Forget wooden nickels; go for the gold! May 9, 2008Posted by ourfriendben in Uncategorized, wit and wisdom.
Tags: coin scams, coinage, gold coins, nickels, numismatics, U.S. history
It’s me, Richard Saunders of Poor Richard’s Almanac fame, back today to continue our discussion of dollars and sense—or, in this case, of gold, fraud, and cents. Five cents, to be exact. (If you’ve missed my previous posts on intriguing facts about U.S. coinage, see “Can a penny be saved?”, “Big bucks and silver dollars,” and “Don’t accept any wooden nickels.”)
Let’s start with some interesting facts about gold. Gold was indeed the “gold standard” of U.S. coinage until 1933, when Franklin Roosevelt demanded that U.S. citizens turn in their gold coins to the government and single-handedly brought about the end of an era, an era that had ironically seen its fullest flowering with the beautiful gold coins commissioned by his cousin Teddy Roosevelt. (Fortunately for coin collectors, they weren’t all melted down, and many are available on the coin market today.) But before FDR, any citizen could use gold coins as legal tender, and there was a wide range of them available, from teensy little bits of “fractional” gold (i.e., fractions of a dollar, such as 50 cents) to hefty $20 gold pieces the size of today’s quarters, but about as thick as two of them stuck together.
Gold coins have been minted in the U.S. since the early days of the Republic, starting in 1795. But they didn’t become widely available until gold was discovered in California and the Gold Rush, which began in earnest in 1849 (remember those Forty-Niners?), made gold more plentiful. Okay, so where did it come from before that?
Believe it or not, our early gold coinage came out of the South. Let me test your memory here: How many mints are there in the U.S.? If you came up with three—Philadelphia, Denver, and San Francisco—that’s not bad. But there’s actually a fourth, West Point, which produces American Eagle silver and gold bullion coins. However, there have been other mints, as the U.S. government tried to keep pace with Westward expansion. At one time, both New Orleans and Carson City had U.S. mints. But let’s get back to the gold. Denver wasn’t the first mint to put a “D” on their coins. That honor goes to the mint in Dahlonega, Georgia. Pre-gold rush gold coins were minted there and in Charlotte, North Carolina.
Gold coins from Dahlonega and Charlotte don’t look a whole lot like gold as we think of it today, that rich, red-gold color of California gold. The early Southern coinage was more of a pale, green-gold color. Most people never saw it anyway, though, since the common coins were silver dollars, half-dollars, quarter-dollars, dimes, and half-dimes, and copper pennies. (Two- and three-cent coins wouldn’t come along until later, but that’s another story.)
What do I mean, half-dimes? The earliest five-cent pieces were small silver coins called half-dimes, or, in their earliest incarnations, half-dismes. But these little pieces of silver were easy to lose. So in 1866, the mint produced a 5-cent piece that was much bigger—almost the size of today’s nickel—in a copper-nickel composition (that’s what our nickels are still made of today), and the “nickel” was born. It must be admitted that this new form of coinage was no thing of beauty, however. In the spirit of Civil War victory, the coin displayed a shield on one side and a big “5” surrounded by stars and rays, then just stars, on the reverse, with “cents” at the bottom. The public, already being asked to give up a silver coin for base metal, was also being asked to accept an ugly, boring coin. But the design endured until 1883, when the mint decided it was time for a design upgrade.
And that’s where gold, greed, and good old American opportunism re-enter the picture. You see, the mint made a terrible mistake. The new coin, now the comparatively hefty size of today’s nickel, bore the bust of a rather bovine Lady Liberty on the front and the Roman numeral “V” surrounded by a wreath on the back. But in streamlining the design of the back and upgrading the previous “5” to the more elegant Roman numeral, they left off the humble “cents” that had previously appeared in the lower part of the design.
It didn’t occur to the mint in those days to launch new coins with publicity campaigns like the ones that accompanied the release of our state quarters or the Lewis & Clark commemorative nickel series. It just made the coins and sent them out into the vast and still not entirely charted expanse of America, where news travelled slowly, a lot more slowly than unscrupulous con men.
Here’s what happened: The mint, doubtless delighted to have gotten that ugly shield off the five-cent piece and anticipating a warm reception from the public, pumped out almost 5.5 million of the new nickels. And the con men, ever alert to new opportunities, got busy right away. American citizens weren’t familiar with the new coins. They had a big old “V” on the back. There was nothing on there to indicate that this meant “5 cents.” The crooks simply had to dip them in a thin coat of gold and—voila!—they had big, hefty, shiny $5 gold pieces to put into circulation in exchange for goods or currency or change that were actually worth five dollars. It was a thief’s bonanza.
Let’s put the scam in perspective. I’m sure you’re all familiar with the annoying tendency of store clerks to run some kind of Magic Marker over your $20 bills to see if they’re counterfeits before accepting them when you’re trying to make a purchase. (Hey! Since you got them out of the ATM to begin with, isn’t it the bank’s fault if they’re counterfeits, not yours?!) But even if they find that your $20 is no good, it isn’t the end of the world. In 1883, however, it might have made the difference between making it through the week and going hungry. The average salary at that time was less than $1,000—in many cases, a lot less. Suppose you made a whopping $600 a year. If somebody pawned off a worthless “$5” coin on you, that would be almost half a week’s wages!
Fortunately, the mint woke up to what was going on. They quickly brought out over 16 million new nickels that same year, with the same basic design but an important modification: Under the wreath, the word “cents” appeared. The scam artists were out of luck. They had to go back to trying to counterfeit actual gold pieces, which required a lot of skill, as opposed to just dipping coins in gold plate. The bonanza was over.
The mint continued to make nickels with the Liberty design until 1913, when they introduced James Earle Fraser’s marvelous buffalo nickel. (And there’s an incredible story about that, but I’ll save it for another post.) Today’s collectors can find the original 1883 “V” nickel and the 1883-1912 “V” with “cents” nickels, which, except for the years 1885, 1886, and 1912S, are very reasonably priced. And, if you’re really lucky, you might also be able to find one of the gold-plated 1883 nickels as well. I have a little collection of fake coins, and I was able to find one locally for a pretty reasonable price. You, too, can enjoy owning this little oddity of American history. Just remember: Don’t accept any wooden nickels (or gold ones, either!).