(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Coinage Act of 1965: Hearings Before ... , 89-1 on H.R. 8746, (superseded by ..."

Google 



This is a digital copy of a book that was preserved for generations on library shelves before it was carefully scanned by Google as part of a project 

to make the world's books discoverable online. 

It has survived long enough for the copyright to expire and the book to enter the public domain. A public domain book is one that was never subject 

to copyright or whose legal copyright term has expired. Whether a book is in the public domain may vary country to country. Public domain books 

are our gateways to the past, representing a wealth of history, culture and knowledge that's often difficult to discover. 

Marks, notations and other maiginalia present in the original volume will appear in this file - a reminder of this book's long journey from the 

publisher to a library and finally to you. 

Usage guidelines 

Google is proud to partner with libraries to digitize public domain materials and make them widely accessible. Public domain books belong to the 
public and we are merely their custodians. Nevertheless, this work is expensive, so in order to keep providing tliis resource, we liave taken steps to 
prevent abuse by commercial parties, including placing technical restrictions on automated querying. 
We also ask that you: 

+ Make non-commercial use of the files We designed Google Book Search for use by individuals, and we request that you use these files for 
personal, non-commercial purposes. 

+ Refrain fivm automated querying Do not send automated queries of any sort to Google's system: If you are conducting research on machine 
translation, optical character recognition or other areas where access to a large amount of text is helpful, please contact us. We encourage the 
use of public domain materials for these purposes and may be able to help. 

+ Maintain attributionTht GoogXt "watermark" you see on each file is essential for in forming people about this project and helping them find 
additional materials through Google Book Search. Please do not remove it. 

+ Keep it legal Whatever your use, remember that you are responsible for ensuring that what you are doing is legal. Do not assume that just 
because we believe a book is in the public domain for users in the United States, that the work is also in the public domain for users in other 
countries. Whether a book is still in copyright varies from country to country, and we can't offer guidance on whether any specific use of 
any specific book is allowed. Please do not assume that a book's appearance in Google Book Search means it can be used in any manner 
anywhere in the world. Copyright infringement liabili^ can be quite severe. 

About Google Book Search 

Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers 
discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web 

at |http: //books .google .com/I 



db,Google 



db,Google 



db,Google 



Coinage act of 1965 



HEARINGS 

BKFOSn TBEl 

COMMITTEE ON BANETOG AM CTJIlRENCYj 

HOUSE OP REPRKSEN TATTYE P 

EIGHTY-NI'-TH i i .\i;|,'PSS 



H.R. 8746 

(Superseded by HJt. 8926) 

A BILL TO PBOTIDB FOB TBB OOINAQB OF THB ONITED STATES 



IONS 4, T, AND 9, 1H8 



Printed for Uie lue of ttie ConunittM on BanklQe and Onrrency 



MlO 



•&h 



X').%> 



•^^ 



COINAGE ACT OF 1965 



HEARINGS 

BBFURE THE 

COMMITTEE ON BANKING AND CURKENCT 
HOUSE OF REPRESENTATIVES 

EIGHTY-NINTH CONQEESS 

FIRST SESSION 

ON 

H.R. 8746 

(Superseded by H.R. 8926) 

A BILL TO PROVIDE FOR THE COINAGE OF THE UNITED STATES 



JUNE 4, 7, AND 8, 1965 



Printed for the use of tbe Committee on Banking and Cunencr 



D.8. QOVBHNMHNT PBINTINO OFBICB 
WASHINGTON : 1865 



89 3rasT XLJ n,q 

09/92 93-006-00 /V.L' 



a b, Google 



COMMITTEE ON BANKING AND CUEHENCT 
WRIGHT FATMAN, Teius, Oiairmaji 

WILLIAM B. WIDNALL, New Jersey 
PAUL A. FINO, New York 
FLORENCE P. DWYER. New Jersey 
BEYMOUE HALPERN. New Yotk 
JAMES HARVEY, Mtchlsan 

(BILLI BROCK, Tenn«ss«e 



ABRAHAM J. MULTER, New York 
WILLIAM A. BARRETT, PennaylTanla 
LEONOR K. SULLIVAN, Missouri 
HENRY S, REUSS, Wisconsin 
THOMAB L. ASHLEY, Ohio 
WILLIAM 8. MOORHEAD, Pennsylvania 
ROBERT a. STEPHENS, JK., Georgia 
EERNAND J. ST GERMAIN, RhodB iBlancl 
HENEY B. QOMZALBZ, Teias 
JOSEPH O. MINISH, New Jersey 
CHAKLB8 L. WELTNEK, Georgia 
RICHARD T. HANNA, Calitocnia 
BERNARD F. 0RAB0W8EI, ConnecUcut 
COMPTON I. WHITE, la.. Idaho 
TOM B. OETTYS, Soutb CaroliuB 
PADL H. TODD, JB., Michigan 
RICHARD L. OTTINQEE, New York 
BARLE CABELL, Teias 
THOMAS C. McORATH, Jr., NeiT Jeise; 
JOHN R. HANSEN, Iowa 
FRANK ANNUNZIO, nilooU 



BUBT L. TALCOTT. CalllOTiil! 
DEL CLAW SON, Calilornia 
ALBERT W. JOHNSON, Pennsylvania 
J. WILLIAM STANTON, Obio 
CHESTER L. MIZE, Kansat 



Paul Nelson, Clert and Staff Dirtctar 

ALViN Lee Moaae, Coaaiil 

CnRTTS A. PaiNB, Cklef InciilisalitT 

NOKMAN L. Holmes, Aiiitiant CfauiutI 

Charles B. Holsteih, Profetaloaal Slaff Mtmbcr 

OrHAK e. FlKB, Mtnorltv Staff MeratM 



■dbyGOOgIC 



CONTENTS 



FlM 

H. R. 8746. A bill to provide for the coinage of the United States 1 

Message from the President of the United States relative to silver coint^e.. 3 

Statement of — 

Conte, Hon. Silvio O., a Representative in Congress from the State of 

Massachuaetta 90 

Fowler, Hon. Henry H., Secretary of the Treasury; accompanied by 
Robert A, Wallace, AsBistant Secretary; Fred B. Smith, Actim; 
General Counsel; Eva Adams, Director of the Mint: Frederick W, 
Tate, Deputy Director of the Mint; and John H. Auten, Deputy 

Director, Office of Financial Analysis 13, 67 

Hardy, Robert M., Jr., chairman of the Silver Committee of the 

American Mining Congress 94 

Hosmer, Hon. Craig, a Representative in Congress from the State 

of California 134 

Morris, Joseph T., managing director, National Association of Photo- 
graphic Manufacturers, Inc 112 

Ramsey, Rear Adm. Donald J., U.S. Navy (retired), legislative counsel 

for the Silver Users Association 101 

Stevens, John B., executive vice president International Silver Co., 
and chairman of the executive committee of the Silver Users Asso- 
ciation; accompanied by Frank Wemple, treasurer. Handy & 
Harman; George R. Frankovich, executive director. Manufacturing 
Jewelers & Silversmiths Association; Donald J. Ramsey, Washington 
legislative counsel, Silver Users Association; Dr. Weldon Welffing, 
Western Reserve University; also accompanied by Joseph T. 
Morris on behalf of the National Association of Photographic 

Manufacturers 99 

Strauss, Simon D., vice president, American Smelting A Refinii^ Co 96 

Welfling, Dr. Weldon, clmirman, Departments of Economics and 
Banking and Finance, Western Reserve University, Cleveland, 

Ohio 108 

Additional information submitted to the committee by— 
Annunsio, Hon. Frank: 

Lennon, William F,, president Local 4, International Jewelry 

Workers' Union, letter dated May 28, 1965 132 

Spodick, Harry, general president and general secretary-treasurer, 

International Jewelry Workers' Union, letter-statement 132 

Fowler, Hon. Henry H.: 

Answer to questions submitted by Mr. Patman 52 

Answers to questions submitted by Mr. White 38 

Clarification of figures used for silver consumed in coinage 84 

Copper requirements based on fiscal year 1965 production, 

table 77 

Cost of copper in quarters (based on 1,000 pieces), table 77 

Countries naving a silver coin — varying finenesses, table 45 

Estimated free world silver consumption and production, 1949-64, 

table - 14 

Estimated production of coins, fiscal year 1966, table 86 

Estimated production of new alloy coins, fiscal year 1966, table.. 50 

Intrinsic value of present and proposed coins, table 30 

Savings in seigniorage of oupronickel half dollars over silver clad 

half dollars__ - 61 

Scignioriige estimates, current coins and new alloy coins, table.. 31 



■dbyGOOgIC 



IV CONTENTS 

Additional information submitt«d to the committee by — Continued 
Patman, Hon. Wright: 

Balier, Thomas F., executive vice president, American Bottlers of 

Carbonated Beverages, the National Association of the Soft r««i 
Drinlt Industry, Washingl^on, D.C., letter dated June 7, 1965.. 148 

Bancroft, Richard K., statement of, on behalf of Che Columbium 
for Coinage Association;. withdowment entitled "A Proposal 
for Columbium Coinage -. i 148 

Caverly, Gardner A,, executive vice president, the New England 
Council, Boston, Mass., letter dated June 8, 1965 141 

Chandler, Lester V., professor of economics, Princeton University, 
letter dated June 4, 1965 _ 89 

Clough, Howard W., vice president, sales, Quaker State Coca-Cola 
Bottling Co., Pittsburgh, Pa., letter to Hon. William S. Moor- 
head, dated April 6, 1965 146 

Gallameau, J. B., Gallarneau Bros., Amarilto, Tex., letter dated 
June 7, 1965- 147 

Goldman, Aaron, president, Macke Vending Co., Washington, 
D.C., letter with statement dated June 7, 1965 144 

Harcourt, John T., letter dated June 4, 1965 55 

Harlin, H. W., Jr., vice president. Southern Vendors, Inc., San 

Antonio, Tex., letter dated June 8, 1965 148 

Hungerford, Thomas B,, executive director of the National Auto- 
matic Merchandising Association, Chicago, III., statement by. 55, 135 

Kramer, Alex, Interstate United Corp., Lincolnwood, 111., letter- 
Btatemeut dated June 4, 1965 146 

Lewis, Marvin, owner. Key City Vending Co., Abilene, Tex., 
letter dated June 7, 1965 147 

McDowell, Joseph E., president, Servomation Corp., New York, 

N.Y., letter-statement 145 

MiUman, Carl, president. Automatic Merchandising Corp., Mil- 
waukee, Wis., telegram dated June 4, 1965 54 

National Association of Photographic Manufacturers, Inc., state- 
ment from 54 

Odlin, Reno, president, the American Bankers Association, New 

York, N.Y., letter with statement, dated June 7, 1965 138 

O'Shaughnessy, Martin, administrator, food services. Radio Corp. 

of America, Camden, N.J., letter dated June 7, 1965 147 

Pferd, W., head, public telephone department. Bell Telephone 

Laboratories, Inc., Murray Hill, N.J., letter dated June 8, 1965, 141 

Rice, Theron J., lepslative action general manager. Chamber of 
Commerce of the United Stat^, Washington, U.C, letter 
dated June 8, 1965 - 140 

Rosen, Harry, Allegheny Cigarette Service Co., Pittsburgh, Pa., 
letter to Hon. William 8. Moorhead, with statement, dated 
April 21 1965 --- 142 

Rosselot, Edward N., National Automatic Merchandising Associa- 
tion, Smithtown, N.Y., letter to Hon. 0. G. Pike, dated April 
30, 1965 143 

Silver Users Association, statement on the President's coinage 

message 54 

Ramsey, Rear Adm. Donald J.: 

Fowier, Hon. Henry H., Secretary of the Treasury, letter to, 

dated May 10, 1965 107 

Frankovicb, George R., executive director. Manufacturing 

Jewelers A Silversmiths of America, Inc 120 

Members of the Silver Users Association 106 

Wemple, Francis H., treasurer of Handy & Harman, statement of, 117 
Sullivan, Hon. lieonor K.: 

Donahue, Thomas B., president and chief executive officer. 

Universal Match Corp., telegram dated June 4, 1965 66 

Sokol, Eric, executive vice president. National Rejectors, Inc., 
telegram dated June 5, 1S65 _ _ 57 



■dbyGOOgIC 



CONTENTS T 

Appendix: 

"A Program for a New and Modernized U.S. Coinage," a summary ^»<» 

of the President's coinage program, dated June 3, 1965 159 

"Treasury Staff Study of Silver and Coinage" 163 

"A Study of AilovB Suitable for Use as United States Coinage," final 

report prepared by the Battelle Memorial Institute 269 

"Photography in the Economy — The Silver Image," by the National 

Association of Photographic Manufacturera, Inc 381 

"The Silver Market in 1964," 49th annual review compiled by Handy 

A Harman __ 389 



■dbyGOOgIC 



db,Google 



COINAGE ACT OF 1965 



FRIDAY, JtfHB 4, 1985 

House of REPRESBNTATivEa, 
Committee on Banking and Cobrenct, 

Washington, D.C. 
The comniittee met, pursuant to notice, at 10 a.m., in room 2128, 
Raybum House Office Building, Hon, Wright Fatman (chairman) 
presiding. 

Present: Representatives Patman, Ashl^, Moorhead, Stephens, 
Weltner, Hanna, White, Gettys, Todd, Cabell, Hansen, Widnall, 
Mrs. Dwyer, Harvey, Brock, Stanton, and Mize, 

The Chairman. The committee will please come to order. 
Today the committee considers H.R. 8746, a bill providing for the 
coin^e needs of the United States. 

(H!r. 8746 and the President's message follow:) 

[H.R. S?», 8Sth Ooag., lat sen,] 
A BILL To proTldB for the cDln^e or tbe Ualud Stales 

Be U enacted by the Senate and House of Represenlatives of the United Stalet of 
America in Congreia assembled, That this Act may be cited as "The CoiDage Act 
of 1965". 

TITLE I 

Section 1. (a) The Secretary of the Treasury is authorized to cause to be 
minted and issued the following coins: 

(1) A half dollar or SCMsent piece which shall be composed of an alloy of eight 
hundred parts of silver and two hundred parts of copper per each one thousand 
parts by weight clad on a core of a silver-copper alloy of such fineness that the 
composition of each coin shall be four hundred parts of silver and six hundred 
parts of copper out of each one thousand parts by weight. 

(2) A quarter dollar or 26-cent piece and a dime or lO-oent piece each of which 
shall be composed of an alloy of 75 per centum of copper and 25 per centum of 
nickel clad on a core of pure copper. 

(b) The cladding alloy used for the outaide layers of such coins shall comprise 
not less than 30 per centum of the weight of each coin. Such coins shtUl be of 
the same diameter, lespectiveiy, aa the coins of the United States of corresponding 
denominations current at the time of enactment of this Act, 

(c) The weight of the half dollar provided for herein shall be eleven and fifty 
one-hundredthB grama, of the quarter dollar five and sixty-seven one-hiindredthe 
grams, and of the dime two and two hundred and sixty-eight one-thousandths 

Sec. 2. Subject to the requirements of section 1, the methods of manufacture 
of the coins therein provided, the wastage allowances, and the allowable deviations 
in the metallic percentages and weights, shall bo as determined by the Secretary 
of the Treasury. Such coins shall be aubiect to the laws pertaining to the designs 
and inscriptions on coins of the United States. 

Sec. 3. All coins minted pursuant to the provisions of this Act shall be legal 
tender for all debts, public and private, public charges, taves, duties, and dues. 

Sec. 4. Nothing herein contamed shall be deemM to prohibit the continued 
minting of coins at the United States authorized by law at the time of enactment 
of this Act. 



■dbyGOOgIC 



2 COINAGE ACT OF 1965 

Sbc. 5. Whenever In the judgment of the Secretary of the Treasury such action 
is necessary to protect the coinage of the United States, he is authorized under 
such rules and regulations as he may prescribe to prohibit the exportation, 
melting, or treating of coins of the United States. 

Sec. 6. The Secretary of the Treasury is authorized to sell on such terms and 
conditions as he may deem appropriate, at not less than the monetary value 
thereof, aoy silver of' the United States in e;tce3s of that required to be held aa 
reserves against silver certificates. 

Sec. 7. The Secretary of the Treasury ia authorized and directed to purchase 
at the price of Sl-26 per fine troy ounce silver mined after the date of enactment 
of this Act from natural deposits in the United States or any place subject to 
the jurisdiction thereof and tendered to a United States mint or assay office 
within one year after the month in which the ore from which it is derived was 
mined. The bullion fund provided by section 3526 of the Revised Statutes, as 
amended (31 U.S.C. 335), may be used for such purchases. 

Sec. 8. In order to expedite acquisition of essential equipment, patents, patent 
rights, technical knowledge and assistance, metallic strip, and other materials 
necessary to assure the prompt and continued availability of materials required 
to produce an adequate supply of the coins provided for herein, tlie Secretary dt 
the Treasury, during such period as he may deem necessary, is authorized, without 
regard to the provisions of section 3528 of the Revised Statutes, as amended 
(31 U.S.C. 340), or any other law, to enter into contracts upon such terms and 
conditions as he may deem appropriate and in the public interest, for the acquisi- 
tion or transportation of such equipment, patents, patent rights, techiucal 
knowledge and assistance, metallic strip, or other materials. 

Sec. 9. (a) The Act of September 3, 1964, Public Law 88-580, is amended to 
read as follows: "Notwithstanding section 3517 of the Revised Statutes (31 
U.S.C. 324), all coins minted from the datfl of enactment of this Act shall be 
inscribed with the year of the coinage or issuance unless in the judgment of the 
Secretary of the Treasury such inscription is likely to contribute to a shortage of 
coins, in which case the particular coins involved may be inscriljed with the last 
preceding year whose date has been inscribed on coins of the same denominations." 

(b) Section 3550 of the Revised Statutes (31 U.S.C. 366) is repealed. 

Sec. 10. The first sentence of section 3558 of the Revised Statutes, as amended 
(31 U.8.C. 283), is amended to read as follows: "The business of the United States 
assay office in San Francisco shall be in all respects similar to that of the assay 
office of New York except that until such time as the Secretary of the Treasury 
determines that the mints of the United States are adequate for the production of 
ample supplies of coins, its facilities may be used for the production of any coins 
of the United States authorized by law. 

Sec. 11. Section 4 of the Act of August 20, 1963 (31 U.S.C. 294), is amended by 
striking out "$30,000,000" and inserting in lieu thereof "$45,0OO,0Q0." 

See. 12. Section 3 of the Act of December 18, 1942 (31 U.S.C. 317c), is amended 
by striking out "minor" each plac« it appears in such section. Section 9 of the 
Act of March 14, 1900 (31 U.S.C. 320), is hereby repealed. 

Sec. 13. Section 3528 of the Revised SUtutes, as amended (31 U.S.C. 340), ia 
amended (1) by striking out "this Act," in the first sentence and inserting in lieu 
thereof "law,"; (2) by striking out "minor" each place it appears, in such section; 
and (3) by striking out "$3,000,000" and inserting m lieu thereof "$30,000,000." 

Sec. 14. 8ection485of the Actof June25, 1948 (18 U.S.C. 485), is amended by 
striking out "the gold or silver coins" and inserting in lieu thereof "gold, silver, 
silver- clad, or cupronick el-clad coins." 

See. 15. The Secretary of the Treasury is authorized to issue such regulations 
as he may deem necessary to carry out the provisions of this Act. 

Sec. 16. Whoever knowingly violates any of the provisions of section 5 hereof 
or of any order, rule, regulation or license issued pursuant thereto shall, upon 
conviction, be fined not more than 810,000 or imprisoned not more than five 
years, or both. In addition, there shall be forfeited to the United States any 
coins exported, melted, or treated in violation of this Act of any order, rule, 
regulation of license issued hereunder, or any metal resulting from such melting 
or treating of coins. Such coins or metal may be seized and condemned by like 
proceedings as those provided by law for the forfeiture, seizure or condemnation 
of property imported into the United States contrary to law. 



■dbyGOOgIC 



COINAGE ACT OF 1D65. 



TITLE II 



Section 1. The President is hereby authorized to establish a Joint Commission 
on the Coinage to be composed of the Secretary of the Treasury as Chairman; 
the Secretary of Commerce; the Director of the Bureauof the Budget; the Director 
of the Mint; the chairman and ranking minority member of the Senate Banking 
and Currency Committee; the chairman and ranking minority member of the 
House Banking and Currency Committee; one Member of the House of Represen- 
tatives to be appointed by the Speaker; one Member of the Senate to be appointed 
by the President of the Senate; and four public members to be appointed by the 
Iresident, none of whom shall be associated or identified witb or representative of 
any industry, group, business, or association directly interested as such in the 
composition, characteristics, or production of the coinage of the United States. 

Sec. 2. No public official or Member of Congreas serving as a member of the 
Joint Commission shall continue to serve as such after he has ceased to hold the 
office by virtue of which he became a member of the Joint Commission. Any 
vacancy on the Joint Commission shall be filled by the choosing of a successor 
member in the same manner as his predecessor. 

Sec. 3. The Joint Commission shall study the progress made in the imple- 
mentation of the coinage program cGtablished by this Act, and shall review from 
time to time such matters as the needs of the economy for coins, the standards for 
the coinage, technological developments in metallurgy and coin-selector devices, 
the availability of various metals, renewed minting of the silver dollar, the time 
when and circumstances under which the United States should cease to maintain 
the price of silver, and other considerations relevant to the maintenance of an 
adequate and stable coinage system. It shall, from time to time, give its advice 
and recommendations with resjiect to these matters to the President, the Secre- 
tary of the Treasury, and the Congress. 

