only 15 minutes and 22 seconds.

● Virgil “Gus” Grissom made the second manned space flight, but his Mercury capsule, Liberty Bell 7, sank on splashdown and Grissom was safely recovered. The Gemini capsule for his second flight was nicknamed “Molly Brown” after “The Unsinkable Molly Brown.” Sadly, Gus died in the Apollo 1 fire.

● The first Space Shuttle orbiter was scheduled to be named Constitution by NASA. However, after President Ford received 100,000 letters from Star Trek fans, the name was changed to Enterprise.

● There were six Apollo missions that landed men on the moon: 11, 12, 14, 15, 16 and 17. Apollo 13 was aborted when an oxygen tank exploded and the astronauts were forced to return via the lunar module.

● Neil Armstrong and Buzz Aldrin left a plaque on the moon: “Here men from the planet Earth first set foot upon the Moon. July 1969, A.D. We came in peace for all mankind.”

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

State of the Union Speeches Will Continue Evolving

Twenty-three lines in Abraham Lincoln’s own handwriting from his last State of the Union address went to auction in June 2009.

By Jim O’Neal

On Jan. 15, 1975, President Gerald Ford in his State of the Union speech said:

“The State of The Union is not good. Millions of Americans are out of work. Recession and inflation are eroding the money of millions more.”

“Prices are too high and sales too slow.”

“The national debt will rise to over $500 billion.”

“We depend on others for essential energy.”

These were remarkably candid admissions and atypical from most of his predecessors, who took great leeway with the facts to spin a nice story.

George Washington personally delivered the first State of the Union to a joint session of Congress on Jan. 8, 1790.

Then Thomas Jefferson abandoned the “in person” practice because it was too similar to what a monarch might do, something he was trying to avoid (i.e., a speech from the throne).

In 1913, President Woodrow Wilson revived the practice and it has gradually become a major national event. It has also morphed into a presidential wish list rather than a practical, non-political assessment of national conditions … as designed.

Personal attendance by high-profile politicians is a “must,” except for one Cabinet member who is in the line of secession (a designated survivor) in the event of a major catastrophe.

In 1981, Jimmy Carter felt compelled to issue an “exit” State of the Union, but that lame-duck ritual has been discontinued.

However, I suspect presidents will increasingly remind us … one more time … about everything that was accomplished, in case we forgot. It provides an excellent chance to combine a farewell with the start of a memoir … and not leave a legacy assessment in the hands of less gentle hands.

I would.

Jim O'NielIntelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is President and CEO of Frito-Lay International [retired] and earlier served as Chairman and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].