[The following is an interview with Burton Blumert, CEO of Camino Coins in Burlingame, California. He is chairman of the Mises Institute and president of the Center for Libertarian Studies.]
Mises.org: What happened to the government’s ballyhooed Sacagawea $1 coin? It seems to have disappeared.
Blumert: They called it the "golden dollar." What an outrage! It is made of scrap metal, not gold. The year 2000 issue oxidizes very quickly to become a muddy brown, so that it doesn’t even look like gold. You can actually press your thumb on it and see the process begin. Now, this flaw is supposedly fixed in the 2001 issue, but who knows?
The government issued this fool's-gold coin in hopes that it would gain stature as though it were a genuine gold coin. If a private mint did this, the FBI would probably send in armed agents. But the U.S. Mint can get away with things private parties can’t.
I confess some degree of delight that the coin has not entered into circulation. Another central plan is foiled, so to speak.
Mises.org: So it was the last thing its backers expected.
Blumert: Hillary Clinton announced the new dollar coin with a great deal of fanfare in April 1999. She loved it for its political message. It supposedly brought new attention to the contribution of native peoples. But this was silly: Indians have long been featured on U.S. coins, because they were a symbol of courage and independence. Politicians, who embody the opposite qualities, weren’t honored on coins until the twentieth century.
The government was going to ensure that they entered into circulation right away, so they distributed them through Wal-Marts, and in cereal boxes, and at the International House of Pancakes.
It is all quite hilarious, when you think about it. I imagine bureaucrats in Washington in a board meeting: "How can we get the stupid American people to go along with this new coin? Hey, let’s get them into the hands of the working class! Let’s get them out at this place called Wal-Mart, where many people are said to shop!"
The Mint initially said that the coin was a "grand-slam home run." It even dragged out poor George Washington in modern garb to promote it. None of it worked. Given the choice, people like the paper dollar better. The Sacagewea dollar is not a circulating coin. It is just a curiosity or a collectable, and a failed collectible at that.
Mises.org: Are you saying that the government has given up?
Blumert: The jig is indeed up for the coin. If you go to the government’s website, you will see that the coins are selling at a premium. You can buy a roll of twenty-five coins for $35. That’s odd, if you think about it. What if you found that the government was selling dollar bills for $1.40?
You have to ask the question: Is this a real coin, or is it a collectible? The answer is clear from the premium alone. Also, the government has turned the coin into money clips, necklaces, and key chains. That’s the one way the bureaucrats have dreamed up to get rid of the millions of these Sacagawea’s that they have sitting around.
Mises.org: What mistake did the government make?
Blumert: In Europe and Canada, when new denomination coins are introduced, they cease production of the paper currency at the same time. That way people have no choice. They have to accept the coin.
But because the U.S. Treasury is constantly worried about the stability of the dollar, it is reluctant to take such extreme steps. They worry it will spur rumors of broader call-ins and even lead to runs.
They don't understand that so long as the paper is around, people will prefer it. Everyone can intuitively understand this. What do you do with change these days? You put it in a can, or, if you spot an unusual coin, you put it in your dresser drawer.
But because the coinage has been so debased over the years and now buy so little, people tend not to carry them around. They carry cash, which is also what ATMs give you. Vending machines now accept bills as well, so there is not much use for a coin.
There are additional interesting elements. The folks in Las Vegas didn't like the $1 coin because it doesn’t make the right sound when it hits the tray of the slot machine. So gambling was another potential market that dried up very quickly.
Mises.org: What are the mechanics of how a new coin could be introduced?
Blumert: Despite the trick with Wal-Mart and cereal boxes, the only way to get a coin in circulation is through the banking system. People have to actually request the thing from the bank. That’s how the public determines what circulates and what doesn’t. If people were demanding Sacagaweas, the order would go through the Fed to the Treasury, which would tell the U.S. Mint, which then would produce the coin.
But the orders are not coming in. The government could keep minting them, but there is no one who seems to want them for circulation.
Mises.org: What is the difference between the failure of the Sacagewea and the failure of the Susan B. Anthony dollar?
Blumert: You’ll noticed that the U.S. Mint is still trying to fob that slug off on people, too. In the industry, we call it the Susan B. Agony. And you talk about premiums: The government is trying to sell a proof edition of this one-dollar coin for nine bucks.
The mechanics of the failure are very similar. In 1979, the Mint made one billion of them. In 1980, they made fewer than one hundred million. In 1981, they made fewer than ten million. Again, people just didn’t like the thing.
It was said that the problem was that it looked too much like the quarter. The government swore it wouldn’t make that mistake again, and thus the Sacagawea was given a gold color. They didn’t count on the fact that it would tarnish so quickly or that people just wouldn't use it.
The story is that people love the Sacagawea. But it’s not true. The tooth fairy may love to put coins under kids’ pillows, but the whole point of money is to carry it and spend it. It is the money aspect of a coin that determines its success or failure. By that measure, the coin has failed.
Mises.org: While we are on the subject, whatever happened to the $500 and $1,000 bills?
Blumert: If you go to the bank and deposit a $1,000 bill, and then later ask for it back, you will not get it. The policy is to withdraw these bills from circulation. Those things haven’t been printed since 1934, one year after FDR confiscated the people’s gold. Back then, that bill would allow you to make a substantial down payment on a house! The government just doesn’t want people dealing with those amounts in cash. It makes tax evasion too easy. Also, these days, the absence of large denominations is justified in the name of the war on drugs.
Mises.org: Just from an artistic point of view, it seems like our money becomes ever uglier.
Blumert: Yes, the coins of our grandparents carried beautiful symbols: Indian Head cent, Buffalo nickel, Mercury Head dime, Standing Liberty quarter, Walking Liberty half-dollar, and, of course, the magnificent Liberty Morgan dollar and the Peace dollar. Today, our pocket change has no silver, and it bear portraits of dead politicians—some okay, but most horrible. When countries honor men rather than symbols, they are headed downhill. When a country's coinage honors living men, it is time to run for the hills.
Mises.org: What are the lessons of the Sacagawea failure?
Blumert: It should remind us again that the government can’t do anything right. It also shows that the public can wreck the government’s most elaborate plans fairly easily. Money can sometimes be so mysterious that even the government is afraid. It will be a long time before we witness another attempt to introduce a new phony coin. The money system cannot afford too many humiliations on this scale.