Sec. 4. There are authorized to be appropriated to remain available until ex- 
pended, such amounts as may be necessary to carry out the purposes of this title. 



[H. Doe. in, Setb Cong., Ist sees. 

Message Fbou the PRssinENT or the United States Relative to Silvbb 

COINAQB 

To Che Congress of the United Slates: 

From the early days of our independence the United States has used a system 
of coinage fully equal in quantity and quality to all the tasks imposed upon it by 
the Nation's "'"""^•"■na 



.. B today using one of the few existing silver coinages in the world. Our 

coins, in fact, are little changed from those first established by the Mint Act of 
1793. For 173 years, we have maintained a system of abundant coins that wiUi 
the exception of pennies and nickels is nearly pure silver. 

The lone tradition of our silver coinage is one of the many marks of the extraor- 
dinary stability of our political and economic system. 

Continuity, however, is not the only characteristic of a great ration's coinage. 
We should not heBilaie to change oar coinage to meet new and growing needs. I am, 
therefore, proposing certain changes in our coiruige syatern — changes dictated by need — 
which mil help Americans to carry out their daily transactions in the most efficieTit 
tDOj* possible. 

■There has been for some years a worldwide shortage of silver. The United 
States is not exempt from that shortage—and we will not be exempt as it worsens. 
Silner is becoming loo scarce for continued large-scale use in coins. To maintain 
unchanged our high silver coinage in the face of this stark reality would only invite 
a chronic and growing scarcity of coins. 

We expect to use more than 300 million troy ounces— over 10,000 tons — of 
silver for our coinage this year. Thai is far more than total new production of silver 
expected in the entire free world Ikis year. Although we have a large stock of silver 
on hand we cannot continue indefinitely to make coins of a high silver content^-in 
the required quantity- — in the face of such an imbalance in the production of silver 
and the demand for it. 

We must take steps to maintain an adequate supply of coins, or face chaos in 
the myriad transactions of our daily lite — from using pay telephones to parking in 
a metered zone to providing our children with money for lunch at school. 



■dbyGOOgIC 



4 COINAGE ACT OF 1965 

Tke legislalion I am eending to the Congresa with this message will truure a staMe 
and dignified coinage, fully adequate in quantity and in ila specially designed technical 
characteristics to the needs of our 20th century life. It can be maintained indefinitely, 
however timch the demand for coin may grow. 

Much as we all would prefer to retain the silver coins now in use, there ie no 
practical alternative to a new coinage based on materials in adequate supply. 

THE NEW COINAOB 

I propose no change in either the penny or the nickel. 

The new dime and the quarter — while remaining the same size and design as the 
present dime and quarter — will be composite coins. They will have faces of the 
same copper-nickel alloy used in our present 5-cent piece, bonded to a core of pure 
copper. The new dime and quarter will, therefore, outwardly resemble the nickel, 
except in size and design, but with the further distinction that their copper core 
will give them a copper edge. 

This type of coin was selected because, alone among practical alternatives, it 
can be used together with our existing silver coins In the millions of coin-operated 
devices that Americans new depend upon heavily for many kinds of food and other 



Our new half dollar will be nearly indistinguishable in appearance from the 
present half dollar. 

It will continue to be made of silver and copper, but the silver content will be 
reduced from 90 to 40 percent. It will be faced with an alloy of 80 percent silver 
and 20 percent copper, bonded to a core of 21 percent silver and 79 percent copper. 
The new half dollar will continue to be minted with the image of President Ken- 
nedy, Its size will be unchanged. 



No change in this famous old coin, or plans for additional production, are 

iiroposed at this time. It is possible that implementation of the new coinage 
egislation that I am proposing, greatly reducing the requirement for silver in 
our subsidiary coinage, will actually make feasible the minting of additional silver 
dollars in the future. Certainly, without this change in the silver content of the 
subsidiary coinage, further minting of the silver dollar would be forever foreclosed. 

It is our intention that the new coinage circulate side by side with our existing 
coinage. We plan to continue the minting of our current silver coins while 
the new coinage is brought into quantity production. 

The new coins will be placed in circulation some time in 1966. 

In terms of the present pattern of coin usage, adoption of the new coinage will 
permit a saving of some 90 percent of the sflver we are now putting into coins 
annually, 

/ tvani to make U ahsolutely dear that these changes ■ 
effect on the purchasing ■power of our coins. The new _ . . ,,. 

full face value for the paper currency of the United States. They will be accepted 
by the Treasury and by the Federal Reserve banks for any of the financial obliga- 
tions of the United States. The legislation I am proposing expressly recognizes 
the new coins as legal tender. 

It is of primary importance, of course, that our new coins be specifically de- 
signed to serve our modern, technological society. In the early days of the 
Republic, silver coins served well because the value of a coin could only be 
measured by the value of the precious metal contained in it. For many decades 
now the value of a particular coin has depended not on the value of the metal 
in it, but on the face value of the coin. Today's coinage must primarily be 
utilitarian. The new coinage will meet this requirement fully, while dispensing 
with the idea that it contain precious metal. 

It ia, above all, practical. It has been specifically designed to function, without 
causing delays or disruptions of service, in coin-operated merchandising machines. 

Furthermore, it is composed of materials low enough in value and readily 
enough available to insure that we can have as many coins as we need. 

The legislation I am proposing also contains these additional recommendations: 



■dbyGOOgIC 



COINAGE ACT OF 1986 5 

OTHER AUTHORITY REQUESTED 

Ftrai.— Aa a useful precautionary measure, I request standby authority to 
institute controls over the melting and export of coins to assist the protectioa 
of our existing and our new silver coinage. 

Second. — I request authority to purchase domestically mined silver at not 
lees than S1.25 per ounce. 

Third. — I am asking for authority to reactivate minting operations temporarily 
at the San Francisco Assay Office. 

Fourik, — As a safeguard for assured availability of the new coinage, I am asking 
for new contracting authority for the procurement of material and facilities 
related to it. 

Fifth. — I propose the establishment of a Joint Commission on the Coinage, 
composed of certain Members of the Congress, the public, and the executive 
branch of the Government, to report to me later the progress made in the installa- 
tion of the new coinage and to review any new technological developments and 
to suggest any further modifications which may be needed. 

WHY THE SILVER CONTENT OP THE COINAGE MDST BE REDUCED AT THIS SESSION 



These recommendations for revision of our silver coinage rest upon extensive 
study of the silver situation, and of alternatives to our present coinage, by both 
governmental and private specialists. The Treasury Department's comprehen- 
sive report, known as the Treasury Staff Silver and Coinage Study, is being released 
today as background to my recommendations. Its principal finding was that the 
supply of silver in the free world has become progreaeively incompalible with the 
maintenance of silver in all our STibsidiary coins. 

On the average, in the 5 years from 1949 through 1953, new silver production 
in the free world amounted to about 175 million troy ounces per year, while con- 
sumption amounted to more than 235 million ounces. There was an avert^^o 
deficit in those 5 postwar years of more than 60 million ounces of silver per year. 

In the latest completed 5 years, 1960 tlu-ough 1964, free world consumption 
of silver has averaged 410 million ounces annually, but new production has 
averaged a little less than 210 million ounces a year. The result has been an 
average annual deficit of about 200 million ounces. That is three times the 
average annual deficit in the 5 years from 1949 through 1953. 

If no silver at all had been used for coinage there would have been a deficit in 
new production in free world silver during the last 5 years averaging over 40 
million troy ounces, or some 1,370 tons, a year. 

The gap between the production of silver and Eilver consumption is continuing 
to increase. In 1964 the silver production deficit swelled to over 300 million 
ounces — half again the 1963 figure. And in 1964, the use of silver in coinage, 
and the use of silver for the arts and industry of the free world were each — taken 
separately — greater than new production. 

TTiere is no dependable or likely prospect that neio, economically workable sources 
Of silver may be found that coidd appreciably narrow the gap between silver supply 
and demand. The optimistic outlook is for an increase in production of about 
20 percent over the next 4 years. This would be of little help. Further, because 
silver is produced chiefly as a byproduct of the mining of copper, lead, and zine, 
even a very large increase in the price of silver would not stimulate silver produc- 
tion sufficiently to change the outlook. 

Short of controls that are undesirable in a peacetime free society, there is no 
way to diminish the bounding growth of private demand for silver for use in 
jewelry, silverware, photographic film, and industrial processes. The one part 
of the demand for silver that can be reduced is governmental demand for use in 
coinage. 

Most free world countries no longer use silver in their coins. A few — as we now 
propose — continue to make limited use of it. It is true that U.S. coinage does 
not currently depend upon new silver production, because for many years we 
have supplied silver tor our coinage out of large Treasury stocks, which still 
amount to 1 billion troy ounces. 

But — and this is the ctth of the mallei — at the present pace, this stock cannot 
last even as much as 3 years. We would then be shorn of our ability to maintain the 
ccinage, and, if there were no edternalive to out present silver coinage, the Nation 
would be faced u:ith a chronic coin shortage. That is why definitive action is necessary 
at this session of the Congress. 



■dbyGoogIc 



COINAOE ACT OF 1905 



PKOmcTIOH c 



It is necessary for the U.S. Government to have large stocks of silver in addition 
to the quantity needed for coinage. 

We need these stocks because our silver coins in circulation must be protected 
from boarding or destruction. Protection of the silver coinage will continue to 
be a necessity since we plan for it to continue to circulate alongside the new coins. 
Our silver coins are protected by the tact that the Government stands ready to 
sell silver bullion from its stocks at $1.29 a troy ounce. This keeps the price of 
silver, as a commodity, from rising above the face value of our coins. This, in 
turn, makes hoarding or melting of the silver coinage unprofitable. 

/( is a» additional proUciion for ike existing coinage thai I am requesting standbg 
authority to institute controls over the melting, treating, or export of U.S. coins. 

It may be asked why we seek standby control authority since we retain a Urge 
stock of silver with which to protect our silver coins through operations in the 
silver market. 

The answer is clear. Given the magnitudes by which demand for silver is 
outrunning new production, we must consider the possibility, however unlikely, 
that the silver stock we possess could itself require the support and protection 
that would be afforded by authority to forbid melting and export of our coins. 

We believe our present stocks of silver to be adequate, once the large present 
drains from coinage are greatly reduced, to meet any foreseeable requirements 
for an indefinite period. However, prompt action on a neie coinage will kelp us 
protect Ike silver coinage by freeing our sAver resenie* for redemption of silver cer- 
tificales at $1.19 per ounce. Thus, u>e can assure that no incentive ivill be created 
for hoarding our present coins in anticipation of a higher price for their silver content. 

There is the opposite, although in all likelihood short-run, possibility that a 
fall in the price of stiver might result from the enactment of this legislation largely 
removing silver from our subsidiary coin. /( is for the purpose of protecting silver 
producers from a precipitate drop in Ifte price of silver resulting from the action of 
the Oovemmenl that I am requesting authority for the Secretary of the Treasury to 
purchase any newly mined domestic silver offered to kim, at the price of S1.S5 per 
troy ounce. 

THS SAK FRANCISCO ASBAI OFFICE 

Coinage operations at the San Francisco Mint were ended in 195.5. Legislation 
converting the mint to the San Francisco Assay Oifice was passed in 1962. As 

Krt of our efforts to overcome the coin shortage of the past year, coin blanks 
ve been cut and annealed at the San Francisco Assay Office. Present law 
forbids full minting there. However, we will temporarily need the faciUties of 
this plant to move into large quantity production of the new coinage and to 
continue production of existing coins until enough new small money is made to 
make certain we have adequate supplies. Consequently, I am asking for authority 
to reactivate minting operations at San Francisco on a temporary basis. 

A new, fully modem mint is to be built in Philadelphia. However, it cannot 
be completed and in operation before late 1967. It is our expectation that when 
the new Philadelphia Mint's capacity is added to that of the Denver Mint, our 
coinage requirements can be met efficiently and economically. Consequently, 
no more than temporary authority to mint coins in San Francisco is recommended 
in the draft legislation I am sending to you. 

WHY COMPOSITE COINS ARB RECOUUENDBD 

We have no choice but to eliminate silver, for the most part, from our subsidiary 
coinage. The question was; What would be the best alternative? After very 
thorough consideration of all aspects of this highlj^ complex problem, we have 
settled upon the two types of composite, or clad, coins I have already described. 
These are 10- and 25-cent pieces with cupronickel alloy faces bonded to a solid 
copper core, and a new half dollar with outer and inner layers of differing silver- 
copper alloys. 

This type of coin was found to be necessary if the new coinage is to be com- 
patible with the existing silver coinage in all the 12 million coin-operated devices 
in use in the United States. 

The convenience of using coins in automatic merchandising and service devices 
Is a fact that, like the coins in our pockets and in our store tills, we take for granted. 
But if our coinage were suddenly to be such that it would not work in coin- 
operated devices, the public would be subjected to very great inconvenience and 
serious losses would occur to business with harmful effects upon employment. 



Digitized byGoOgle 



COINAGE ACT OF 1965 7 

The ftutomatio merchandising Induetrir la a large and growiog part of our 
national economy. Last year, $33^ billion wortii of conaumer items were sold 
through 3H million of these machiaea. On more than 30 biilion separate occa- 
sions a consumer made a purchase by putting a coin in a machine. In growing 
nmnbers, factories, hospitals, and other places now depend upon automatic 
vending for the service of goods. A miJIion and a half people now rely upon 
coin-controlled vending for at least one meal a day. The use of ooin-operated 
devices is expanding rapidly, not only in merchandise vending, but also in a 
number of other services. 

Six miUion of our coin-operated devices, including nearly all vending macliinee, 
IWiVe selectors set to reject coins or iTnitations of coins that do not have the 
electrical properties of our existing silver money. Highly selective rejectors are 
a necessity in. these machines if they are to be a low-cost source of food and other 
goods and services. Otherwise, fraudulent use would soon make them costly. 

The sensors ia these machines are set to accept or reject coins on the basis of 
the electrical properties of our traditional coins, which have a high proportion 
of silver. To be compatible in operation with our existing coinage, therefore, our 
new coins must duplicate the electric properties of a coin that is 90-percent silver. 
No single acceptable metal or alloy does so. The composite coins, made of layers 
of differing metals and alloys, that I am asking the Congress to approve, are 
coins made to order to duplicate the electrical properties of coins with a liigh 
silver content. They are the only practical alt^natives we liave discovered to 
our present coinage. 

Selectors exist that can liandle coins with the widely varying electrical properties 
of, say, nearly pure silver and nearly pure nickel. But tliat is not enough. Wtiea 
the selectors are set to accept coins with greatly differing electrical properties, the 
selectivity of the mechanism declines and they will accept wrong coins and 
imitations. Unless the coins in use have very similar electricfJ properties, the 
coin-operated mactiinea tiecome subject to a iiigh degree of fraudulent use. Tliis 
would be costly to all concerned. 

The future may bring selectors of a different kind able to accept coins of widely 
varying electrictd properties while at the same time rejecting imitations and 
wrong coins. They are not available now. When and if they become available, 
our new coinage will work in them. On the other hand, if we now chose an 
incompatible coinage, there would be delays and interruptions lasting a year to 
3 years in the services of these machines. This would impose heavy inconven- 
iences upon the public and would cause business and employment losses in a large 
and growing industry. 

In view of these considerations of public interest, we have concluded that our 
new coinage must without fail be able to carry out the technical merchandising 
functions of a modem coinage, working alongside our existing silver coinage. The 
new coim that I ain recommending to you do this, and do it meti, becaute they v>er» 
specifically designed for the taek. 

The new ha& doOar was designed with the Strong desire in mind of many 
Americans to retain some silver in our everyday coinage. We beUeve that by 
eliminating silver from use in the dime and the quarter, we will have enough 
silver to carry out market operations in protection of our existing silver coinage — 
and to make a half dollar of 40 percent silver content. It is clear and unmistakable 
that we would not tiave enough silver to extend this to the dime and quarter; 
they are heavily used, indispensable coins that we must have at all times ia 
large quantity. We are convinced that we can include a 40-percent Mlver half 
dollar in the new coinage, but we cannot safely go beyond that. As a precaution, 
we intend to concentrate at first on getting out large quantities of the new quarter 
and dime before we embark upon quantity production of the new half dollar. 

THE JOINT COMMISSION ON THE COINAQB 

We believe the recommendations being made for a new coinage ore sound and 
durable and in the best public interest. However, the installation of a new 
coinage is a matter so intimately affecting the life of every citizen, and so delicately 
related to the Nation's commerce, that it is impossible to be certain in advance 
that all problems have been foreseen, even by such a long and arduous process of 
research as has gone into the selection of the proposed new coins. 

Consequently, I am including among my recommendations the proposal for a 
Joint Commission on the Coinage. It will be composed of the four officers of 
the executive branch most directly concerned with matters affected by the coinage 
— the Secretary of the Treasury, the Secretary of Commerce, the Director of the 



Digitized byGoOgle 



8 COINAGE ACT OF 1965 

Budget Bureau and the Director of the Mint; of four members representing the 
public interest, to be appointed by the President; of the chairmen and ranking 

members of the Banking and Currency Committees of the House and the Senate; 
of one Memt)er each from the two Ilouaee of the Congress, to be appointed by the 
Vice President and the Speaker of the House. The Commission will be appointed 
soon after the new coinage is issued. It will study such matters as new technologi- 
cal developments, the supply of various metals, and the future of the silver dollar. 
It will report as to the time and circumstances in which the Government should 
cease to maintain the price of silver. It will be directed to advise the ft-eaident, 
the Congress, and the Secretary of the Treasury on the results of its studies. 

THE COINAOB CUKKBNT AND PSOSPECTIVB 

I am pleased to report to the Congress substantial progress toward overcoming 
the coin shortage the Nation has been experiencing. Greatly increased minting 
has eliminated the shortage of pennies and of nickels. We are still somewhat on 
the short side of the demand for dimes and quarters, but this deficit is rapidly being 
overtaken. A severe shortage of the half dollar continues, due to the popularity 
of the new 50-oent pieces bearing the image of President Kennedy. 

I want to emphasize that we will continue to make the existing coins while the 
new ones come into full production, and that we contemplate side-by-side circula- 
tion of the old and new coins tor the indefinite future. There is no reason for 
hoarding the silver coinage we noio use, because there is no reason for it to disappear. 

We are gearing up for maximum production of the new coins as soon as they are 
authorized by the Congress. Supply of the materials for them is assured. Both 
copper and nickel are economical and available in North America. Their usage 
in coins will not add enough l*o overall employment of these metals to create 
Bupply or price problems. 

In the first year after new coins are authorized, we expect to make 3M billion 
pieces of the new sulisidiary coins. That is a billion and a half more pieces than 
will be made of the corresponding silver coins in the current fiscal year. 

In the second year after authorization of the new coinage, we expect to be able 
to double the first year's output of the new coins, reaching a production total of 
7 billion pieces. 

We expect iu this way to avoid any new coin shortage in the transition to pro- 
duction of the new coins, and within a period of less than 3 years to reach a point 
at which we could, if necessary, meet total coinage needs out of production of the 

/ am satisfied, Ihal taking into account all of Ike various factors involved in lki» 
complex pToblem, the recommendations thai I am making to you are sound and right. 
Your early and favorable action upon the proposed legtslalton iailt make it possible 
to produce and issue to the public a coinage (hat leill be acceptable, provide the maximum 
convenience, and serve aU the purposes — financial and technical-^of modem com- 
merce. In considering this problem the needs of the economy and the conv^iience 
of the public have been placed ahead of all other considerations. They are the factors 
that have resulted in my recommendations to the Congress. I urge their approviA at 
&e earliest possible date. 

Ltndon B. Johnson. 

The White House, June S, I9S5. 

Dbaft of Ad uiNi strati on Bill 

A BILL To provide lor tbe coinage D( th« United States 

Be it enacted by the Senate and House of Representatives of the United States of 
America in Congress assembled. That this Act may be cited as "The Coinage Act 
of 1965." 

TITLE I 

Section I. (a> The Secretary of the Treasury is authorized to cause to he 
minted and issued the following coins: 

(1) A half dollar or fifty-cent piece which shall be composed of an alloy 
of 800 parts of silver and 200 parts of copper per each one thousand parts 
by weight clad on a core of a silver-copper alloy of such fineness that the 
composition of each coin shall be 400 parts of silver and 600 parts of copper 
out of each 1000 parts by weight. 

(2) A quarter dollar or twenty-five-cent piece and a dime or ten-cent piece 
each of which shall be composed of an alloy of 75 percent of copper and 25 
percent of nickel clad on a core of pure copper. 



Digitized byGoOgle 



COIN AGE ACT OF 1966 9 

(b) The cladding alloy used for the outside layers of such coins shall comprise 
not less than thirty percent of the weight of each coin. Such coins shall be of the 
same diameter, respectively, as the coins of ,the United States of corresponding 
denominations current at the time of enactment of this Act. 

(c) The weight of the half dollar provided for herein ahal] be 11.50 granifl, of the 
quarter dollar 5.67 grams and of the dime 2.268 grams. 

Sec. 2. Subject to the requirements of section 1, the methods of manufacture of 
the coins therein provided, the wastage allowances, and the allowable deviations 
in the metallic percentages and weights, shall be as determined by the Secretary 
of the Treasury. Such coins shall be subject to the laws pertaining to the designs 
and inscriptions on coins of the United States. 

Sec. 3. All coins minted pursuant to the provisions of this Act shaU be legal 
tender for all debts, public and private, public charges, taxes, duties and dues. 

