The Bitcoin, and a Calvin Coolidge Coin That Merits Concern

May brings an update on the development by the federal government of new coins in its $1 presidential series, begun a few years ago with George Washington. The U.S. Commission of Fine Arts, which oversees coin design, just announced it has chosen among a series of finalists' images portraits of Presidents Warren Harding, Calvin Coolidge, Herbert Hoover, and Franklin Roosevelt. The selected portrait of the thirtieth president, Coolidge, looks handsome but not happy. This Coolidge emanates concern.

The Coolidge concern, one can imagine, actually relates to the value of the Coolidge coin you will hold in your hand. Coolidge, who served between 1923 and 1929, presided over prosperity. In his era wages rose. Men purchased their first automobile. Households got their first indoor plumbing. The Coolidge era featured strong improvement in output, a top tax rate of 25%, and federal surpluses. Stock prices and the price of real estate in Florida rose in Coolidge's day, but other prices did not. To Coolidge's mind, all of that could be traced to the reliability of the value of a currency. Coolidge liked a coin to be worth what the number on its face said it was, because he knew that if money was stable, people would trade.

The value of coins, in particular, was embossed into Coolidge's memory early.

In 1896, the year after Coolidge graduated from Amherst, the Democrat William Jennings Bryan was arguing that the U.S. should inflate by moving from a gold standard to free coinage of silver. Farmers were pinioned by tight money. The country must, Bryan said, increase the amount of money in circulation or forever be crucified on a Cross of Gold. Democrats before Bryan might have rebutted him: Grover Cleveland whose presidential coin the U.S. mint has already issued, backed the gold standard. Bryan though thought the party should push for easier money.

If the Democrats were no longer going to fight for gold, the Republicans would. Coolidge was just getting into Republican politics. To help out the Grand Old Party, he penned an article in the Northampton Daily Herald to question Bryan's logic. The recent decades of the gold standard had featured tough years but overall had seen increased growth. "There never was an era of greater prosperity," he wrote of Northampton, where he lived. Bryan and other silverites might say they wanted to help farmers, but many of the people prospering in Coolidge's Massachusetts town were former farmers, like himself. There might be other ways than inflation for farmers to improve their lot.

In Coolidge's day the theory of monetarism was not yet known or discussed. The Federal Reserve did not exist yet. Coolidge and many other viewed money shortages as problems of banking or, even, trust in the gold standard. "The only scarcity is scarcity of credit," opined Coolidge. The young law clerk imagined that he and others, Americans from the small merchant to the greatest businessman, actually played their part in making money sound by honoring contracts. Such contracts would be his business as a small-town lawyer.

Money was also on his mind for another reason. In those years the Coolidge family kept a running joke about the unworthiness of silver. The year before, as a college senior, Coolidge had entered an essay contest on the nation's founding. Coolidge had won the first round, which meant he was entitled to a silver medal. But his father, a tightfisted and pro-Republican Vermont merchant, had joked that such a medal, not being for circulation, and perhaps because it was "only" silver, "would buy no bread and butter."

Then had come word that Coolidge had placed not only in early rounds but that his essay had also won first place in the entire contest. For this greater victory, Coolidge received not a silver but a gold medal. "It is round like a coin weighs about nine ounces and is worth about $150," the young man proudly wrote his father. All his life, Coolidge would keep this coin, counting in turn on its keeping its value.

In 1896 the ambitious law clerk had his eye on another Western Massachusetts Republican who was running for office in his state that year of 1896, Murray Crane, the heir to a paper plant. Crane, who was seeking the post of lieutenant governor, oversaw paper mills on the Housatonic. Crane himself had personally assured his family's prosperity, and the employment of mill workers, by winning a contract from the federal government to print the paper for the U.S. dollar. The value of the Crane contract depended on the value of the U.S. dollar.

Crane would later become Coolidge's mentor. The pair had faith in hard money and it was more or less borne out. When Coolidge did come to the presidency the price of gold, at $20 an ounce, was not much different than it had been when he won his collegiate prize a quarter century before.

Such stories, knowledge and attitudes are of course obscure to us, schooled as we have been that tight money caused eleven years of Great Depression, or that it is money supply, and not credit, that matters. Yet the Coolidge Era's attitude toward money, if not one we would instantly adopt, merits at least our consideration.

In any case the uncertainty over our current and government-created money is evident everywhere, most obviously in the rise of Bitcoin, the digital currency, in the very years the Mint has been issuing the little presidential coins. The uncertainty over value is evident even over at the Mint itself. The Coolidge dollar, like the other presidential dollars, will be gold colored, suggesting that someone at the Mint bet that even the illusion of gold comforts customers. But the 1.05-inch-diameter coins are 88.5% copper, along with manganese and nickel.

Originally, the presidential coins were designed to circulate, like the quarters that honor the states. Yet Americans did not seem to want these non-gold gold coins. "We have not seen an increase in demand," as the Treasury wrote after it commenced issuing the Presidentials. The Presidentials ended up stockpiling at embarrassing rates. So in 2011, the Treasury announced the presidential coins would be produced in smaller number and for their numismatic value principally.

Yet there is real demand for gold-based coins. Like Coolidge, the law clerk, Americans obsess over true gold coins. In the same days that Coin Update reported news of the Coolidge dollar, it also announced May, 2013, sales of American Gold eagle coins amounted to 947.5% of such sales in the year-earlier period.

You have to wonder what Coolidge, or for that matter Murray Crane, would do about money today. You can imagine the pair of them fighting for Congressman Kevin Brady's Sound Dollar Act in Washington. Or Coolidge campaigning for president on a sound dollar. But you can also imagine Coolidge, the country attorney, and Crane, the country businessman, inviting authorities from Bitpay or another company that traffics in Bitcoin to their factories to see if they could strike a deal to make a new kind of money along the Housatonic.