Sec. 4. Nothing herein contained siiall be deemed to prohibit the continued 
minting of coins of the United States authorized by law at the time of enactment 
of this Act. 

Sec. 5. Whenever in the judgment of the Secretary of the Treasury such action 
is necessary to protect the coinage of the United States, he is authorized under 
such rules and regulations as he may prescribe to prohibit the exportation, melting 
or treating of coins of the United States. 

Sec. 6. The Secretary of the Treasury is authorized to sell on such f«rmB and 
conditions as he may deem appropriate, at not less than the monetary value 
thereof, any silver of the United States in excess of that required to be held as 



at the price of $1.25 per fine troy ounce silver mined after the date of enactment 
of this Act from natural deposits in the United Statos or any place subject to the 
jurisdiction thereof and tendered to a United States mint or assay office within 
one year after the month in which the ore from which it is derived was mined. 
The bullion fund provided by section 3626 of the Revised Statutes, as amended 
(31 U.S.C. 335), may be used for such purchases. 

Sec. 8. In order to expedite acquisition of essential equipment, patents, patent 
rights, technical knowledge and assistance, metallic strip and other materials 
necessary to assure the prompt and continued availability of materials required 
to produce an adequate supply of the coins provided for herein, the Secretary of 



(31 U.S.C. 340), or any other law, to enter into contracts upon such terms and 
conditions as he may deem appropriate and in the public interest, for the acqui- 
sition or transportation of such equipment, patents, patent rights, technical 
knowledge and assistance, metallic strip, or other materials. 

Sec. 9. (a) The Act of September 3, 1964, Public Law 88-580, is amended to 
read as follows: 

"Notwithstanding section 3517 of the Revised Statutes (31 U.S.C. 324), all 
coins minted from the date of enactment of this Act shall be inscribed with the 
year of the coinage or issuance unless in the judgment of the Secretary of the 
Treasury such inscription is likely to contribute to a shortage of coins, in which 
case the particular coins involved may be inscribed with the last preceding year 
whose dale has been inscribed on coins of the same denominations." 

(b) Section 3550 of the Revised Statutes (31 U.S.C. 366) is repealed. 

Sec. 10. The first sentence of section 3558 of the Revised Statutes, as amended 
(31 U.S.C. 283), is amended to read as follows; 

"The business of the Unit«d States assay office in San Francisco shall be in all 
respects similar to that of the assay office of New York except that until such 
time as the Secretary of the Treasury determines that the mints of the United 
States are adequate for the production of ample supplies of coins, its facilities may 
be used for the production of any coins of the United States authorized by law. 

Sec. 11. Section 4 of the Act of August 20, 1993 (31 U.S.C. 294), is amended by 
striking out "$30,000,000" and inserting in lieu thereof "$45,000,000". 

Sec. 12. Section 3 of the Act of December 18, 1942 (31 U.S.C. 317c), is amended 
by striking out "minor" each place it appears in such section. Section 9 of the 
Act of March 14, 1900 (31 U.S.C. 320), is hereby repealed. 

Sec. 13. Section 3528 of the Revised Statutes, as amended (31 U.S.C. 340), 
B amended (1) by striking out "this Act," in the first sentence and inserting in 
lieu thereof ''law,"; (2) by striking out "minor" each place it appears in such 
section; and (3) by striking out "$3,000,000" and inserting in lieu thereof 
"$30,000,000". 



■dbyGOOgIC 



10 COINAGE ACT OF 1065 

Sec. 14. Section 485 of the Act of June 25, 1948 {18 U.6.C. 485), is amended 
by striking out "the gold or silver coins" and ineerting in lieu thereof "gold, 
silver, silver-clad, or cupronickel-clad coins". 

Sec. 15, The Secretary of the Treasury ia authorized to issue such regulations 
as he may deem necessary to carry out the provisions of this Act. 

Sec. 16. Whoever knowingly violates any of the provisions of section 5 hereof 
or of any order, rule, regulation, or license issued pursuant thereto shall, upon 
conviction, be fined not more than $10,000 or imprisoned not more than five 
years, or both. In addition, there shall be forfeited to the United States any 
coins exported, melted, or treated in violation of this Act or any order, rule, 
regulation or license issued hereunder, or any metal resulting from such melting 
or treating of coins. Such coins or metal may be seized and condemned by like 
proceedings as those provided by law for the forfeiture, seizure, or condemnation 
of property imported into the United States contrary to law, 

TITLE II 

Section 1. The President is hereby authorized to establish a Joint Commission 
on the Coinage to be composed of the Secretary of the Treasury as Chairman; 
the Secretary of Commerce; the Director of the Bureau of the Budget; the Director 
of the Mint; the chairman and ranking minority member of the Senate Banking 
and Currency Committee; the chairman and ranking minority member of the 
House Banking and Currency Committee; one Member of the House of Repre* 
sentativea to be appointed by the Speaker; one Member of the Senate to be 
appointed by the President of the Senate; and four public members to be appointed 
by the President, none of whom shall be associated or identified with or repre- 
sentative of any industry, group, business, or association directly interested as 
such in the composition, characteristics, or production of the coinage of the 
United States. 

Sec. 2. No public official or Memiwr of Congress serving as a member of the 
Joint Commission shall continue to serve as such after he has ceased to hold 
the office by virtue of which he became a member of the Joint Commission. Any 
vacancy on the Joint Commission shall be filled by the choosing of a successor 
member in the same manner as his predece^or. 

Sec. 3. The Joint Commission shall study the progress made in the iraplemen- 
• tation of the coinage program established by this Act, and shall review from time 
to time such matters as the needs of the economy for coins, the standards for the 
coinage, technological developments in metallurgy and coin-selector devices, the 
availability of various metals, renewed minting of the silver dollar, the time when 
and circumstances under which the United States should cease to maintain the 
price of silver, and other considerations relevant to the maintenance of an adequate 
and stable coinage system. It shall, from time to time, give its advice and recom- 
mendations with respect to these matters to the President, the Secretary of the 
Treasury, and the Congress. 

Sec. 4. Ttiere are authorized to be appropriated, to remain available until 
expended, such amounts as may be necessary to carry out the purposes of this title. 

Section-bt-Section Analtsis or the Bill 
Tide I 

Section 1 authorizes the minting and issuance of a new series of coins in denomi- 
nations of 10, 25, and 50 cents which will be manufactured from composite metals 
containing three layers. In the case of the 50-cent piece, the outside or cladding 
layers would be composed of an alloy of 80 percent silver and 20 percent copper 
and the core of a silver-copper alloy of such fineness that the overall composition 
of each coin would be 40 percent silver and 60 percent copper. The 10- and 25- 
cent coins would consist of cupronickel (75 percent copper, 25 percent nickel) 
clad on a core of pure copper. Section 1 also prescribes the proportionate amounts 
of core and cladding alloys in the coins, the weight of each coin and that such 
coins are to be of the same diameter as the current coins of the United States of 
corresponding denominations. 

Section 2 authori2es the Secretary of the Treasury to determine the methods 
of manufacture of the new coins, the wastage allowances, and the allowable 
deviations in the metallic percentages and weights. It provides also that such 
coins shall be subject to existing laws pertaining to the designs and inscriptions 
on U.S. coins. 

Section 3 provides that the coins shall be legal tender. While existing statutes 
governing legal tender are broad enough to cover the new coins, an express 
provision in the new bill ia deemed desirable to eliminate any possible doubt. 



Digitized byGoOgle 



COINAGE ACT OF 1965 11 

Section 4 provides continuin); authority for the coinage of coins authorized by 
provisions of existing law. This will enable the continued production of present 
coinage to the extent necessary to assure the production of ample supplies of 
coins during the period of tratisition to the new coinage. 

Section 5 gives standby authority to the Secretary of the Treasury to prohibit 
the exportation, melting, or treating of U.S. coins when necessary to protect the 
coinage. 

Section 6 provides for sales by the Treasury of silver in excess of that required 
to be held against silver certificates at prices not less than the monetary value. 
This will clarify the authority of the Treasury to make sales of such excess silver 
under appropriate conditions. 

Section 7 authorizes the purchase of newly mined domestic silver by the Treas- 
ury at the price of $1.25 per fine troy ounce. This will protect silver-producing 
industries against any precipitate drop in the price of their product which might 
result from the change in U.S. coinage alloy. Silver purchased under this provi- 
sion can be used in coinage at values not less than SI. 29 plus per fine troy ounce. 
Section 7 also authorizes the use of the bullion fund for the purchase of silver. 

Section 8 authorizes the Secretary, tor as long as he deems it necessary, to 
procure, on terms deemed appropriate and in the public interest, any materials, 
technical knowledge and assistance, equipment, patents, transportation services, 
etc., necessary to assure prompt and continued availabilitv of materials required 
for the new coinage without regard to any laws requiring advertising and competi- 
tive bidding or imposing other restrictions on the negotiation of contracts for the 
purchase of property by the Government. 

Section 9 directs that coins minted after enactment of this act aiiall bear the year 
of the coinage orissuance unless the Secretary of the Treasury determines that this 
is likely to contribute to a coin shortage. In this event, the particular coins 
involved may be inscribed with the last preceding year whose date appeared on 
coins of these denominations. This section would also repeal an obsolete pro- 
vision of law requiring that the obverse working dies at each mint be destroyed 
at the end of each year. 

Section 10 authorizes use of the San Francisco Assav Office for coinage on a 
temporary basis until such time as the Secretary of the "Treasury determines that 
the facilities at the mints are adequate for the production of ample supplies of 
coins. It is anticipated that during the period of transition to the new coinage 
the mints' production load will be partioularly heavy and additional facilities will 
be needed. Use of the San Francisco Assay Office is the most expeditious way of 
providing these. Section 10 also authorizes permanent use of the San Francisco 
Assay Office for refining gold and silver bullion. This will also contribute to the 
efficiency of operations at the mints and assay offices. 

Section 11 mcreases the maximum amount authorized to be appropriated for 
the construction of the new mint at Philadelphia from $30 million to $45 million. 
Additional funds will be necessary to provide equipment and facilities for the new 
coinage. 

Section 12 will authorize and provide financing for the melting of any worn 
and unourrent U.S. coins, including the new cupronickel-elad and silver-clad 
coins, received in the Treasury and the sale or recoinage of the resulting metals. 
The section also repeals an act which requires recoinage of all worn and un current 
subsidiary silver coins received in the Treasury. 

Section 13 authorizes use of the minor-coinage metal fund and the minor-coinage 
profit fund (to be renamed the coinage-metal fund and the coinage-profit fund) 
for the purchase of metals for the coins provided tor in the act and for certain 
expenses incurred in such coinage ; namely, the wastage and cost of distribution of 
the coins. It also raises the amount available in the coinage-metal fund from 
S3 million to $30 million. This increase in amount is necessary because after 
enactment of the bill this fund will be used tor the purchase of metals used in 
coinage of alt denominations whereas at the present time it is used only tor metals 
for I- and 5-cent coins. 

Section 14 amends one of the counterfeiting laws so as to make it applicable to 
the new cupronickel and silver-clad coins on the same terms and conditions as it 
is now applicable to the subsidiary silver coins. It is not necessary to amend 
any of the other counterfeiting laws since these will be applicable by their terms 

Section 15 is a general provision authorizing the Secretary of the Treasury to 
issue regulations that may be necessary to carry out the provisions of the act. 

Section 16 provide penalties for violations of any regulations issued under 
eeotion 6 of the act, prohibiting the export, melting, or treating of U.S. coins. 
S5— 2 



Digitized byGoOgle 



COINAGE ACT OF 1965 



Titk II 

Section 1 provides for the establishment of a Joint Commission on the Coinagei 
composed of tour executive officials, six Members of Congress, and four pubUc 
members to be appointed by the iVesident. The public members shall not be 
representatives of any group having a direct interest in coinage. 

Section 2 provides that the executive and congressional members shall cease to 
serve on the Joint Commission after leaving their public office, and provides for 
the filling of vacancies on the Commission. 

Section 3 provides that the Joint CommisEion shall study the progress made in 
the implementation of the coinage program established by the act. It shall 
review and give its advice and recommendations from time to time to the Congress, 
President, and the Secretary of the Treasury on such matters as the needs of the 
economy for coins, the standards for the coinage, technological development in 
metallurgy, the availability of various metals, renewed minting of the silver 
dollar, the time when and circumstances under which the Unitedf States should 
cease to maintain the price of silver, and other considerations relevant to the 
maintenance of an adequate and stable coinage system. 

Section 4 authorizes the appropriation of such amounts as may be necessary 
for the expense of the Joint Commission. 

The Chairman. The Congress and the American people have 
known for some time that legislation would be proposed to solve the 
several complex problems relating to our coin situation. This prob- 
lem has been the subject of study by the U.S. Treasury for the past 2 
years. The legislation before us today calling for changes in our 
coinage will, if enacted, provide the needed coins of all denominations 
to oil the wheels of commerce and trade. 

Under this l^islation, industries such as defense, jewelry, film, 
and others, which use substantial quantities of silver, will be assured 
of continued availability of this useful metal. The vending machine 
industry, which today constitutes an important element in our 
economy employing many people, will be assured that coins, both the 
new ones as proposed and, of course, the existing coins will be operative 
in existing coin-operated devices. 

Also, tie silver-mining industry, both its owners and the miners 
that provide us with silver, will, under this legislation, be encouraged 
to expand exploration and research and development activities to 
produce the greatest amount of this increasingly scarce mineral. 

And, finalfy, the pubHc, under this legislation, will need have no 
fear whatsoever of the value of these new coins; for, regardless of the 
metal used in making our coinage, the full faith and credit of the 
United States stands oehind them all. 

We are opening our hearings with the Honorable Henry Fowler, 
making his first appearance before oiir committee since his appoint- 
ment as Secretary of the Treasury. 

Secretary Fowler, over the years, has appeared frequently before 
this committee during the distinguished career he has achieved in 
a number of top posts in Government, particularly as Defense Mo- 
bilizer during the Korean war, and as Under Secretary of the Treasury 
in the early days of the Kennedy administration. 

We are pleased to have Mr. Fowler make his first appearance before 
us as Secretary on a matter of such importance to the United States 
as the composition of the coinage. 

Secretary Fowler is accompanied by Assistant Secretary Robert 
A. Wallace, who also has contributed much to the proposal now 
under consideration and who also is a distinguished public servant. 



Digitized byGoOgle 



COCKAQE ACT OF lOeS 13 

We are glad to have you gentlemen with us today. 

Mr. Secretary, if you wUl identify yourself for the record, and 
also those accompanying you, it would be appreciated, and you may 
proceed in your own way. 

STATEMENT OF HON. HENKT H. FOWLEB, SECRETARY OF THE 
TBEASURT; ACCOMPANIED BY ROBERT A. WALLACE, ASSISTANT 
SECRETARY; FRED B. SMITH, ACTING GENERAL COUNSEL; 
FREDERICK W. TATE, DEPUTY DIRECTOR OF THE MUTT; AND 
JOHN H. AUTEN, DEPUTY DIRECTOR, OFFICE OF FINANCIAL 
ANALYSIS 

Secretary Fowleh. Thank you, Mr, Chairman. 

My name is Henry H. Fowler, I am Secretary of the Treasury. 
. On my left is Assistant Secretary of the Treasury Robert Wallace; 
Mr. Frederick Tate, who is the Deputy Director of the mint on his 
left; Mr. Fred Smith, the Acting General Counsel for the Treasury 
Department on his left; and on my right, Mr. John Auten, Deputy 
Director of the Office of Financial Analysis of the Treasury Depart- 
ment. 

Thank you, Mr. Chairman, for this opportunity to appear before 
your committee today in support of the legislation the President has 
recommended for a new and efficient U.S. coinage. 

Wg particularly appreciate the promptness with which this hearing 
has been called following the submission of the President's mess^e, 
because time is an Important element in the matter with which we 
have to deal. 

We are recommending a change in the coinage because there is 
not enough available silver to assure the continued minting of our 
traditional 90-percent silver coins for the years aheud in the quantities 
necessary to meet our rapidly increasing coinage requirements. 

As much as all of us would prefer to keep our old and handsome 
silver coinage, there is no choice but to reduce drastically our heavy 
dependence upon silver for this purpose for one simple reason: the 
demand for silver has far outrun supply. 

The only option open to us in this matter, without gravely risking 
the national interest in adequate and plentiful coinage, has been choice 
of what new material to use in the place of silver. 

The new coinage the President has recommended that you authorize 
has all the attributes of a strong and stable coin system, and that, 
moreover, it is fully modem, and specifically engineered to carry out 
efficiently all the tasks that American merchandising of our day 
requires. 

The new coins recommended to you will provide uninterrupted 
service as a medium of exchange. They can be made without the 
necessity of further change for a long period ahead. These coins are 
made of materials for which there is assured access. They can be 
minted without undue difficulty and at moderate cost. They can 
be used across the counter — and m all of the 12 million coin-operated 
devices in use in the United States — side by side with our existing 
silver coins. 

There is, of course, no substitute for the appearance of silver. In 
one of the three new coins we are asking authority to make — the 



Digitized byGoOgle 



14 OOIHACm tXfr OF 1D66 

half dollar — the beauty of the "noble metal" is preserved intact, 
aIthoup;h the actual silver content is much reduced. The proposed 
new dime and quarter are a departure from the tradition of mver, 
but thev are coins that have a distinctively modem appearance and 
that wiD serve us well because they can protect us from future coin 
shortages. The fact that they are not silver, but are composite coins 
made of a nickel alloy bonded to a copper core, is a change that re- 
quires getting used to. But I think the ruddy edge resmting from 
tneir copper core gives these coins a character we wm come not only 
to accept, but to value. 

Now, for a few comments as to the underlying need for this legisla- 
tion, which is simply the shrinkage of silver supplies. 

In the statement there is a table attached which presents the 
silver supply situation as briefly and succinctly as possible. I have 
taken it from our "Treasury Staff Study of Silver and Coinage," 
which I understand is or wiU be made available to the members of 
the committee. 

(The table referred to follows:) 



EatimaUdfree world silver consumption and prodiiction, 1949-64 

[MiUlona ot fine troy ouncesl 






■S!S' 


Use-Coinage demand 


Total 


diicthui 


On»9 
defldt 


Deftrit. 




Unltsd 
Stales 


Foreign 
world 


Total 


ti<m 


as 


1W9-5S. averages 

KilSS:-.::: 


163 

s 


i 
i 


i 

K 
«2 


SS 


i 


171 

E 


M 

1 


SS 
S5 

67 















NoT«.— A troy ounce equals 480 grains, an avQlrdapoL! pound equals 7.000 Kralns, a ZpnoO-poniid ton 
equata 14,1)00,000 gralDSi hence, 1,000,000.000 troy ounces (480,000,000,000 grains) equals S4,2g« Ions. 
Bodicg: "Treasoi; Stall study oISQverand Coinage," pi. lit, table 1, figures rounded. 

Secretary Fowlek. The table shows a steadily worsening of our 
silver supplies, from a small deficiency of production in the early 
postwar years to a slightly biffier deficiency in the next S-year period, 
a much larger inadequacy in toe 5 years from 1957 through )961, and 
to a boundmg growth of the deficiency in the last 2 calendar years. 
Actual market deficits are smaller than the difference between total 
consumption and new production because the United States meets its 
coinage needs for silver out of its stocks. These, however, are being 
depleted at a rate which cannot be permitted to continue indefinitely. 

It is notable that in 1964 eacli major type of usage — the use of 
silver by industry and the arts, and use of silver for coinage — taken 
se^rately, was greater than new supply. 

This is the crux of the matter. 

There is simply not enough silver appearing on the market to 
continue to satisfy the demand for it in the foreseeable future. 

There is no dependable — or, for that matter, likely — prospect, m 
the opinion of experts both inside and outside the Treasury, of new 
economically workable sources of silver that would appreciably 
narrow the gap between sUver supply and demand. In fact, opti- 



DigitizcdbyGoOgle 



COmAQE ACT OP 1966 15 

mistic projectiona envision an increase of no more than 20 percent over 
the next 4 years. Projected increases in consumption are at least 
equally as great. 

This standoff between future increases of production and consump- 
tion in a situation where deficits are already very heavy could not 
change the basic conclusion that use of silver in our coinage must be 
very sharply curtailed. Also, because silver is produced chi^y as 
a byproduct of the mining of copper, lead, and zinc, even a very great 
increase in the price of silver would not stimulate new production 
sufficiently to change the situation. 

Most free world countries have long since ended or nearly ended the 
use of silver in their coinage. Except for Canada and Switzerland, 
those countries still using silver coins make only limited use of it, in 
one or two "prestige" coins, as we now propose to do with the new 
haK dollar. As seen in the table, in the early postwEir years, the 
United States accounted for less than half of total free world employ- 
ment of silver for coias, but at present we use more than three-quarters 
of all silver put into coins in the free world. 

We have no choice but to make a lai^e reduction of silver in the 
coinage, and no choice but to do so now. We have on hand some 1 
billion ounces of silver in the Treasury stock. At current rates of mint 
production we are using silver for coinage at the rate of 300 million 
ounces a year; and for the redemption of silver certificates at 120 
million ounces a year. 

Even should demands upon our stock increase no more, it is clear 
that at present rates of use we can expect to exhaust our resources in 
2 or 3 years. This gives us enough tune to shift to a new coinage if 
we act promptly. 

As to the basic requirement for the new coinage system — in arriving 
at our recommendations for new coinage alloys our overriding con- 
sideration, Mr. Chairman, was the necessity of continuing at all times 
to provide an adequate means of exchange and of avoiding any dis- 
ruption of commerce. Experience shows all too clearly that, under 
modem conditions, the essential medium of exchange function is im- 
periled if a subsidiary coinage alloy threatens to become more valuable 
as a commodity than as money. 

The Treasury's own staff study, and that of the Battelle Memorial 
Institute, establish certain other criteria which an acceptable coinage 
alloy should have, beyond the basic criterion of efficiency in its func- 
tion as a medium of exchange. These include, the degree to which a 
coinage material lends itself to being minted into coins which would 
be durable in use; its acceptability to the public; ease and sureness of 
production; cost and availability of raw materials, and counterfeiting 
potential. 

An additional criterion is a critical factor for a modem American 
coinage. Present-day coins should perform not only as a mediiun of 
exchange, but also as tecimical merchandising instruments, in use in 
coin-operated vending and service machines. 

As to the need for compatibihty of old and new coinage: The 
new coins should be made compatible with the existing comage in 
use today in coin-operated devices, particularly in coin-operated 
vending machines. This is one of the most desirable characteristics 
of a modem coinage, and a characteristic fully met by the President's 
proposal. If the new coint^e could not be used in these mechanisms. 



Digitized byGoOgle 



16 COINAGE ACT OF 1966 

the public would be subjected to ^at inconvenience, and trade and 
commerce in many sectors of distnbution hara,ssed and handicapped. 
If the new coins were not compatible, two alternatives would be 
presented, both of them undesirable from the point of view of the 
public atlai^e: 

(1) The vending machines would have to be shut down until new 
sensing and rejecting devices could be installed; or 

(2) Their devices for sensing and rejecting wrong coins and slugs 
would have to be deliberately circumvented, exposing the machines 
to a high rate of fraud. 

In the case of merchandise vending machines alone — that is, not 
including such service devices as pay telephones and coin-operated 
laundries — over $3!^ billion worth of goods were dispensed to con- 
sumers last year, in over 30 billion separate transactions. 

These vending machines are equipped with sensitive selectors, 
which reject wrong coins, slugs, foreign coins, and the like. Highly 
selective rejectors are necessary if coin machines are to be low-cost 
supply points for foods and for many other kinds of goods, available 
by night and by day, in out-of-the-way as well as accessible places, 
such as the modern factory, which we have all observed. 

Approximately half of the 12 million coin-operated machines 
in the United States are equipped with sensors that accept or reject 
coins on the basis of the electrical properties of our traditional high 
silver content coinage. To be compatible in operation with our 
existing coinage, our new coins must duplicate the electrical char- 
acteristics of a coin with high silver content. The coins we are - 
recommending to you reproduce precisely the electrical properties of 
coins with high silver content. Moreover, they are made of the only 
materials that do so, satisfactorily, among the practical alternatives. 
Any other course would subject the public to extensive inconvenience. 

If noncompatible materials are used, there will have to be an inter- 
regnum while new selectors are developed and brought into mass 
production that are — 

(1) capable of handling coins of high silver content together with 
coins that do not have the electrical properties of nearly pure silver, 
and 

(2) at the same time capable of rejecting sli^s, low value foreign 
coins and coins of wrong denominations. Selectors exist that can 
handle coins with a wide range of electrical properties. But when 
they are set for a wide range, their selectivity falls, and they become 
subject to fraudulent use. 

During the 1 to 3 years that development, manufacture and in- 
stallation of a new kind of sensor would take, the public would not 
be able to use the incompatible new coinage in the 6 million of our 
coin-operated devices, chiefly those vending merchandise, fitted with 
sensitive selectors. The choice of the coins recommended here avoids 
these difficulties and the attendant interferences with trade and 
commerce. 

Now, to outline briefly the recommendations that appear in the 
proposed legislation: 

Section 1 of the proposed legislation describes the metallic content 
of the proposed new coinage: 



■dbyGOOgIC 



COINAGE ACT OF 1965 17 

A. THE MINOB COINAGE 

The penny and the 5-cent piece: No change is proposed. 

B. THE BUBSIDIARY COINAGE 

1. The dime and the quarter: It is proposed that silver be eliminated 
from the dime and quarter. Instead, they should be composite, or 
dad, coins, faced with an alloy of 75 percent copper and 25 percent 
nickel — the same cupronickel alloy used throughout the 5-cent 
piece — bonded to a core of pure copper. 

2. The half dollar: It is proposed that the 50-cent piece should also 
be a composite coin, with the silver content reduced from the present 
90 percent to a new ratio of 40 percent. It would be faced with an 
alloy of 80 percent silver and 20 percent copper, clad on core alloy of 
approximately 21 percent silver and 79 percent copper. 

3. The Silver Dollar: No change is proposed. Authority to make 
a silver dollar of the same weight and fineness — 412.5 grains, 90 
percent silver — made at various times since the act of 1837, would be 
continued. However, we would not plan to mint any new coins of 
this denomination at the present time. 

Section 2 provides that the new coins would be subject to the 
current laws as to design and inscription. 

With respect to these coins, I would like to emphasize the following 
points, some of them aheady discussed: 

1. It is our intention that the existing silver coinage should circu- 
late side by side with the new coinage, indefinitely. 

2. The proposed new dime and quarter would have a copper- 
colored edge, due to the use of a pure copper core. 

3. The new coinage would meet the exacting technical requirements 
necessary to permit it to be used in the coin-operated devices now in 
use in the United States, including those fitted with rejectors set to 
refuse coins or imitations of coins that do not have the electrical 
properties of our current silver coins. 

4. We plan to place the new coins in circulation some time in 1966. 

5. The new couis would be of the same size and design as present 
coins of the same denomination. They would be sightly hghter in 
weight. 

Section 3 provides specific recognition of the new coins as legal 
tender. 

Section 4 provides for continued minting of the existing coins as 
needed until production of the new coinage is adequate, continuing 
without change the standard silver dollar. 

Section 5 provides for standby authority for the Secretary of the 
Treasury to prohibit the melting, exportation, or treating of U.S. sil- 
ver coins. 

Section 6 provides for sales by the Treasury of silver in excess of 
what is needed to back silver certificates, at a price not less than the 
monetary value of silver. 

Section 7 would authorize the Treasury to purchase newly mined 
domestic silver at $1.25 per fine troy ounce. 

Section 8 provides for legal authority to procure the materials and 
technical assistance^ equipment and patents needed to make the new 
coinage in the required quantity. 



Digitized byGoOgle 



18 COmAOE ACT OF 1965 

Section 9 provides authority to continue dating the new coins as of 
the first year they are issued. 

Section 10 would authorize the temporajy use of the San Francisco 
Assay Office for the minting of new coins, and would authorize the 
conversion of that facility for the refining of precious metals, if 
necessary, after it is no longer needed for coin production. 

Sections 11 to 16: An act requiring recomage of all worn and 
uncurrent subsidiary silver received in the Treasury is repesJed ; the 
minor-coinage metal fund is renamed the coinage-metal fund, and the 
minor-coinage profit fund is renamed the coinage-profit fund, and the 
amount available in the coinage-metal fund is raised from $3 million 
to $30 million; expenditure of not more than $15 million is authorized 
for additional mint facilities to accommodate manufacturing require- 
ments of the new materials; the counterfeiting laws are amended to 
cover the new coinage; the issuance of necessary regulations by the 
Secretary of the Treasury under the proposed act is authorized; and 
penalties are provided for violations of regulations issued under 
section 5. 

A separate title of the proposed l^slation of great significance 
provides for the establishment of a Joint Commission of the Coinage 
after the new coinage is issued. 

The Commission would be composed of the Secretary of the Treas- 
ury, the Secretary of Commerce, the Director of the Bureau of the 
Budget, the Director of the Mint, of four public members, not repre- 
sentatives of interest groups, appointed by the President, of the chair- 
men and ranking minority members of the House and the Senate 
Banking and Currency Committees, and of two other congression^ 
members, one appointed by the Speaker of the House and one by the 
President of the Senate. 

The function of the Commission would be to study the progress 
of the implementation of the new coinage program, new technological 
developments that may intervene, the supply of various metals, 
and the future of the silver dollar. It would report as to the time and 
circumstances in which the Government should cease to maintain the 
price of silver, if that decision should seem desirable. And it would 
advise the President, the Congress, and the Secretary of the Treasury 
on the results of its studies. 

As to the protection of existing coinage: 

The continued use of coins that are 90 percent silver also requires 
protection of this high silver content coinage from hoarding or destruc- 
tion. 

There is no reason for hoarding of coins in anticipation of a coin 
shortage. We expect no such shortage during the period when we are 
installing the new coinage. We can, if necessary, step up production 
enough to replace completely, in less than 3 years, the entne body of 
existing silver coinage while at the same time keeping up with the 
normal growth of com demand. 

We can defend the existing silver coinage against the second possible 
danger — the threat of destruction by melting them for then* silver 
content. To make certain that the silver coinage is not destroyed 
in this manner, it will be necessary for the Treasury to protect the 
monetary value of our silver coinage by supplying silver to the market 
upon demand at the present monetary pnce of silver of $1.29 plus 
per troy ounce. The Treasury has been doing this since 1963 by 
exchanges of silver buDion against silver certificates. 



Digitized byGoOgIC 



CMKAGE ACT OP 1868 19 

The value of the silver in our existing coinage, as ealver, would 
exceed the face value of the coins if the price were allowed to rise 
above a so-called melting point of these coins of $1.38 per ounce. 
We hold the price of $1.29 plus per ounce by standing ready freely to 
redeem silver certificates in silver at this price. The prudent course 
is to maintain the price of silver at its present level. 

It is as additional protection for existing silver coinage, which 
includes the silver dollar, that we recommend asking for standby 
authority to institute controls over the melting, treating or export 
of U.S. coins, practices not now forbidden by law. 

We believe strongly that suggestions for more extensive controls 
would operate against our best mterests. 

As to the sufficiency of coinage supply: 

As you know, we nave recently experienced a shortage of coins. 
I am happy to say that as a result of intensive production efforts 
on the part of the Mint the supply of coins in circulation and in 
inventory in the Federal Reserve banks is improved. There is no 
longer a shortage of the 1-cent and 5-cent pieces. 

We still have a problem with dimes and quarters supply but sub- 
stantial improvements have been made. The shortage of half dollars 
b still severe. 

In view of the continuing shortages of high denomination coins 
and the uncertainties inevitable during the changeover period, we Eire 
gearing up for maximum production of the new coins as soon as the 
legislation is passed. In the first year after enactment, we expect 
to make at least 3H billion of the new subsidiary coins— a billion and 
a half more than we will make of the silver coins in fiscal 1965. This 
is more than double the production in fiscal 1964 and four or five 
times what we would consider as a normal year's production of silver 
coins. In the second year after enactment we would expect to make 
well over 7 billion of the new coins, doubling production ^ain. 

As to the silver dollar: 

The silver dollar will remain as an authorized coin of the United 
States, at 90 percent fineness. This is a central element in our pro- 
gram for holding the price of silver to its present level for the protec- 
tion of our existing subsidiary silver coin. The future of the silver 
dollar can better be decided when the Joint Commission of the Coinage, 
which we have recommended, can take a look at the world's silver 
supply and demand situation and other relevant factors and make 
its recommendations. At that time, the facts can lai^ely govern the 
decision on the issue of the future of the silver dollar. 

Now, as to maintaining some silver in the subsidiary coinage: 

We have considered it desirable to maintain some silver in our 
subsidiary coinage. It was to this end that the new silver half dollar 
was designed. The new composite coin reduced the silver content of 
the half dollar from 90 to 40 percent. It nevertheless retains without 
readily apparent differences, the aspect and ring of a coin with high 
silver content, although it is slightly lighter than the present half 
dollar. It is to be of the same design as the present half doUar, that 
is, bearing the image of the late President Kennedy. 

One reason for retaining some silver in our coinage is a desire to 
continue the 173-year-old tradition of American silver coinage. In- 
clusion of a 40 percent silver half dollar is as far as we can safely go 
to satisfy this tradition. We expect that, barring unforeseen changes 



Digitized byGoOgle 



20 COINAGE ACT OF 1965 

in industrial demand for 8ilver, we will have adequate silver to make 
this one coin in normal amounts for an indefinite period. After the 
new coins are in full production it should require no more than 15 
million ounces a year — less than 5 percent oi expected 1965 silver 
consumption for coins. One reason for continuing this particular 
coin is the fact that we could, if unforeseen difBculties developed, do 
without the half dollar temporarily. It can be replaced in use by 
two quarters. 

In conclusion, a change in our coinage is unavoidable. We have 
reviewed very carefully the results of all of the studies which have 
been made on this subject. We are satisfied, that, taking into account 
all of the various factors involved in this problem, our recommenda- 
tions for the new coinage are sound proposals that will, if enacted, 
provide the United States with a dependable, technically perfect, and 
distinctive coinage that can be produced in whatever quantity desired. 
It is a coinage that, I emphasize, "will perform not only across the 
counter, but will also carry out fully and without interruption its 
function as a technical merchandising instrument." This is abso- 
lutely necessary for the public interest. I, therefore, strongly urge 
approval of these recommendations and that they be enacted into 
law at the earliest possible date. 

Thank you, Mr. Chairman. 

The Chairman. Thank you, Mr. Secretary, 

We are not asking for "souvenirs," but I wonder if you have any 
"samples" available that the members of the committee may inspect. 

Secretary Fowler. Yes; I think it would be appropriate to view 
them. Assistant Secretary Wallace has a display tor that purpose. 

The Chairman. All right, show them to the members, if you would, 
please, starting right here with Mr. Widnall. 

It is not true, Mr. Secretary, that we would not debase our coinage 
at all by this bill because the monetary value attributed to silver is 
merely that accorded by the people's elected representatives? 

Secretary Fowler. That is correct, air. 

The Chairman. Isn't it really the full faith and credit of the 
United States that makes silver attractive to Americans? 

Secretary Fowler. That is correct. 

The Chairman. In other words it is the dollar that supports silver 
and gold as well. What is really meaningful is official recognition as 
a medium of exchange by the Government, whether one speaks of 
paper, metal, or glass beads. 

Now, legal tender is, of course, something that everyone must 
accept in payment of debts and taxes. 

Secretary Fowler. Yes, sir. 

The Chairman. And related matters. So these coins, regardless 
of the commoditv value of the metal that is in them, will have the 
stamp of the United States recognizing that each coin is legal tender 
for the payment of all debts, public and private. 

Secretary Fowler. Yes, sir. 

The Chairman. What broader definition of "legal tender" is em- 
braced—it has been a long time since I looked into it — besides debts 
and taxes? I know one fellow who owed a considerable amount as 
alimony, about $1,500, and he took it all m pennies and delivered it 
to his former wife. 



■dbyGOOgIC 



COtNAOE ACT OF 1963 



Secretary Fowler. The provision would read as follo^ra: 
Section 3, as proposed: 



The Chairman. In other words, if they have something owing to 
them, they are compelled by law to accept these coins? 

Secretary Fowler. Correct. 

The Chaibman. Because these coins are legal tender. 

Secretary Fowler, Correct. 

The Chairman. And that embraces not only taxes of the U.S. 
Government, income taxes and other different forms of taxes, but it 
includes debts of all kinds, pubUc debts, private debts, including local 
ta.\es in the 3,072 counties, the States, the cities, and other p^tical 
subdivisions. 

Secretary Fowler. Correct. I think it would be worth under- 
scoring, in the light of your comments and questions, Mr. Chairman, 
that the President, in his message, mentioned the changes involved 
here will have no effect on the purchasing power of the coinage as we 
know it. The new ones will be exchanged at full face value for the 
paper currency of the United States, They will be accepted, in 
addition to the acceptance you have indicated, by the Treasury and 
the Federal Reserve banks for any of the financial obHgations of the 
United States, and section 3 expressly recognizes the coins as legal 
tender. 

We are aware, of course, that in the early days of the Republic, 
silver coins served well because the value of the coin at that time 
almost had to be measured by the content of the precious metal 
contained in it- But for many decades now, the value of the coin 
has depended on its face value and not on the value of the metal in it. 
We thmk that today the primary test of coinage must be primarily 
utilitarian. And indeed the difficulty that we are in today is that the 
value of the metal in our sUver coins is so closely approaching their 
face value that, should it exceed that, the coinage would be no longer 
the medium of exchange that we want it to be. 

The Chairman. The way I view it, when that situation is reached, 
at that time only is money a commodity. 

Secretary Fowler. That is right. 

The Chairman. Money was spoken of as a commodity when, of 
course, we used gold and silver, and it was really a commodity. But 
now I do not think it is correct to say that money generally is a 
commodity, because it is not- Paper money is not a commodity — ■ 
can't be. 

Secretary Fowler. Purely a medium of exchange. 

The Chairman. So when the people decide through their elected 
representatives that the silver content of their coins be reduced, this 
in no way enhances the value of presently circulating coins or the 
silver that they contain. 

For these reasons and other provisions in this bill, there is no point 
whatever in hoarding or melting the older coins by the public. There 
is nothing to be gained by this, and it will only cause another coin 
shortage. The new coins would he just as valuable in every way as 
our existing coinage, no more, no less. 

Secretary Fowler. Right, sir. 



■dbyGOOgIC 



22 v,v - C9IN4()E) AOr OF 1965 

The Chairman, Mr. Ashley? 

Mr. Ashley. Thank you, Mr. Chairman. 

Mr. Secretary, you say that about 300 million ounces of silver ia 
being used annually at the present time for the minting of coins. Is 
that correct? 

Secretary Fowler. Well, last year in the United States, in 1964, 
we used 203 million ounces, and this year — let's take the fiscal year 
1965, that ia just closing now — we will have used 268 million ounces 
for coinage purposes. 

Mr, Ashley. Can you tell me how that breaks down in terms of 
dimes, quarters, half dollars? 

Secretary Fowler. By far the predominant usage of silver cur- 
rently ia in the dime and the 25-cent piece. For the fiscal year 1965, 
out of the total of 268 million ounces, we are using 73.8 million ounces 
for the 10-cent piece, 125 million ounces for the 25-cent piece, and 
69.3 million ounces for the 50-cent piece. 

Mr. Ashley. Thank you. 

Now, how much for me 10-cent piece, again, sir? 

Secretary Fowler. 73.8 million ounces. 

Mr. Ashley. Can you tell us or can it be supplied for the record 
the number of dimes, quarters, half dollars, and dollars that are 
presently in circulation? 

Secretary Fowler. The amount in circulation or the amount 
produced ? 

Mr, Ashley. The amount in circulation is what I would be inter- 
ested in. I am interested in what is being introduced on an annual 
basis relative to the total supply in circulation. 

Secretary Fowleh. By the end of this year, this calendar year, 
1965, our estimate is that there will be in drculation 1,233 million 
50-cent pieces. 

Of the quarters, 3,317 million, 

or the dimes, 7,844 million. 

Of the 5-cent pieces, 7,308 miUion. 

Of the pennies, 40,645 million. 

Total, if you are interested, Congressman Ashley, would be 60,347 
million pieces of coins. 

Mr, Ashley. In your statement, Mr. Secretary, you indicated 

Secretary Fowler, I might qualify that in one respect. These are 
our estimates, and our estimates are based on an estimated 25-year 
Ufe of coins. 

Mr. Ashley. Thank you, sir. 

In your statement you indicated a present world deficit, excluding 
U.S. coinage, of 132— this would be for 1964 — 132 milhon ounces. 

Secretary Fowler. That is right — excluding the U.S. coinage. 

Mr. Ashley. Now, do we have a net deficit in this country in terms 
of our demand picture? 

Secretary Fowlee. In terms of production? 

Mr. Ashley. Of production versus supply. 

Secretary Fowler. Oh, yes. We are a very heavy importer. 
And also. Congressman Ashley, we must take into account the fact 
that today our needs in the United States are being met, not only out 
of domestic production — which is relatively not a very substantial 
factor — but out of imports and out of our own Treasury stocks. 

Mr. Ashley. That is the thing that interests me, because our 
stocks are not limitless, by any manner of means. 



Digitized byGoOgle 



COINAGE ACT OF 1965 23 

Secretary Fowler. They certainly are not. They are down now 
to roughly a billion ounces. 

Mr. Ashley. So in 1964 if the deficit, excluding U.S. coinaee de- 
mand, was 132 million ounces, what would be the U.S. deficit, excluding 
U.S. coinage demand that would have to be met from our stocks and 
from imports abroad? 

Secretary Fowler. That will take a little computation. But it is 
ve^ easily obtained on an approximate basis. 

If you mclude U.S. coinage, and U.S. industrial use, we had a gross 
deficit in 1964 of almost 300 million ounces in the United States. 

Now, if you take out coinage, that deficit would be almost 100 
million ounces. 

Mr. Ashley. It is your feeling, I take it, it is your belief that this 
deficit would be met by imports from abroad without recourse to the 
(loremment's stock of silver? 

Secretary Fowler. No. I think there would have to be continual 
recourse to the Government stock of silver to meet this deficit. 

Mr. Ashley. But if we have this limited stock, which indeed we do, 
of only a billion ounces or so, why do we then continue the production 
of half dollars with even 40 percent silver? 

Secretary Fowleh. Because of the considerations that enter into 
maintaining at least one prestige coin as a part of our tradition, be- 
cause the estimated silver use for a ver? adequate annual production 
rate of this coin would be only 15 million ounces, and because the 
ultimate solution of what I would call the industrial and arts problem 
of the use of silver is not going to be solved for the long-term indefinite 
future by whether we do or whether we don't utilize this 15 million 
ounces of silver a year for our own coinage. 

Obviously, one of the problems that the proposed Joint Commission 
on Coinage will focus on — should it be authorized, when and if it is 
convened — will be the question of how long and under what circum- 
stances the United States should continue in the silver business, so 
to speak. There will be an occasion, at that time, I think, for more 
careful and orderly review — ^away from the atmosphere of a coinage 
problem or of a comage crisis — to consider the action most necessary 
in the light of the supply and demand situation as it exists at that 
time: Wnether there are technolo^cal developments in which some 
of the industrial users of silver can find adequate substitute materials, 
whether reclaiming processoj and whatnot that can be developed will 
avert any serious dislocation when and if for the U.S. Government to 
go out of the silver business. There are a whole range of problems, 
which it seemed to us would be untimely now for the Congress to try 
to resolve in connection with this current problem. 

We wanted to focus fm- this legislation on the decisions that you 
and your colleagues would have to make regarding the coinage 
problem, and in a sense to defer until a more normal supply-demand 
situation^ — ^apart from the atmosphere of a coinage problem, when 
you might say the commercial and the industrial future of silver 
could be looked at in a somewhat separate context. 
Mr. Ashley. Thank you, Mr. Secretary. 
The Chaibman. Mr. Widnall? 
Mr. WiDKALL. Thank you, Mr. Chairman. 
Good morning, Mr. Fowler. 

I would like to say this at the outset, Mr. Chairman. I feel in 
■view of the importance of this legislation, that members who received 



Digitized byGoOgle 



24 COmAOB ACT OF 1965 

very short notice for the meeting today and who were unable to attend 
should have an opportunity to question the Secretary of the Treasury. 
I would hope that he would be recalled at a date in the near future so 
that that opportunity could be afforded them. I think this applies to 
both sides of the aisle. 

The Chairman, We will have Mr. Fowler back Monday. We 
discussed it with him, and he and Mr. Wallace can be with us on 
Monday, Mr. Widnall. 

Mr. Widnall. Thank you, Mr, Chairman. 

Mr. Fowler, in view of the fact that there is something in this bill 
for everybody, the users, the producers, tlie vending machine operators, 
and the like, couldn't this properly be characterized as a consensus coin- 
age, which is a term you used in discussing it with the press yesterday? 

Secretary Fowler. I didn't coin that phrase, to use a pun, but it is 
a very acceptable one from my point of view, sir. 

Mr. Widnall. Wben this bill goes into executive session, I am 
going to offer an amendment to flatly prohibit the coinage of silver 
dollars for a period of 5 years from the effective date of the act. 
The reason is to prevent any recurrence of the recent fiasco on the 
silver dollar coinage. 

On May 15 there was a release from the White House with a 
statement by the President. This contained the following sentence: 

Consequently, I have directed the mint to proceed with the making of silver 
doUiirs up to the amount authorized by the Coi^ress during the remainder of 
the current fiscal year ending June 30. 

To many of us it was absolutely incredible, in view of the con- 
tinuing com shortage, and the prospective action to revamp the 
silver coinage system. 

On May 25, 1965, dispatches front wire services informed us the 
silver dollar coinage program was off. The first two paragraphs of 
the UPI dispatch stated: 

The Treasury did an about-face yesterday and announced it wiU not mint 
any new silver dollars at this time. 

The action with White House approval reverses President Johnson's order of 
May 15 for the minting of silver dollars. 

I observe in passing that the executive department countermanding 
a Presidential order is an unusual procedxu-e. 

The next 3 to 5 years will be crucial and critical years in any re- 
vamping of our silver coinage system. My amendment woidd make 
certain in that critical period there would be no possibility of a 
silver dollar coinage fiasco such as we experienced only within the 
past month, 

I would like to call your attention to a hearing before a subcom- 
mittee of the Appropriations Committee on May 24, 1965, where 
testimony was developed that trial runs had actually been made on 
the minting of the silver dollars authorized by the May 15 Presi- 
dential directive. And I quote from page 50 of that hearing: 

Mr. CoNTB. Will you, for the record, find out how many triaJ pieces have been 
minted? 

Miss Adams. Surely. 

The information that was requested follows, and I quote: 

No silver dollars have been produced for delivery to the cashier as finished coins. 
A large number of pieces have been made as trial strikes. But in accordance with 
applicable mint regulations, these will be melted. 



Digitized byGoOgle 



COINAGE ACT OF 1966 



I think that answer is rather evasive and unresponsive. 

Mr. Chairman, I would like to have for the record before the close 
of these hearings the number of silver dollars minted in the trial run. 
I note in April 1965, the mint has a record that 339,685,000, 1-eent 
pieces were produced. It is inconceivable that they cannot come up 
with the number of silver dollars produced in the trial run. 

And I also think it is important to know what date was placed on 
these silver dollars in the trial runs. 

Now, have these trial run silver dollars vet been melted down? 

Secretary Fowler. Mr. Widnall, I woula like to make sever^ 
comments on your statement, and we will supply the information 
for the record and give you an answer to your question when that 
information is available-— it should be readily available. 

(The information referred to follows:) 

A large number of silver dollar trial Btrilies were madn ut the Denver Mint. 
However, under established security control procedures, these trial strikes are 
accounted for on a weight basis, rather than a piece-count basis, and the trial 
strikes did not reach the Unal stage of being counted and bagged. All trial pieces 
have been melted as required by mint regulations. 

From mint control records of the number of troy ounces of materials that were 
processed in the pressroom, it is estimated that approximately 316,076 pieces were 
processed. The dollar trial strikes were dated 1964. 

Secretary Fowlee. I think that without rehashing the entire 
situation in detail, since it is behind us, I would onlv want to say that 
the committee should be also aware of the fact that in the Appro- 
priations Act for the Treasury Department there was allotted $600,000 
tor the purpose of making silver dollars and in the report of the Senate 
Committee it was very clearly indicated that tlds $600,000 was 
earmarked for that particular purpose. 

We had deferred the compliance, you might say, with that con- 
gressional appropriation — or that expression of congressional will 
and intent — -in this particular fiscal year because of the coin shortage 
that you referred to, and because of the Treasury's desire to give a 
priority use of its facilities for the other necessary subsidiary coins. 

However, as the end of the fiscal year approached, we were con- 
fronted by the dilemma — and to some degree, as I have indicated 
in my testimony, the coin shortage problem had been substantially 
reduced— we were confronted by the problem of whether we in effect 
ignored the expression of congressiontd will as reflected in the Appro- 
priations Act, and allowed the appropriation to lapse, or whether 
we should undertake in good faith toward the end of the appropria- 
tion year to at least comply in some small degree with that desire. 

Now, the decisions that were taken were to begin to comply in good 
faith. When the committees that had been concerned with the 
silver dollar on the appropriations side in both Houses indicated to 
us, through the expressions of leaders of those committees, that they 
thought It woidd oe an undesirable course from the standpoint of 
coinage to proceed with this production — which happened to be 
fullv in accord with our own attitudes — we ^"ery readily complied 
with this expression and changed our position. 

In the hght of all this, I would welcome an amendment by this 
committee fixing very definitely, or deferring very definitely, for a 
reasonable period of time any further minting of silver dollars. This 

Digitized byGoOgle 



26- COINAOB ACT OF 1965 

would remove the Treasury from the type of dilemma w© were con- 
fronted with before where there were ooviously contending forces in 
the Congress, with contending points of view. And we had to look 
primarily at the Appropriations Act in question for our guidance. 

So, without going to the question as to what is an appropriate 
period for the deferment — I have not given consideration to that, I 
think perhaps a period of time in which the Joint Commission — ^if it 
shoula be the will of Congress to create such a Conmiission — -is being 
created and has time to consider the problem would be appropriate 
and desirable to put at rest this particular issue. Whether it snould 
be 2 years, 3 years, or 5 years is a question which would require some 
further thought, 

Mr, WiDNALL, Thank you, Mr. Fowler. 

Just one short question. During the last war, nickel became in 
such tight supply for a period of 2 or 3 years our nickels were made 
out of silver. Copper was in such short supply the copper content of 
the penny was reduced. The Treasury lent silver to mdustrial users 
to make electric bus bars rather than being made out of copper. 
Should we run into another such war eraei^ency might we find we are 
making our new coins out of materials that would be in extremely 
short supply? 

Secretary Fowler. I don't think that is likely, although one can 
never be positive and dogmatic about predicting or forecasting a 
supply- ana-demand situation in times of a war emei^ency. 

However, my recollection, based on experience in both mobiliza- 
tions, is that the position of the United States from the standpoint 
of strategic and cntical stockpiles had not readied the very adequate 
position that it is in today, with reference to both copper and nickel. 
The very unusual demands that were a conseq^uence of the mobiliza- 
tion effort in World War II, before the stockpile program had had a 
chance to accumulate the necessiirv supplies, did put tremendous 
pressure on those two materials. This was also still somewhat of a 
problem, I think, in terms of nickel during the Korean war, because 
of the extraordinary demands for nickel for, at that time, the new 
type of aircraft. 

1 believe today, although the Office of Emergency Planning would 
be the more appropriate and authoritative source on this subject, 
that given the stockpiles that have been created, given the discoveries 
and development of nickel on the North American Continent which 
have intervened since the period you refer to, that so far as we can 
see, so far as the Department of the Interior and the Battelle Memorial 
Institute— those who have studied the problem — can see, the supphea 
of copper and nickel are reliable for the long term future to make it a 
desirable base for coinage. And I would not anticipate the type of 
shortage problems in those two metals in the wars of tlie future which 
are obviously going to be of quite a different character than the one 
in World War II, particularly the World War II experience. 

Mr. WiDNALL. Thank you, Mr. Fowler, 

The Chairman. Mr. Moorhead? 

Mr, Moorhead. No questions at this time, Mr. Chairman. 

The Chairman. Mr. Stephens? 

Mr. Stephens. Thank you, Mr. Chairman. 

Mr. Secretary, we appreciate the opportunity of having you here 
before our committee, especially on the occasion of such an important 



Digitized byGoOgle 



COraAGE ACT OP 1965 27 

item as we know is being proposed by this legislation, a change in our 
coin^e. 

You have given and other people have given testimony as to the 
duration of the transition period — estimatea from 2 to 4 years. 

How long do you think it will be before there will be a more or less 
general retirement of these coins that have silver in them? 

Secretary Fowler. A general retirement? 

Mr. Stephens. Yes. 

Secretary Fowler. From the coinage? 

Mr. Stephens. When predominately the new coins will be in 
circulation. 

Secretary Fowlbr. We expect them to continue to circulate along 
with the new coinage. I think I used the term "indefinitely." 

Now, since during the transition period we will arrive at a point at 
which we will no longer mint the silver coins — the silver dime, the 
silver 25-cent pieces, or the present type of 50-cent pieces — and since 
coins, however durable they may be, don't last forever, I should 
qualify that term "indefinitely." The life of a given coin is roughly 
estimated to be 25 years. So I would think that some time beyond 
the next, well, 15 to 20 years, the coins would begin to wear out, 
would come back in, and be melted down and added to Treasury 
stocks if they existed at that time. 

Now, if, of course, there should be, during that period, a develop- 
ment of any sizable hoarding, then tiie withdrawal of coins from use 
through that particular channel might present a particular situation. 
That will, of course, depend somewhat upon another decision — the 
withdrawal of the United States from tiie silver market, so to speak, 
which we are not suggesting the Congress make at this time, but that 
it postpone its decision — until it can have the benefit of the inewa of 
this Joint Commission taken in the light of the new emergent situation 
which will follow this transition period. 

Mr. Stephens. How long did you estimate it will be before you 
will stop minting any coins with silver in them? I am talking about 
the ones that are being eliminated. 

Secretary Fowler. Let's take the dime and the quarter — and we 
don't have a precise production schedule at the moment. But I 
would roughly estimate that early next year, we would have enough 
new quarters to release them and stop making the old ones. Then 
some time about the middle of 1966 we would stop making silver 
dimes. The time would be when we had built up such an adequate 
inventory of the new quarter or dimes that it would be feasible to 
b^n to distribute the new coins in the channels of trade. When that 
quantity was built up adequately and the distribution begun, we 
would stop the production of the old silver coins. 

A similar process would follow in sequence with the 50-cent piece, 

Mr. Stephens. In your opinion, then, it would be approximately 
a year after this is in effect before there will be a possibility of stopping 
the coining of coins with silver? 

Secretary Fowleb. Yes; roughly. I would say for the 25-cent 
piece, which is the one we would hit first, early 1966. 

For the dime mid-1966, and the 50-cent piece perhaps the end of 
1966. 

Mr. Stephens. One other question I would like to ask you. 



■dbyGOOgIC 



2S comAOE ACT OF iges 

It has been proposed, I think, in the Senate that an amendment be 
made to this bul to make it a crime for bank officials or bank employees 
to blackmarket new coins to coin dealers. Would you think we ought 
to add such an amendment to this? 

Secretary Fowleh. Well, I don't have a view on that proposal, 
currently. I frankly think that as far as the new coin is concerned, 
this is not going to be a problem. They are going to be produced in 
such quantity, and we would expect at the time of distribution there 
would be such a mass distribution, that there would be very little 
incentive or occasion for a bank official to take advantage of his 
particular position in that regard. So I really don't believe this is 
going to be a serious problem, given the program that is outlined here. 

If wo had a different program, in which there would be a high 
premium for a subetantial period of time on the possession of one of 
the new coins, I think we might have to take a more serious view of it. 

Mr. Stephens. Thank you. I believe my time has expired, Mr. 
Secretary. 

The Chairman. Mrs. Dwyer? 

Mrs. Dwyer. Thank you, Mr. Chairman. 

Mr. Secretary, on p^e V of the very excellent Treasury staff 
study, among the important criteria thought to be mandatory in 
association with this proposed change in coinage is, and I quote — ■ 



With this I most assuredly agree. 

But without complete understanding, there could be misunder- 
standing and family noarding during the transition to the new coins. 
Yet in the face of these obvious reahties for public understanding, the 
President's statement and Treasury study were made pubhc on the 
day of the Gemini space shot. On last night's network TV programs, 
the coinage announcement was of secondary interest, and the reasons 
for the change were hardly mentioned. The same occurred in most 
of this morning's newspapers. 

Why, Mr. Secretary, then, did you delay your announcement to 
coincide with the Gemini space shot? Was tms just a coincidence? 

Secretary Fowleh. This was a coincidence. When we learned 
of the conflict in schedule, we felt that in the interests of time we 
should move ahead anyway. The chairman stated that he would 
provide this hearing today so that the Congress could move ahead 
quickly on this legislation. Therefore, we decided against post- 
ponement even though, as you quite properly indicated, we knew 
we would have to take, very definitely, second bilhng in terms of the 
news today. 

However, I do believe that this matter affects every individual 
American so closely and intimately that we will not be lacking in the 
weeks ahead for pubhc writing and description and comment and 
displays regarding it. I think uiat the problem of pubhc information 
is a very real one. We have been quite conscious of it and have had 
the TVeasury staff study, which you referred to, made available so 
that everyone could have the facts and the observations and the 
criteria in detail. 

Our public affairs office is going to do its dead level best to make 
available to all interested parties all the information that we have on 
the various aspects of the problem. 



Digitized byGoOgle 



COINAGE ACT OF 196 S 29 

This launching of spacecraft is getting to be such a regular thing in 
American life, it is pretty hard to avoid a conflict with it in any given 
week, 

Mrs, DwYBH. But it was announced 10 days or a week e^o when it 
was going to be. It just seems to me the timing of this report was very 
unfortunate. Because I anticipate a flood of letters inquiring about 
a change of the coinage. It seems to me if it had proper publicity, 
people would understand without writing the hundreds of letters I 
am sm-e we are going to get about it. 

Secretary Fowler. Well, I have no further observations to make 
on it. I would hope that the matter would be adequately covered as 
a result of these hearings and the other hearings. It is very, very 
difficult to time all that you do with reference to ail other things that 
are happening. A revolution may break out, or some other difficulty. 

We are qmte content to have second billing to any g^ven day for 
this particular problem. 

Mrs. DwYER. Thank you. 

The Chairman. Mr. Weltner? 

Mr. Weltner. Mr. Chairman — ^Mr. Secretary, I, for one, would 
like to commend you for proceeding to discharge the responsibilities 
of your office as those responsibilities might require, rather tlian as 
the prospective newspaper headlines might indicate. I think it is 
fine that we have a high ranking official who is proceeding on that 
basis, rather than on the publicity value of whatever proposals might 
be made. 

I wonder why— if these coins are to circulate side by side — why we 
need a transition period at all? Why is it not appropriate to start 
turning these things out? 

Secretary Fowler. I think that too much can be read into our 
use of the term "transition period." We mean it to describe that 

fieriod of time in which the tooling-up process, the acquisition of 
acilities, the acquisition of the adequate quantities of the new mate- 
rials for the new coins, the building up of an adequate inventory for 
initial distribution in series, so to speak — that is what we have in 
mind when we say "transition period." 

If your question goes to the proposition as to the timing of the 
release of the new com, whether that can be done more or less off the 

Eroduction line rather than building up a very sizable inventory, it 
as been our judgment that tlie building up of a sizable inventory 
and the release in more or less mass proportions would avoid any 
initial problems of hoarding or the kind of problem that Congressman 
Stephens referred to-— some discrimination in the distribution— and 
that handling it in the way in which I have indicated would take the 
edge of noTWty off very quickly and bring the situation back to a 
more or less normal attitude as far as the new coins are concerned. 

Mr. Weltner. One other item that interests tne 

Secretary Fowler. I might say, also, that we learned a lesson in 
the handling of the Kennedy half dollar. It went out in smaller 
quantities and did give rise to hoarding. Perhaps there would have 
been the same degree of personal acquisition of the coin for memento 
or family use. But we do feel that in the light of that experience, 
when a new coin comes out, that if it can be distributed initially in 
mass quantities, this is the preferable course. 

Mr. Weltner. There is one other request I would like to make, 
and that is to be furnished a table showing the intrinsic value of the 



Digitized byGoOgle 



30 COIXAQB ACT OF 1965 

metals in the existing silver coinage, as compared to the metal in the 
proposed new coinage. 

Secretary Fowler. Such a table wiU be readily available. 

Mr. Wbltnbr. Thank you, Mr. Chainnan. 

(The information referred to follows ;) 

Jntrifuic value of pretent and proposed eotTU 

(Per piece] 





»• 


'Sff' 




tO.OM 

















' Includes sllv«r and copper. 
> Includes copper and nickel. 

The Chairman, Mr. Hanna? 
Mr. Hanna. Thank you, Mr, Chairman. 

There are four points I would like to make. The first one has to do 
with the balance-of-paym'ents problem. As I looked at your chart, 
it occurred to me that with 550 milli on troy ounces being used in the 
United States this year, with the production being somewhere be- 
tween 36 and 37 million troy ounces, that we were buying — assuming 
we had run out of our supply here in the United States, and we were 
buying this, we would be buying foreign silver to make up the differ- 
ence between what we produce and what we use, which would appear 
to me to be somewhere between $650 to $700 million worth of suver 
we would have had to be bujdng on the foreign market. And I ask 
you : Is there not a future balance-of-payments problem if we continue 
to use silver in these large quantities? 

Secretary Fowler. Without following the arithmetic, the total 
consumption figure you mentioned, 650 milhon, was the total es- 
timated consumption for the free world. The total estimated con- 
sumption in the United States for 1964 was substantially less than 
that. Our industrial consumption in 1964 was 123 million ounces 
and coinage use, 203. So our total use in the United States was 326 
mUlion ounces for that year. However, that is somewhat a matter 
of detail. 

Your point that our use of silver does entail a substantial importation 
from abroad is a very real one, but in that 326, just again to quantify 
it, a large portion of that use in the United States in 1964 was from 
our own stocks and, thereby, diminished any potential drain. 

Mr. Hanna. I understand. May I go to point 2? 

Secretary Fowler. We imported in the United States in 1964, just 
to quantify this, about 52 million ounces, which is a substantial 
amount. 

Mr. Hanna. You might put in the record what you think you might 
import for next year. 

(The information requested follows:) 

U.S. imports of silver, excludinff relatively amall amounts of coin, averajfed 
juat under 60 million ounces annually in the 5-year period 1960-64. During the 
first quarter of this year, the Bureau of the Census reports im^rts of 11.2 million 
ounces, possibly somewhat reduced in amount by a dock strike which ended in 
mid-February. Any estimate of the volume of diver imports for the full year 



Digitized byGoOgle 



COmAQE ACT OF I96i 31 

1965 is neeeBurily tentative mid veiy approximate. However, a reasonable 
e^ectation might be for imports eomewl^re in the neighborhood of 55 to 6P 
million ounces. 

Mr. Hanna. Another thing for the record, on point 2. I am in- 
interested ID the seignior^e position. Would you kindly put down for 
the committee what your present position is on seigniorage on the 
nickel, dime, quarter, and half, and what that position will be when 
yoij change to the new metals? 

Secretary Fowlbr. We will supply that for the record, sir, 

(The inmrmation referred to followB:) 

Seigniorage, eaiimates current coins and neiB alloy eoitta 
ISelgnlnage equals dlSecenos between bcs value of coins and the coat o[ metal In tbe coIhe] 





ssa 


Hon rates 




attl.OOOtece 


"if 


Minions 01 
pleoea 


PresenI coins MO sUver 100 copper: 


11,000.00 

93E.2T 


102.0 


1,020.0 






B.6 

mo 






M.73 








ItoenU: 


1,000.00 

»36.2r 










o&o 






M.TS 








«) cents: 


i,ooaoa 

MS.37 


m.tr- 






0.3 
102.0 






M.7S 












1,»10- 




1.000.00 


-••■«£:. 


l,02Q.ff 






00.0 






MI.BB 








3S cents: 


1.000.00 
















~'^™iue_ 


■■ffl!! 


90.0 










M7.6S 


M.S 
ill.* 

78.7 
















1,000.00 




Ptesent minor otrins (no Chang*) : 

'"5rjr?^';.Z^ 












M.7 




BtUtOatt^ ,. -— - 


B4T.M 






1-cent bronie; 


1,000.00 

829,80 










21.4 
BZ.1 






en.ao 





















IS Mint, June 7, IBU. 



Digitized byGoOgle 



82 COINAGE ACT OP 1965 

Mr. Hanna. On point 3, I should like to point out that I have a 
very strong feeling about the half dollar. First of all, I think that all 
of us who look objectively at it might agree it was the b^gest mistake 
'we ever made to make the Kenneify haU dollars, in terms of our silver 
shortage. I also think the half dollar is a psychological point at which 
people stop looking so heavihr at utility of coin and start thinking 
about the depoaitive value, of^it being a matter of themselves saving 
the value of the coin. So I don't think we should emphasize the hau 
dollar. That is my own personal belief. We think we ought to 
put out more dimes, mckels, and quarters, and go easy on the half 
dollar. I don't know whether you agree with that. 

Secretary Fowlek. We do agree with you on that. And I think 
we have in mind the other fact which is related; that, as a practical 
matter, you can be more flexible in your production run on the half 
dollar because, if we run into any problem as a utility matter, two 
quarters will serve equallv well. And we agree with you that the 
emphasis in this program has to be on the dime and quarter. 

Mr. Hanna. As tiie last point- — we know what the acceptability is 
for the coins made with the 400-fine silver. You apparently beheve 
that the pubHc will accept the cupronickel coins. 

My question is: Has the Treasury or the Mint imdertaken any 
studies or any trial programs to see what the acceptability would be? 

Secretary Fowler. No, we have not taken any polls or surveys or 
studies in depth of the personal reactions of the public because we 
would have given rise, I think, to a lot of conjecture. 

Mr. Hanna. Do you think that the pubhc will accept these new 
coins? 

Secretary Fowler. I certainly do. 

Mr. Hanna. On what do you base tliat belief? 

Secretary Fowler. Well, in addition to reactions of all of us 
around — maybe I am not a very good yardstick for this, but they 
seem to be very acceptable, and nandle well, and their appearance is 
attractive — I am incbned to agree with the chairman. It is what the 
coin will buy; as long as a quarter will buy me a quarter's worth of 
goods, I am not concerned, at least I reahze there are a number of 
other people who have entirely different tastes. But the predominant 
element of acceptability here seemed to us to be as a function of use 
rather than in terms of appearance. 

Mr. Hanna. Thank you. 

Secretary Fowlek. And those that are of course concerned about 
the appearance of the coin, we think that the new coins will be reason- 
ably attractive and acceptable, and we think that the silver 50-cent 
fiiece will be, continue to oe, a prestige coin which will appeal to those 
or which coinage has that particular ring. 

Mr. Hanna. Thank you, sir. 

The Chairman. I would like to clarify two points for the record. 

No. 1 — aU coins, all paper money, are all of equal value as legal 
tender. You can pay a million dollar debt with copper cents if you 
want to. That has not always been true. You can pav any debt 
with 5-cent pieces or 25-cent pieces, and it makes no aifference. It 
ifi all acceptable legal tender. 

With respect to 50-cent pieces, isn't it true that vending machines 
generally don't use 50-cent pieces? 

Secretary Fowlee. Up to now that is the case, although I think 
there are some isolated uses. 



Digitized byGoOgle 



<X>INAO£ ACT or 1965 OS- 

The Chaihman. The only place I know of is Las V^as, for instance, 
in the gambling devices. 

Secretary Fowler, There are also isolated uses in coin-operated 
drycleaning eetablishments and change makers. 

The Chaihhan. Mr. Brock? 

Mr. Brock. Mr. Secretary, we appreciate your being here today. 

I am somewhat concerned over the point of the 50-cent piece con- 
taining some degree of silver. You say that we need a prestige coin. 
I would point out that I think we have a prestige coin in the silver 
dollar, which you are not affecting, is that not true? 

Secretary Fowler. That is right. They are not very much 
around these days, however. 

Mr. Bhock. Isn't it true there are not very many around because 
it is a prestige coin and it does have silver content? 

Secretary FowLEK. I think it is mainly because th^ haven't been 
produced and distributed sufficiently in mass supply. 

Mr. Brock. But we have some evidence of hoarding of silver dollars, 
because the silver content in the silver dollar is currently worth a 
dollar. If the price goes up any more, it will be worth melting them 
down. 

Secretary Fowler. Correct, 

Mr. Brock. Now, you point out that we are going to maintun 
the 50-cent piece as our prestige coin. Are you not encouraging the 
hoarding of this particular item, even though the silver content is 
reversed down to 40 percent? — by referring to it as a prestige coin, 
you do give people a psychological incentive to stash them away. 

Secretary Fowler. I say if they want to stash away anything, 
that is what it tends to rivet on. You are quite right in that. How- 
ever, I am not sufficiently conversant with the mental attitudes of 
hoaniers. I frankly don't understand a lot of it, and why they do it. 
And I believe that thb program here, in many ways, b designed to 
discoiu-age and to flatten out whatever these tendencies are to hoard 
coins for the sake of realizing on them in a melted-down form. 

Now, as to the collection of coins for family purposes, for gifts for 
children, for those people that are collectors and many, many other 
things, I think this is a rather neutral program in that regard. I 
think it doesn't affect it one way or another, except we are taking 
measures in the transition period by dating, and devices of that sort, 
to minimize any withdrawal from the existing coinage supplies, to 
minimize any drain, I might say, during this transition period. 

Mr. Brock. I am quite honestly concerned. I thmk we are a 
couple of years late in aoing what we are doing. But I think there is a 
possibility that by naming it a prestige coin, just that one fact, is 
asking for trouble. 

Let me talk about the general situation with regard to silver. Are 
you currently selling silver outside of the area of redemption of silver 
certificates? 

Secretary Fowler. No. 

Mr. Brock. You have approximately a billion ounces of silver; is 
that correct? 

Secretary Fowler, That is correct, 

Mr. Brock. That would be about enough, then, to cover the 
outstanding silver certificates we have? That is fairly close, isn't it? 

Secretary Fowler. We can more than cover it. 



Digitized byGoOgle 



34 COINAGE ACT OF 1966 

I think our mai^in, our additional ma]^;iD OT«r and above, would 
be about 275 million ounces. 

Mr. Brock. You are, are you not, in cooperation with the Federal 
Reserve S^tem, pulling out silver certificates from circulation as 
possible, without redeemmg them — replacing them by Federal Reserve 
notes? 

Secretary Fowlee. That is correct. 

Mr, Bhocs. Why, Mr. Secretary, in the hght of the enormous 
increase in demand, not only for industrial but for defense purposes 
in the use of silver, why do we not provide for a strategic silver reserve 
in this bill, then, or propose new legislation to amend 

Secretary Fowler. My understanding is that that legislation or 
that type of proposal is being considered separately as a result of the 
work and at the behest of the Office of Emei^ency Planning, I 
think the two proposals are running concurrently, or will run conciir- 
rentlv, in the Congress. But we would have had some jurisdictional 
problems. 

Mr. Brock, I hope they do, because I think it is important tiat 
we coDsid^ this. 

Secretary Fowler. I think there was an annoimcement yesterday 
from the Office of Emergency Planning on this matter, indicating that 
they have a target of approximately 165 million ounces of silver that 
they thought would be necessary and desirable for the stockpile. 

Mr. Brock. The thing that has concerned me is that if people 
began to realize just how critical this situation was, and if they oe^an 
to noard silver certificates, then you would have a situation in which 
you had very littie latitude, very little leeway, for the stockpile. 

Secretary Fowler. We would have substantially enough more to 
take care of this problem. 

Mr, Brock. For the current year. But the fact is that our con- 
sumption is considerably in excess of world production — and this 
surplus isn't going to last for long. 

Secretary Fowler. I was speaking in terms of redeeming silver 
certificates. We still would have enough. 

Mr. Brock. It is true you would have $200-plu3 milBon worth of 

Secretary Fowlbb, Ounces of silver, 

Mr. Brock. Which is in excess of the request for the defense stock- 
pile. 

But the point is that we are using — I have foi^ttrai whether it is 
100 or 200 milhon ounces, in excess of world production today; are 
we not? 

Secretary Fowler. I can't follow your figures. But we are usiug 
substantial amounts in excess of production. 

Mr. Brock. We are consuming substantially more than we are 
producing. 

Secretary Fowler. There is no question about that. 

Mr. Brock. And we still will be consuming more than we produce 
even if we stop all silver coinage. 

Secretary Fowler. No question about that, 

Mr, Brock, So silver is a critical material. 

Secretary Fowler, No question about that. It is a critical mate- 
rial from an industrial standpoint, and I think that even given a 
solution in the treatment of tne coinage problem — whatever you do 



Digitized byGoOgle 



COmAGB ACT OP lft«5 35 

about coinage and whether or not you stop the use of silver completeljy 
in coin^e— it will still be a critical problem. The solution of it is 
not at the moment within the reach of our handling of the coinage 
situation. 

The question that is before the committee in r^ard to the continued 
use of silver, I think, is a very limited one. It is whether or not, 
after the transition to the new coinage, it is worth 15 million ounces 
a year, which ia roughly 5 percent of the current use of silver for 
comage, to maintain a link with silver in the form of this reduced 40- 
percent silver 50-cent piece. That ia a very real issue. I think it is 
one that I hope you will resolve in this legislation, along the lines that 
the President has recommended, by providing for this type of coin. 
It may be that years from now— 4, 5, 7 years from now— this will be a 
burning issue before the proposed Joint Commission. 

Mr. Brocs. Well, I consider that to be one of the things we should 
consider. But I think our responsibility is considerably broader than 
that. If it were me, I would like to see the Treasury consider, as 
these new coins come out in full production, actually pulling silver 
coins off of the market as they are doing with silver certificates, 
because I think there is quite a distinct possibility that we will be 
in a critical need situation in the coming 4 to 5 years. 

Secretary Fowler. Well, on the question of the rate of withdrawal, 
what we qo now is to take a coin back when it is worn out. We 
retire it when it comes in; we put the silver in stock. 

Now, the question you raise is whether we continue that process or 
whether we should accelerate the withdrawal after your new coinage 
is in use in adequate supply. This is a question which I think is 
quite appropriate to ask. It is one of the things that was behind the 
proposal for this Joint Commission on Coinage. I think if there is 
any difference between us it is a question of the timing of that decision. 
We felt that the timing of the decision on the rate or method of 
withdrawal of the existing coinage is one that could be better taken 
after the new system was m operation, and any possibility of a coinage 
crisis, you might say, had been averted. Meanwhile, we need alver 
coins for circulation. 

Mr. Bhock. I hope we don't delay so long that we face a serious 
crisis in defense needs ia the silver that we have. 

Thank you. 

The Chairman. Thank you, Mr. Brock, 

Mr, White? 

Mr. White. Thank you, Mr. Chairman. 

Mr. Secretary, it is very good to have you here. 

I think that we should, put in proper focus the transition pericd, 
I believe you would be incorrect if you would leave the idea that we 
are talking about a 15-year period. 

It is my understanding — and I assume there is some f^eement in 
your office — that the transition period is the length of time that we 
can defend the price of silver at $1.29, which is necessary during any 
transition from one coinage to another, no matter wnat the new 
coinage would be. We must protect the existing coinage — $1,38 per 
ounce is the value of the silver contained in the dime, quarter, and 
one-half dollar piece. 

Now, isn't the transition period really predicted on the length of 
time that you can defend the price at $1.29? 



Digitized byGoOgle 



36 COINAGE ACT OF 1965 

Secretary Fowler. I think everyone can have his own "transition 
period," so to speak. But the one I have in mind, when I use the 
term, is the period of time it takes to produce and distribute and to 
have an adequate supply of the new coins in use, so that trade and 
commerce that is related to and dependent upon coinage is not sub- 
jected to the threat of anv shortage. 

Mr. White. Let me ask you this question then; 

If we did not have our stock of silver, which we started out with 
in 1963, do you believe that the price of silver due to the shortage 
that you talked about here, and the lack of supply, would be at the 
$1.29 price today, or is not the $1.29 price a direct result of the re- 
demption of silver certificates at that price? 

Secretary Fowlbh. I think so. 

Mr. White. Well, therefore, to continue to defend that price, we 
have to take a look at .how long the existing stocks of silver will last; 
is that correct? 

Secretary Fowler. That is certainly true, 

Mr. White. How long do you believe the existing stocks of silver 
will last at the present rate of redemption? 

Secretary Fowler. I would not like to make an estimate on that. 
I think it will be a sufficient period of time to affect in an orderly 
and nondisruptive way the program that we are presenting to the 
Congress here. 

Mr. White. What was your rate of redemption last year, Mr. 
Secretary. 

Secretary Fowleh. 141 million ounces. 

Mr, White. How much silver was freed during this same period? 

Secretary Fowler. About twice that. 

Mr. White. It is my impression it is near 300 million ounces. 
And that means with a billion ounces, you have 3 years' supply. 
Therefore, the transition of one coinage to another definitely must 
take place within the 3-year period. 

Secretary Fowler. That is correct. 

Mr. White. And, therefore, you can further say that the 7-cent 
nickel made during World War II, when we substituted silver for 
nickel, is presently being melted down. I have a block of the silvOT 
in my desk refined from silver nickels. So, therefore, we have to 
face the possibility of our subsidiary coinage being melted down it 
the price of silver would exceed $1,385; is that correct? 

Secretary Fowler. We include a provision in the law that we rec- 
ommend for the creation of standby control over the melting and 
export of coins, 

Mr. White. Well you didn't necessarily make a provision in this 
law. You indicated a possibility of such a provision. You did not 
make a definite recommendation. 

Secretary Fowler. We put it on a standby basis, a^inst the pos- 
sibility or the probability that we don't really foresee. But we 
would have recourse to it if necessary. 

Now, I think there is set forth clearly in the President's messM;e 
the rationale of what we are trying to do. We think that our stocks 
are adequate to protect the silver coinage during the period in which 
the new coinage comes into effective use. We do not wish just to look 
to one side blindly and ignore the possibility that our judgment mi^ht 
be wrong. We feel that an additional protection - for the existing 



Digitized byGoOgle 



COINAGE ACT OF 1965 37 

coin^ie should be requested and it is requested. It takes tlie form of 
this standby authority to institute controls over the meltmg, treating, 
or export of U.S. coins — something that today would be legal could 
become illegal, could become a crime if it becomes necessary. 

Mr. White. It would take some act of Congress, however, to do it. 

Secretary Fowler. That is what I am saying — with the aetion 
reconunended here. We hope it won't become necessary to issue such 
regidations. We don't think it will. But the tool in the closet would 
be a useful and desirable piece of legislation. 

Mr. White. Wby didn't you also suggest in your legislation the 
possibility of end-use certificates to see that this silver that is purchased 
or redeemed from the Treasury went into the channels of industry? 
It would seem to me a logical use of such a procedure to provide that 
the industry was supplied with silver. 

Secretary Fowler. Well, I think you will find in the studies a good 
deal of commentary on the pros and cons of this particular question 
ot end-use certificates. We simply made a judgment that at this 
particular time, as we see it, this would be a counterproductive and 
unnecessary nuisance for trade and commerce. 

Mr, White. Why suggest it for the coinage, then? 

Secretary Fowler. Well, coins are one thmg, and silver is another. 

Mr. White. I don't really see the difference today when we are 
talking about the redemption of silver certificates. 

Secretary Fowler. We think there will be quite a difference in the 
period ahead. 

Mr. White. The buUion that you hold at West Point? There is 
a great difference? 

Secretary Fowler. A great difference between what? 

Mr. White, Between the coinage and the silver you hold at West 
Point-^is there a difference? 

Secretary Fowler. Well, for one purpose there is no difference. 
For other purpose there are. The question of placing, in this par- 
ticular situation, a complete governmental control over the industrial 
and artistic use of silver down to the various job shops is a different 
question, I suggest, from the one — related, but quite different and 
much more senous — than providing standby authority we have asked 
the Congress to enact wnich would prohibit the melting of U.S. 
coinage. End-use controls involve a much sharper and more rigid 
deCTee of control with lots of additional consequences. 

The licensing of silver, would, we beheve, tend to result in a two 
price system, here and abroad. You would have the legitimate 
mdustnal, professional, artistic uses, at the $1.29 figure; you would 
eventually have perhaps a higher black market price paid by specu- 
lators and hoarders. And if this price in the second market, so to 
speak, went substantially beyond $1.38, it would tend to make our 
existing coins disappear, either into hoards or through melting. 

So there would be a grave risk, I think, attendant upon the institu- 
tion of end use controls of the sort you seem to suggest. 

Mr. White. Well, Mr, Secretary, isn't the whole transition period- 
speaking of transition again — predicated on the cocirculatioii of the 
two coins side by side, and also the continued defense of the price of 
silver at $1.29? 

Secretary Fowler. That is correct. 



Digitized byGoOgle 



38 COINAGE ACT Or 1965 

Mr. White. And if your assumption is correct, we will end up with 
a change in our coinage. 

I would like to ask you one further thing. I have a list of questions 
I would like to submit to you for answers for inclusion in the record. 

Secretary Fowler, I would be dehghted to hare those questions. 
We will work on them over the weekend and try to get the answers 
to you just as soon as possible. 

Mr. White. Thank you. 

(The following questions and answers were submitted for the 
record.) 

Anbwbbs to Queshons Submitted by Mr. White to Secretart Fowleb 

Question 1. Ib the aolution offered as temporary relief only? If so, why not 
seek a long-range solution now? 

Answer. Our proposal is not offered as a temporary solution. As the President 
said in his June 3 message: "This legislation * * ' will insure a stable and digni- 
fied coinage, fully adequat« in quantity and in its specially designed technical 
eharaeteriatics to the needs of our 26th-oentury life. It can be maintained 
Indefinitely, however much the demand for coin may grow." 

However, certain issues such as the timing and circumstances under which the 
Government should continue to maintain the price of silver indefinitely, and the 
future of the silver dollar, are better decided in the future on the basis of experi- 
ence. For this reason, and because it is possible that unforeseen problems might 
arise, or technological developments affecting our coinage, might occur, we have 
proposed the establishment of a Joint Commission on the Coinage to study and 
report on developments. 

With respect to the basic program we have recommended, however, we have 
every reason to expect, as the President said in his message, that "the recom- 
mendations being made for a new coinage are sound and durable." 

Question 2. Why is the silver content of the dollar to remain the same? If 
sal^ of silver at any price are authorized, as contained in section 6 of the bill, 
what is the need for keeping the monetary value of the dollar the same? 

Answer. The discretion in the bill with respect to sales of silver is to permit 
operations within a narrow range of the $1.29 plus per ounce price, representing 
Wie monetary value. To help in maintaining the present market price for silver, 
and prevent speculative hoarding of the existing silver coinage, we think it is 
important psychologically not to make any change in the monetary value of 
silver which coincides with the SI. 29 plus price. Since 1792, the monetary value 
■o( silver has been set by the silver content of the silver dollar. Thus even tbou^ 
we would continue to redeem silver certificates at $1.29 a troy ounce, a change 
in the content of the silver dollar could not help but put an upward pressure on 
the price of silver. 

Question 3. In section V of the Treasury staff study, two condltiona for a 
transition to a reduced silver content coin are set foith, namely: 
(a) There be no coin shortage at the time. 
(6) The existing coin should be recoverable. 

Why are these conditions unique to a change to a reduced silver content coin? 
Do they not equally apply to a change to any other metal? 

Answer. A reduced silver content of coins, in this instance, refers to reducing 
the silver content of all subsidiary coins, rather than only one, as recommended 
by the President. The conditions referred to here are crucifd for a change to 
a system of reduced content of all silver subisidiaiy coinage because to nave 
enough silver to carry out such a program would require the recovery of the 
silver in most of the existing hi^-content silver comage. In turn, the existence 
of a coin shortage makes any substantial scale of recovery of the existing coinage 
virtually impossible. 

The conditions do not apply with similar force to the transition to a system 
In which nonsilver alloys are used in the 10- and 25-cent pieces. Subsidiary coin 
shortages are unwelcome in any case. But, there is an important difference in 
that with silver removed from the 10- and 25-cent pieces. In this case the problem 
of overcoming existing subsidiary coin shortages becomes one of production and 
distribution, uncomplicated by the rapid depletion of the new coinage material 
itself. The Mint has given a graphic example in the case of pennies and nickels 
of the way in which severe shortages can be quickly overcome by a massive 
production effort. 



Digitized byGoOgle 



COINAGE ACT OF 1966 39 

The further Etnd very eignificant difFerence with uonsilver alloja is that the 
existing silver cranage does not have to be recovered bo thiit two coins can be 
made from one. Instead, the existing coinf^e is left in circulation, side-by'Side 
with the new coins. If it should develop that any substantial portion of the 
existing coinage were being withdrawn from active circulation by the public — 
and no such development is anticipated — higher levels of production of the new 
coins should be able quickly to offset any conceivable scale of withdrawals. 

There would, in fact, seem to be more reason to expect sizable public with- 
drawals of the existing silver coinage if the Government were withdrawing 
high-content silver coins in order to replace them with low-content silver coins. 
Such withdrawals would add to any developing coin shortage. Under the 
proposed legislation the public will be able to retain and use the existing high- 
content silver coinage. 

Question 4. Do you have any estimates of how much silver coin and bullion fs 
held for speculative purposes? Why are your figures for silver consumption not 
broken down along these lines? Would you supply the committee with such 
figures? 

Answer. The Treasury has not prepared any estimates of silver coin and bullion 
which is held (or speculative purposes. Although there are some indications 
that silver bullion is being held for speculative purposes (last year redemptions 
of silver certificates for silver was greater than total U.S. use of silver for industry 
and the arts), precise information on this subject is very limited. We do have 
names of individuals and companies who have redeemed certificates, but it would 
be difficult to determine positively that such redemption transactions were for 
speculative purposes. It is also difficult to estimate very precisely the degree 
of coin hoarding. In view of the above, the estimates for silver consumption 
are not broken down along these tines. 

Question 5. How do you explain an average consumption of silver tor coins of 
40 million ounces from 1949 to 1960, and the doubled, tripled, quadrupled and 
more in later years? 

Answer. It would be difficult to explain adequately the reasons (or the recent 
substantial increase in the use of silver for coinage, but a number of items can 
be cited as contributing factors. Some years ago, the number of coin collectors 
or numismatists was quite limited, and most numismatists were content to collect 
one or two coins of each denomination. In recent years, with increased prosperity 
prevailing throughout the country, the coin collector ranlts have increased sub- 
stantially and l£eir number is now estimated at approximately 10 million or 
more. Collecting habits have changed, and instead of saving one or two coins, 
many persons, especially those who speculate in coins, have adopted the habit 
of saving rolls and bags of new coins, the latter referred to as "min^sealed bags" 
and putting these coins away in hopes of a substantial appreciation in numismatic 
value, several years in the future. 

Coin dealers have become very active in this field, and have encouraged the 
activities of new collectors by numerous advertisements with captions such as 
"How To Retire m 10 Years With an Income of $10,000 Per Year" and by various 
other schemes for selling coins at premium prices. In addition to collectors and 
dealers, speculators have also entered the market and have withheld large quanti- 
ties of coin, both new and used, from the market for sale at premium prices. 

There are many factors, in addition to those cited above, which require addi- 
tional quantities of coins. These include the recent very substantial growth in 
the coin vending and servicing machine industry; the expanding population; 
coins needed for children's school lunches; and increasing requirements for high- 
way toll booths, parking meters, automatic laundries, and many related business 
activities. 

Question 6. On page 15 of the study, it said that in a change to a reduced silver 
content coin, "It is not self-evident tliat Treasury stocks would last." 

(a) Should you not also count on silver from returned coins, industrial recovery, 
and dehoarding? 

(6) Why must it be self-evident? 

Answer, (a) A full examination of the feasibility of reduced content silver 
coinage might well include some consideration of the silver that woiild Iseccone 
available to the Treasury in the form of retuired coin. An effort was made to 
allow for the effect of such recoveries in secticn V of the Treasury studv. 

{&) It was mentioned at page 16 that the adequacy of Treasury sil\'er for a 
transition to reduced content was not "self-evident." At the end of the para- 
graph in question it is stated: "The problem of the transition to silver coinage of 
reduced content is examined more fully in section V of this study,'' 



Digitized byGoOgle 



40 COINAGE ACT OF lOaS 

There is no reason why the probable lack of success of such a transition would 
have to be self-evident. However, a transition to reduced content silver coinage 
oertainly could not be recommended unless study of the problem indicated that 
there was every indication that the transition could be negotiated successfully. 
The TreaBury study concluded that this wafl not the case on any reasonable set of 
aaaumptions under present circumstances. 

Question 7. Referring to page 16 of the study, why would speculation in silver 
be more accelerated by a chauge in monetary value than by knowledge that the 
Treasury silver is being depleted by the indiscriminate sales authorized in the bill? 

Answer. Comparison of the two situations on the basis suggested by the ques- 
tion is difficult since no indiscriminate soles of silver are contemplated. If the 
e'Oposed legislation is enacted, the redemption of sUver certificates required by 
w will be continuing against the background of sharply reduced silver require- 
ments for coinage, and the prospect of any early and destabilizing increase in the 
market price of silver will become remote. However, provision for sales of silver 
not required as backing for silver certificates simply offers additional assurance 
that the market price of eOver will not rise above the existing monetary value. 
Sales would not be authorized at any price less than the monetary value of silver. 
By providing assured access to Treasury silver stocks, the net result of the pro- 

[losed legislation should be a pronounced dampening, not on acceleration of specu- 
ation in silver. 

On the other hand, the reference at page 18 of the study was to the effect of an 
increase in the monetary value of silver while a transition was being made to base 
alloy subsidtary coinage. Such an increase in the ceiling to which silver prices 
might rise could very well have the effect of encouraging some speculation in 
sUver, even though coinage use of silver was being cut back. If the monetary 
value were raised while silver was being continued in the coinage, very heavy speo- 
ulaUon in silver would surely result. Any change in the monetary value of silver 
during the transition to a new coinage system would be ill advised. 

Question 8. Why does the study base its figures and conclusion for rejecting a 
reduced silver ctmtent coin on a 500 fine silver coin, when in fact a 400 fine coin is 
perfectly acceptable and recommended? 

Answer, Section V of the study considers the transition to reduced content 
coinage for the cases of subsidiary coinage of both 400 and 500 fineness. Several 
special assumptions and cautions noted there may bear repeating here. 

(1) It was assumed that the crash coinage program would have removed all 
shortages of subsidiary silver coinage by the endof fiscal 1966, after which coinage 
requirements would fall to less than oi^e-half of current levels. 

(2) Very optimistic estimates were made of the amount of the existing coinage 
that might be recovered. It was pointed out (p. 64) that the estimated scale of 
recovery was selected not because it was inherently plausible, but simply to work 
out the implications of attempting a transition to reduced content silver coinage 
under favorable circumstances. 

(3) It was emphasized at page 64 and elsewhere (for example, pp. 66, 69, and 
73) that under present circumstances, with shortages of silver subsidiary coins still 
persisting, there wasno realistic possibility of recovering anything like the amounts 
of old silver coin that would be required for a successful transition. 

Section V concluded that under existing circumstances the risks would be intol' 
erably great in the case of a transition to either 400 or 500 fineness subsidiary 
coinage, although the situation with 400 fineness was not quite so hopeless BH 
with 500 fineness. It is not correct to state that the study "bases ite figures and 
conclusion on a 500 fine silver coin." 

The study did suggest in an appendix to section V tliat a clad silver 60-cent 
piece of 400 fineness could be continued in our coinage system for a good number 
of years, perhaps indefinitely. However, the estimated 15 million ounces annual 
use of silver that might eventually be devoted to this purpose would be a fraction 
of the requirements if an attempt were made to retain silver throughout the 
subsidiary coinage. 

Question 9. Referring to conclusions on pages 30 to 36 that it is merely a matter 
of conjecture how the price of silver must go to put supply and demand into 
aJinement. Was any attempt made to reach scientific conclusions about this? 
If none were reached, why does the study so emphatically state that there isn't 
enough silver for reduced-content coins? 

Answer. It is true that the discussion in the study at pages 30 to 36 did not 
arrive at a precise, single-valued forecast of the price level at which silver markets 
might eventually be equilibrated. However, that discussion did establish a 
Strong presumption that silver prices would rise about $2 per ounce by 1980 or 



Digitized byGoOgle 



COINAGE ACT OF 1965 41 

1985 if subject only to the forces of private supply and demand. This conclusion 
found some indirect eupport in tlie detaUed trend projections made by Battellc in 
tlie course of their parallel investigation, and in a recently released study of the 
Department of the Interior (Information Circular 8257). Significantly enough, 
the latter investigation detennined (pp. 17-18) that even with a rise in silver 
price to $2 to S3 an ounce, the early effect upon output would not be great. 

Every attempt was made to examine the silver supply situation objectively and 
thoroughly. It is not believed that any imporiiant published sources of informa- 
tion were left uninvestigated. It is true, of course, that "scientific conclusions" 
are difficult to draw in this area and some residual areas of uncertainty inevitably 
remain. For this very reason, 500 fineness silver coinage was not ruled out as a 
result of the discussion at pages 3D to 36 and its consideration of the level that 
silver prices might reach. The study's conclusion that there is not enough silver 
for reduced content subsidiary coinage was reached only after careful investigation 
of the difiicultiea of achieving a successful transition (see. V). 

Question 10. On table 2-A of page 70 in the Treasury stafF study, the indication 
is that the transition to a 40 percent silver content for all coins could be made 
with a surplus of 262.3 million ounces in Treasury silver renaaining in 1972. Surely, 
there is no question but that 40 percent silver halves, or even quarteo^ could be 
made; is there? 

Answer. The same special assumptions and cautions noted in the answer to 
question 8 above are applicable in interpreting table 2-A. It is doubtful whether 
that table, itself, adds much to the case for a single coin. However, there is every 
reason to believe, as the question suggests, that some 40 percent silver half dollars 
can he produced. As noted in the appendix to section V, an eventual annual 
coinage of 100 million of these would use about 15 miUion ounces of silver. 
Whether or not even such a limited scale of coinage could be continued indefinitely 
is not certain. However, if it could not, the shift to another alloy in the hau 
dollar would probably not present serious difficulties. The retention of any 
silver in the dime or the quarter is not a practical possibility. 

Question 11. Since the assumption is that the cupronickel coins will circulate 
side by side with the present coins, would there not be over 1 billion ounces (^ 
silver returned to Treasury from recovered coin? What do you think the Treasury 
should do with this silver? 

Answer. It is contemplated that the new coins will circulate side by side with 
the present coins indefinitely. Over time there may well be gradual recoveries 
of the existing coinage in the ordinary way as it becomes worn and is returned to 
the mint. This silver might then l>e added to Treasury stocks if such existed at 
that future time. Aside from minting the new half dollar, the question as to what 
would be the most appropriate use for this silver is a difficult one to answer at 
this time. "Along with the broader issue of the eventual role of the Treasury in 
silver markets, these are matters which the projected Joint Commission on the 
Coinage can better examine as further experience is gained and with the new 
coinage system firmly installed. 

Question 12. Why would the Treasury object to a standby power in the bill to 
mint 40 percent silver coins if the cupronickel coins are proven unacceptable by 
the public? Would it not be a wise precaution? 

Answer. Careful Treasury staff studies, confirmed by independent studies, 
make it clear that Treasury silver stocks will not be adequate to keep silver in 
more than one of our coins. We firmly believe that the coins proposed will be 
acceptable to the public. In the unlikely event that they are not, the solution 
will not be, indeed cannot be, to switch to coins containing silver. In that event 
we would have to propose to the Congress some other nonsilver alloy. 

Question 13. How can the Treasury expect the Congress, which has the pri- 
mary responsibility for providing coins, to make a wise choice about this legisla- 
tion within a week or 2 weeks, when it took the Treasury many months? Would 
you recommend a month's study of the problem by Congress? 

Answer. I would expect the Congress to take whatever time it requires to study 
the matter. The President's recommendations, as you point out, are the resulto 
oi many months of study. We are making available all the technical information 
and analyses which we developed during this time. I would expect Congress to 
etud^ and review very thorougnly the materials we have developed, but of course, 
the time required for this is a matter for the Congress to decide. 

Question 14. Since you are so confident about the side-by-side circulation of 
the cupronickel-clad coin, would you be willing to take a public opinion poll on 
it, and Kive the results to the Congress before further action is taken on the 
proposed legislation? If not, why not? 



■dbyGOOgIC 



42 COINAGE ACT OF 1965 

Answer. In my judgment, it would be impossible to conduct a poll on this 
subject. It would be necessary not only to give the polices samples of the coins 
but alao to qualify tlie questions severely. Obviously, silver coins are more attrac- 
tive than the new material and would be preferred, But you can't ask the man 
on the street to assess the very complicated silver supi^y situation.. That is the 
job of the Treasury, with the people's elected representatives passing Judgment on 
our recommendations. 

Question 15. You have said that the full faith and credit of the United States 
wHl stand behind the new coins. Do you contemplate backing the cupronickel 
coin with Government securities, or gold, as is the case with paper money? 

Answer. The new coins, as is the case with the eiisting coins, will be freely 
exchangeable for our paper currency. Thus, in effect the baoking for our coinage 
is, and will be, the same as the backing for our currency. In the final analysis the 
value of all of our money, coinage and currency, bank deposits, and the like, is 
dependent upon the strength of the Nation's economy and not upon its intrinsic 
value or the technical resources behind it. 

Question 16. Did the Treasury study encompass an analysis of H.R, 4184? 
How do you analyze its provisions? 

Answer. We have analyzed 11. R. 4184, and we do not find the proposals in it 
feasible. Essentially, it is our conclusion that we cannot count on enough silver 
during the period of implementation of a coinage program to keep silver in more 
than one coin. For this reason alone we are opposed to the bill. In this connection 
I direct attention to the conclusions drawn by the Treasury staff study and the 
Battelle study.- 

H.R.. 4184 also'suSers from the following defeots: 

(1) By changing the reserve requirements for silver certificates, it amounts to a 

Krtial repudiation of the Government's obligation on this currency, which would 
of doubtful constitutionality. 

(2) By indicating at this time a monetary price tor silver of $4 per ounce, the 
bill would have a tendency to generate increased speculation in, and hoarding of, 
silver coin and bullion. This psychological pressure would be present in spite 
of the authority contained in the bill to sell silver at the $1.29-plu8-per-ounce price. 

The Chairman. All right. Mr. Gettys? 

Mr. Gettys. Mr. Chairman. Mr. Secretary, you have atated that 
public acceptance of the cupronickel coin3 seems to be assured. Do 
you have any real basis for that conclusion, or evidence that they 
will be generally accepted? 

Secretary Fowler. The outward appearance of tie coin ia, of 
course, just like the nickel that we are all used to today. The simi- 
larity between the two in appearance would be, I think, quite striking. 
The inscription — the engraving will be identical with present coins. 
The most noticeable difference will be the fact that the e<^;e of the 
coin will have a coppery appearance. To us this doesn't seem to be 
such a radical difference. 

Mr. Gettt6. If the prognostication proves to be incorrect, it 
would more or less create pandemonium, would it not? 

Secretary Fowler. It would be a right rough situation. 

Mr. Gettys. I was just wondering if it would not be wise for 
the Treasury to have standby authority maybe to mint some silver 
content coins. Would that be acceptable? 

Secretary Fowler. Well, I think it would have some other effects 
that would be undesirable. We think it is very important here that 
we take the decision now, at this time, to end the coining of silver 
dimes and quarters. 

Mr. Gettys. You have considered what I have referred to? 

Secretary Fowler. That is right. If we had to turn to some other 
alternative, I think the alternative would not he in that direction- 
Mr. Gettys. Thank you. 

The Chairman. Mr. Mize? 

Mr. Mize. Thank you, Mr. Chairman. 



■dbyGOOgIC 



ObiSTAGt ACT OF 1965 43 

Mr. Setretary, what is the melted down value of the present 50-cent 
piece? 

Secretary Fowler. About 46 cents. 

Mr. MiZE. I am sorry that the new 50-cent pieces are to have any 
silver content at all. 

Is it a fact you are authorized to mint these new 50-cent pieces, but 
you don't really have to, do you? 

Secreta^ Fowlbh. Well, certainly there would be a considerable 
degree of flexibility as to the timing, the quantity, and the pace. 

Mr. MiZE. One other question. Are these new coins to be dated? 

Secretary Fowler. The authority we are requesting is that we be 
allowed to use as a date for a substantial period of years, a given date, 
so that the premium on having one dated 1966 and another dated 
1967, 1965, will be at a minimum. 

Mr. MizE. Thank you. 

The Chairman. Mr. Todd? 

Mr. Todd. Mr. Fowler. 

Thank you, Mr. Chairman. 

I was noticing these coins in this pretty case here. . 

I am skeptical of red lights at the meat counter and green lights 
at the vegetable counter. I wondered if possibly Monday we could 
see some coins not encased in anything if we promise to give them 
back to you. 

Secretary Fowler. I think we can have some. We will guard 
them very carefully as they move around. But I think members 
of this committee will have a little momentary, temporary distribu- 
tion, so to speak, so you can feel the heft of it and turn it around and 
look at it. 

Mr, White. Would the gentleman yield? 

Mr. Secretary some time ago I asked the Treasiuy Department to 
strike some silver coins in the 10- and 25-cent denommations. I 
understand that the coins were made, I understand they are avail- 
able. I would like to have them for examination at the same time 
you make the others available. 

Secretary Fowler. Y^, sir. 

Mr. Todd. Mr. Secretary, I have one further question. 

Following the chairman's comments earlier on the legal tender, 
would it be possible or legal to sign a contract which was payable in 
silver coins? In other words, if I owed you a thousand dollars, would 
it be an enforceable contract if you put m the contract the fact that I 
was to pay it to you in 50-cent silver pieces? 

Secretary Fowler. As far as I know — and I am advised by counsel, 
I am not practicing my own law these days — there b no law to prevent 
that. 

Mr. Todd. Thank you. 

The Chairman. Mr. CabeU? 

Mr, Cabell, Thank you, Mr. Chairman, 

Mr, Secretary, as soon as you reduce the silver content of the half 
dollar below its present value, any other reduction becomes a matter 
of degree — why not go on down to 20 percent or even 10 percent in this 
effort to conserve silver? You could probably take a 10-percent total 
silver content and, by reducing the thickness, could still provide the 
appearance that you are seeking, could you not? 



48-938— B5— 



■dbyGOOgIC 



44 COINAGE ACT OF 19eS 

Secretary Fowler. I am told that there are technical limitations 
on how far down you can be in silver content without really changing 
very materially the appearance. 

Now, it may be, as you indicate, this is a matter of some d^^ee. 
I don't want to leave the impression that there is some very magical 
quality about the 40-percent fineness. However, I think there are 
hmitations, and we have come out with that particular figure in terms 
of the quantity of production that is contemplated, and the quantity 
of silver that would be required for a fine appearing quality coin. 
If you reduced it to 20 percent — which would be quite mai^nal — you 
would be talking in production terms of utilization of around 7 to 8 
silvei 



million ounces of silver, as against 15. 

Mr. Cabell. But your objective has been to reduce it as low as you 
thought appropriate. 

Secretary Fowlbh. Yes, sir. 

Mr, Cabell. Inasmuch as you are asking for standby controls, 
why wouldn't it be wise to put those controk into immediate effect, 
particularly with reference to exportation of our present silver coinage, 
and then not wait until the horse is stolen before you start locking up 
liie door? 

Secretary Fowler. Well, my experience has been in the case of 
controls such as these that sometimes they prove counterproductive 
when they are instituted; they move people more or less in the op- 
posite direction. 

Mr. Cabell. You don't think by any chajice those who would 
have that kind of an idea would have to wait for those controls to be 
imposed to use or put those ideas into effect, do you? They are about 
two jumps ahead of you now. 

Secretary Fowlbh. AU I know is that, during our various emergen- 
cies, sometimes a situation would be reasonably taut in an imcontrolled 
state, and when you announced or instituted the control it got much 
worse. 

I think this is a mai^inal question, a marginal decision, that may 
weU be a decision that we could take with reference to one coin but 
not another. But we did want to leave some room in the request to 
the Congress for the exercise of this judgment. 

Mr, Cabell. I am thinking primarily of our present silver dollar, 
where once you announce that there is not going to be any more of them 
minted in the immediate future you are going to create a situation. 

One further question, if I may. 

You have in your Treasury stocks at the present time a very 
definite quantity of silver dollars, a number of which are definitely 
collectors items that represent a small fortune. Is it the intent of the 
Treasury to keep those particular ones sterilized? 

Secretwy Fowler. Yes, sir. There is no way for us to distribute 
them equitably. In this quantity, they would disappear; they would 
serve no useful purpose as a medium of exchange. 

Mr. Cabell. Thank you venr much, Mr. Secretary. 

The Chairman. Mr. Hansen? 

Mr. Hansen. Thank you, Mr. Chairman. 

Secretary Fowler, you have indicated you would not be resistant 
to an amendment to this measure that would call for a 5-year mora- 
torium on silver dollar coinage. What would be your attitude toward 
a similar situation regarding the 50-cent piece so that you could get 
in motion on the more crucial needs? 



Digitized byGoOgle 



COUfAOS ACT OF 1S6K 



45 



Secretary Fowler. Well, actually in our plans for jiroduction, 
Mr. Hansen, we do plan to put that at the end of the line in our pro- 
duction schedule. In other words, to build up the production of the 
quarter first, which is the area that we would like to have supplied in 
wholly adequate quantities and then move to the new dime. Then I 
think I said around the end of 1966 move toward the 50-cent piece 
in a quantity of production that would be adequate to justify its 
release on the market, avoiding the problems we had with the Kennedy 
half dollar. 

I would naturally prefer to see Congress enact the President's 
program as he has recommended, which does include a production 
of tlie 50-cent piece in the fineness indicated, along the scheduled 
lines that I have indicated here in my testimony, so that we could 
move out in late 1966 or early 1967 with a production of the new 
half dollar and a distribution at the appropriate time when it was 
in quantity supply. 

I think by this time the proposed Joint Commission on Coinage 
would be in existence; it would be in touch with the ongoing problems 
that emerge as a result of the program and could see wheUier or not 
there is room and utihty and desu-abihty in our coinage system for 
that particular coin. I think, therefore, I would be personally opposed 
to any amendment that would have the effect of putting to one side 
the proposal with reference to the 50-cent piece. 

Mr. Hansen. One other question r^ardmg the 50-cent piece. 

Have people, your stafE members made a study concerning the 
extent to which other nations are using a 50-cent piece that is made 
of a more base metal? 

Secretary Fowler. Yes, I think that information is available. I 
would like to supply it tor the record. 

{The information referred to follows:) 



Ccntntries having a Hlser coin — varying fiTiem 


*«« 




Country 




Weight 


,„;i=5., 




Half dollar 


11,2 
4.9 







































Secretary Fowler. I think we can say that there are countries that 
do have a coin which utilizes some quantity of silver; a prestige coin, 
to use that word. The French, for example, have the 5 and 10 franc 

{tieces. There are a number of other countries that use silver in at 
east one coin. 

France, West Germany, and Italy are the ones that come readily to 
mind. They are followme a system whereby they have abandoned 
silver for the lesser coins, out wiey have at least one coin containing 
sUver. 

Mr. Hansen. One further point. 

People called by the fancy name of numismatists — I call them 
collectors or hoarders — have in the last 5 years become extremely 
active. I happen to have one in my own family. 



■dbyGOOgIC 



46 COINAOB ACT OF 1065 

To what extent, in the jud^ent of your staff, do you folks believe 
that this proposed l^islation is going to generate further activity on 
the part of these people? 

Secretary Fowler. Well, it is rather unpredictable to guess about 
the apparently increasing natural instinct we have to be collectors of 
one tmng or another, which has a very pronounced impact on our coin, 
supply. 

We are neither anti nor pro coin collectors. 

We have designed this program so that the impact on proper and" 
legitimate coin collecting as such will not be subjected to any inter- 
ference while at the same time that process will not impede or ob- 
struct or interfere with the distribution and availability of an adequate 
quantity of the new coins so that the experiences that we have had, for 
example, with the Kennedy half dollar, would not be duplicated. 
We hope to avoid that in this program. 

Mr. Hansen. Mr. Secretary, I was thinking more in terms of the- 
effect this whole affair would have on existing coins and whether or not 
you might find it necessary to put a Uttle more toughness into the' 
process you discuss here on page 12, under section 5, dealing with the- 
melting and exporting and treating of silver coins, and whether or not 
you have ^ven any thought to the question of talang an action similar 
to that wMch was taken back in the early thirties on gold. 

Secretary Fowler. We did consider the question m terms of what 
is called hoarding. That is a variant of the question, at least, that I 
think you are asking. And we considered that a ^prohibition against 
hoarding of coins denned in such a way as to make it an offense against 
the laws of the United States would be tremendously difficult to- 
administer and doubtful of success. 

We tried to work out a formula, just to try it on for size, of what one- 
would define as hoarding, and we came up against these kinds of 
figures — that if 200 million Americans stashtd away 10 coins, 2 billion 
would be removed from circulation. What is the normal supply for 
the variety of business establishments that are involved in our com- 
merce today? Different types of stores have different needs. A 
chainstore operator versus ihe comer drugstore; a shoestore versus a 
5 and 10. 

So in establishing any guidelines or in advising Congress on how it- 
should determine what would be an offense, or what boundaries the 
discretion the Secretary of the Treasury should have in Issuing imple- 
menting r^ulations, you would run into quite a complicated network 
and would eventually be fraught with a lot of difficulty — a lot of 
hardship, exceptions and other great problems of administration. 

In fact, when you are all done, there might be a net loss of coins in 
circulation because of only a little bit of Hoarding by a 'majority of 
people, but if you really developed the fear of a shortage through the 
rigid enforcement of hoarding, you might really have alot more coins 
t^en out of active circulation by clearly legitimate commercial estab- 
lishments simply as a hedge against shortages. 

Mr. Hansen. Thank you, Mr. Secretary. 

The Chairman. ^Ir. Harvey. 

Mr. Harvey. Thank you very much, Mr. Chairman. 

First of all, Mr. Secretary, let me apologize for my delay in being- 
here this morning. I already had other plans I just could not change- 
Secretary Fowler. This was rather sudden. 



Digitized byGoOgle 



COINAGE ACT OFlSafi 47 

Mr. Hahtby. I thought you might enjoy the remarks one of my 
&iends made this morning, when I told him I was coming to hear your 
testimony. He said "I can sum it up — he is simply going to say 
'beads I win, tails you lose.' " 

Secretary Fowler. I have felt many times in this decisionmaking 
process that the ways of decision were quite limited. It was a question 
of whether we were going to wrestle a bear or a tiger. 

Mr. Habvey. I omy have one question, in the time I have had to 
look this over. 

In section 5 you are authorized to make these rules and regulations. 
In section 16 it provides a pretty stiff penalty of $10,000 or not more 
than 5 years in prison for any violation of any rules or regulations. 
•So that what we really have is a case where we are setting a penalty 
for violations of unsown rules and regulations which are to be 
presented at an unknown future date, and in an unknown set of 
circumstances. It seems to me that is a pretty broad grant of 
authority. 

Now, I know bein^ a lawyer that you are— something like this must 
l^oth^ you. 

Secretary Fowler. I would be quite concerned, and that really is 
one of the reasons for the so-called standby use here. I think it would 
take quite a good deal of provocation in this area to come to a con- 
clusion that one wished to invoke this kind of harsh authority which, 
if invoked, has to be enforced if it is going to be meaningful, which 
does raise questions of marginal cases where varying degrees of will- 
iulness and intent appear. 

However, I think what we are concerned with here is not a common- 
place act that one might innocently without much thought be drawn 
into, such as might be the case if you had an antihoarding provision. 
Melting coins taltes quite a bit of equipment and quite a good deal 
■of 

Mr. Harvey, That is my next question. I don't know if yoiur 
General Counsel is here— maybe he would prefer to answer it rather 
"than you. But are the words you are talking about here^exporting, 
melting, treating and so forth — capable of such definition that it 
restricts this autnority? 

Secretary Fowler. I think so. I think that if it became necessary 
to issue these regulations, it would certainly be my intention to lean 
lOver backward in seeing that the regulations confined the acts that 
were subjected to the possibility of penalty to such clear and unnmtak- 
able actions that there would be no mistake about it. 

Mr. Harvey. Is there any danger, for example, of a coin collector 
falling into the category of treating coins in anyway? I don't know — 
I ask that out of ignorance. 

Secretary Fowler, I certainly think insofar as the words "melting 
and treating" are concerned, the type and quantity of equipment 
that would Dfi involved to melt down substantial quantities of coins 
and get the resulting silver in bullion form, that is something that 
coula be pinned down. People would not accidentally faff into 
difficulty. There are lots of stories down in my part of the country 
about the Alcohol and Tobacco Tax Unit and mnocent people doing 
a little moonshining on the side. I think everybody would know 
what he was doing in dealing with the melting and treating of a coin. 



Digitized byGoOgle 



48 COINAGE ACT OF ISOS 

Now, the question of exporting coins of course does raise, I think, 
the question of what is the nonnal course of trade of a coin dealer 
who has customers abroad. This may be an important ^art of their 
business. I think we would have to consider the feasibility of pro- 
visions in such regulations to the end that the normal course of traffic 
between coin dealers and their customers abroad would not fall witlrin 
the purview of these regulations. 

Mr. Harvey. I am asking this again— do you have to come back to 
Congress and this committee under any circumstances for approval 
of these regulations, or are you granted the outside authority to do 
that? 

Secretary Fowler. No, I think the authority here would be 
delegated without any such limitations. However, as the current 
Secretary, I certainly would be not only willing but anxious to have 
either informally or formally the views of the committee before taking 
this step. I ttunk it would be a kind of a good testing, as it were, 
whether ot not the regulations designed were in line with the intent 
of Congress in this area. 

Mr. Harvet. Thank you very much for your cooperation, Mr. 
Secretary. 

The Chairman. Mr. Secretary, before we conclude these bearings — 
we are trying to finish by Tuesday if we can— -I wonder if it would be 
too much of an imposition for you to appear here at 9:30 Monday 
morning. 

Secretary Fowler. Not at all. 

The Chairman. Thank you, sur. We cannot possibly have a 
meeting in the afternoon because we may have a bill on the House 
floor and the committee members must be there. So we will meet at 
9:30 Monday morning, 

Mr. Moornead, do you have a question? 

Mr, MooRHEAD, les, Mr. Chairman— just one question, 

Mr. Secretary, can you tell us what is the purpose and what do you 
think would be the effect of section 7, providing for a $1.25 floor on 
the price of silver? 

Secretary Fowler. The purpose of it was to provide against the 
contingency that this particular program, if announced ana adopted, 
should prove to be disruptive to the silver-producing r^on because 
of a sharp drop in the price of silver. I, for one, do not anticipate 
this but there are those that believe by enacting the lerislation pro- 
posed, that there would be a sharp change in the attitudes of buyers 
and in the price of silver. This would disrupt production and create 
ah imdesu*able impact in a given r^on of the country. We therefore 
felt it would be wise to have this authority in the act to avert any 
possible unnecessary hardship. 

We have of necessity to ask for a ceihng in another section of the 
law in order to protect the existing coinage, silver coins that are in 
circulation, as indicated. And we felt having requested the n^ht 
to maintain a ceiling, we ought logically to ask for tne right to main- 
tain a floor. 

Mr. MooHHEAD. One other question, sir. 

Is the coin vending machine industry satisfied with the proposal 
contained in this bill? 

Secretary Fowler. They will of course speak for themselves, but 
it is my understanding from press dispatches that I have had an oppor- 



DigitizcdbyGoOgle 



COINAGE ACT OF I96S 49 

tunit^ to review since the message came out that the org&nlzed 
association that speaks for this s^ment of the industry has expressed 
hearty approval and accord with the proposal. 

Mr. MooBHBAD. Thank you, Mr. Secretary. 

The Chairman. Mr. Asmey. 

Mr. Ashley. Mr. Secretary, just a final question or two with respect 
to the 50-cent piece and one or two other matters. 

Is it your notion that the prestige of a coin is represented by the 
amount of silver that is contained m the coin? 

Secretary Fowler. No. I think that this is something of a 
psychological matter, linked with this 173-year-old tradition. Having 
a silver coin would lend an element of prestige. 

I think the appearance of the new silver half dollar, from the 
samples and tests that we have made, is very attractive. 

Mr. Ashley. At what point would the appearance of the 50-cent 
piece change? You are proposing a reduction in the amount of silver 
to 40 percent. Where did the 40-percent figure come from? Why 
not 20 percent? 

Secretary Fowler. It is a very technical question. We are relying 
here on technical advice. I think aome of the reports that are available 
to you perhaps can answer it better than I can. But I am told that 
the appearance of the coin changes very markedly as you move down 
from the 40 percent silver toward, let us say, 20 or 15 percent. When 
you reach that particular area, then it becomes quite different. 

Mr, White. Will the gentleman yield at that point? 

Mr. AsHLET. Yes. 

Mr. White. Isn't it true that the appearance of the 50-cent piece 
is very similar to the present 50-cent piece, and the reason for that 
appearance is because it is a layered coin with an 80-percent silver 
exterior? 

Secretary Fowler. That's right. 

Mr. White. Isn't it also true that the two coins are almost in- 
distinguishable? 

Secretary Fowler. That's correct. 

Mr, White. And this was a mechanical— — ■ 

Secretary Fowler. So that the layer — you might say two pieces of 
bread— has about an 80-percent content of sflver, and wierefore 
resembles the present com so that they are really almost indistin- 
guishable. 

Mr, Ashley. I am curious — and I don't suppose we are going to 
get any further clarification with respect to the fact that what is 
Being proposed is a dual system of coins, really — one nonprestige, 
utilitarian coins, of the nickel, dime, and quarter, aU essentially the 
same content, at least in terms of silver. 

Secretary Fowler. Right. 

Mr. Ashley. Then for some reason I still cannot understand, we 
decide that it is necessary, regardless of this severe shortage, the 
critical shortage of silver to which you have testified, to have a 60- 
cent-piece coin that it seems to me flies in the face of all the testimony 
you have presented. 

Secretary Fowler, Well, I don't know if I used "necessary." I 
think it is desirable to have the 50-cent piece along the lines recom- 
mended as a continuing part of our coinage system. And this is in 
deference, as I have indicated to some extent, to tradition which is 



Digitized byGoOgle 



50 CQmAG£ ACT OF 19ft& 

not to be ignored in these matters. It is in deference to the desire 
of many people for a coin of appearance that contains silver, which 
has been and always will be the most attractive metal from the stand- 
point of appearance. I don't think there is anything like the law of 
the Medes and the Persians that work in this particular aspect of 
our decision. I think it is a debatable one. We debated it quite 
at length and finally came down on the side that the availability 
and utilization of this 50-cent piece, after the initial period of transi- 
tion to the new coinage, was worth the dedication out of our available 
stocks of approximately 15 million ounces or less a year for that 
purpose. 

Now, we knew that it would be a somewhat controversial recom- 
mendation from the standpoint of silver users who do not want 
1 ounce of silver to be used in coinage. I have said to some of these 
gentlemen frankly, that the answer to their problem, whether it is 
this year or next year or 10 years from now or 15 years from now, 
is not going to lie in whether or not we continue to use 15 million 
ounces of silver a year for coinage; it is going to lie in technological 
changes and adaptation. 

Mr. Ashley. All right, Mr Secretary. I just think your case 
would have been more cleanly presented had you come in with the 
same recommendation with respect to all the coins. 

Seigniorage, Mr. Secretary, as I understand it, is the profit repre- 
sented by the diflference in the cost of production of coins and the face 
value of those coins. In the first 9 months of the last fiscal year, this 
profit amounted to some $57 mifiion, and up to April 30 of this year 
it is running at $87 million, according to the latest monthly summary 
■of Federal cash transactions. This would be attributable to the big 
increase in coin production this year. 

With the introduction of these new coins, for which the ingredients 
or materials will be considerably less in cost, I gather that the sei- 
gniorage will be sharply increased. 

Secretary Fowleh. It will be a very profitable operation. But, 
of course, that is not the reason for the recommended changes. 

Mr. Ashley. Can you give us — of course any forecast that you 
would have would depend upon the rate at which the new coins are 
to be introduced. Is there any plan or schedule that would reflect the 
rate and volume at which the various new coins would be introduced? 

Secretary Fowler. I think we can supply you that. Congressman 
-Ashley, for the record. I do have some figures here. 

Mr. AsHLET. For the record it would be fine. 

Secretary Fowleb. Since it is a technical question I think supplying 
:it for the record would be more satisfactory. 

(The information referred to follows :) 



EstiTtuUed ■produetion of Tteio ailoy coin 
[In mlUkma ol itlece*! 



, jUeal year 1986 





VHeat 


Ifront 


Ukxilt 


Total 


tan—mhm-imii 




,.S 








1,430 














l.«0 


2.419 













Du,iiz=db,Googlc 



OOINAaE ACT OF 1B65 51 

3 released. in early 

a mid-iees. 

Production of the new half dollar will be deferred until fiscal 1967, and will be 
released when sufficient quantities are on hand. While a definite production 
program baa not been dereloped for fiscal 1667, the mint will be in a position 
to meet any foreseeable demand placed on it. 

Mr. Ashley. Thank you very much. I must say, as others have 
said, it is a great pleasure to have you here. You make an extremely 
lucid and persuasive witness. I must say that I commend you 
particularly because you have not been in office too long — it seems to 
me the grasp of the subject matter which you reflect is very, very 
reassuring. 

Secretary Fowler. Thank you. There have been a few other 
things to think about as well as coinage. 

The Chairman, Mr. Fowler, I don't want to take up any more 
time, but I feel we should have this in the record. 

I notice at page 13 of your booklet on the "Treasury Staff Study 
of Silver and Comage" you have this table 4, "Elstimated U.S. Silver 
Consumption by Field of Use for End Product, 1959 to 1964," and 

Sou show there the different purposes for which this silver was used, 
ke batteries and alloys, medical uses, and so forth, aggregating 127 
million fine troy ounces, in 1964. It was less than that in 1963, less 
m 1962, less m 1961, less in 1960, and even less in 1959. So it has- 
increased every yeai^-127 million fine troy ounces. 

Now, out of that there is 40.3 million fine troy ounces that are used 
for photographic film plates and sensitized paper. 

la it your understanding that an effort is being made now to sub- 
stitute something for these purposes where the use of silver will not 
be required? 

Secretary Fowler. There is, I am told, a good deal of scientific 
effort going on hy some of the outstanding mraa in this particular 
field. 1 am not m a position to appraise the possibilities of break- 
throughs in this particular area, but certainly with the pressures that- 
are on the supply of silver and with the problems ahead I would 
hazard a judgment that this kind of effort, to find suitable substitute 
materials, is likely to be substantially intensified, and of course it 
would become a very crucial thing when and if any decision were 
made by the U.S. Government to go out of this silver field. 

Mr. White. Mr. Chairman, womd you yield at that point? 

The Chairman. Yes. 

Mr. White. I believe there is one other piece of information that, 
should be added there. Is there not quite an effort being made in. 
the recovery area of silver from hypo solutions? 

Secretary Fowler. Yes, The research is along two lines — sub- 
stitute materials and reclaiming and recovery. 

Mr. White. And there is a possibihty of a greater d^ree of recovery 
than they are now exercising. 

Secretary Fowler. Yes, sir. 

The Chairman. Well, thank you very much, Mr. Secretary, and 
also the gentleman accompanying you. We dislike asking vou to- 
come back Monday morning, but we would like to get this bill voted 
out Tuesday if we can. 

Secretan' Fowler. You want me to be here at 9 o'clock, Mr- 
Chairman? 

The Chairman. 9:30 will be fine. 



■dbyGOOgIC 



■See COINAGE ACT OF 196$ 

Secretary Fowler. Thank you, sir. 

The Chairman. Thank you very much, Mr. Secretary. 

The committee will stand in recess until 9:30 Monaay morning. 

(The following information was submitted for the record:) 

Anbweb to Questions Sdbmitted by Me, Patm4N to Bbchbtabt Fowi^r 

QueationB. Aesuming you have considered the silver extraction industry in your 
deliberations, whftt do yoti feel the effect of this legislation will be on this industry? 

How will the emplovment situation and the silver mining be changed, and vnll 
the mine owners still have enough economic incentive to continue in business? 

Answer. The Treasury Department in its extensive study and dMiberationH of 
the silver and coinage problems has made every effort to consider all of the con- 
eequences which would arise from its legislative proposals. One ^leciflc require- 
ment of the new coinage program was that it Bhould not inGict undue hardship 
on any group, or sector of the economy. The present legislation meets that re- 
quirement and will not inflict undue hardship on any group or sector of the 
economy, including the silver producers. Section 7 of the draft legislation author- 
izes the Secretary of the Treasury to purchase silver rained in the United States, 
provided it is tendered within 1 year, at the price of $1.25 per fine troy ounce. 
If enacted, this provision would offer silver producers an insurance against price 
declines which they do not have at present. Silver producers have, of course, 
already benefited from the 42-pereent increase in ^ver prices that occurred 
between 1961 and 1963. 

It is not anticipated that enactment of the Treasury's legislative proposals 
would be Ukely to cause any sustained decline in the price of silver. However, 
it is possible that the liquidation of speculative stocks of silver in an unsupported 
market could cause silver prices to fall temporarily; and it would seem appro- 
priate to shield domestic producers from the full impact of any sharp fall in price, 
if contrary to expectation, such were to occur. It should also be noted that 
under section 6 of the proposed legiHlation the Secretary of the Treasury is 
authorized to sell silver not required to back silver certificates, but at a price 
not less than the monetary value of silver. Hence, domestic silver producers 
are assured that any sales of Treasury silver will not depress market price. 
. Id regard to the legislation's effect on employment at silver mines, the Treasury 
anticipates very little or no effect at all. In 1963, approximately 4,100 persona 
were employed in the silver and gold-silver mining industry. These employment 
figures refer only to those mines primarily producing silver-bearing ores and dtt 
not include employment at base metal mines, such as copper, lead, and nnc, 
which are responsible for producing about two-thirds of the domestic silver output 
in any given year. Of the five major silver-producing States, only Idaho, which 
obtains about 60 percent of its total recoverable silver from silver ores, is signif- 
icantly dependent upon pure silver mining for output and employment. In the 
other States, silver is largely obtained as a byproduct with other ores, and in these 
other States employment depends mostly upon the price and demand for other 
base ores, not silver. In any event, as described above, the legislation contaiafl 
specific safeguards against any sharp fall in the price of silver. In view of the 
large and growing demand for stiver and the assurance of relatively stable prices, 
the position of the silver mining industry should be a favorable one. 

For these reasons, the Treasury considers that the current legislation will have 
little or no adverse effects relating to employment or economic incentives of the 
silver producers. 

(Whereupon, at 12:30 p.m., the committee adjourned, to recon- 
vene at 9:30 a.m., Monday, June 7, 1965.) 



■dbyGOOgIC 



COINAGE ACT OF 1965 



hlothday, june 7, 1965 

House of Ebprbsbntatives, 
Committee on Banking and Currency, 

Washington, D.C. 

The committee met, pursuant to recess, at 9:30 a.ra., in room 2128, 
Rayburn House Office Building, Hon. Wright Fatman (chairman) 
presiding. 

Present: Bepresentatives Fatman, Barrett, Mrs. Sullivan, Reusa, 
Ashley, Moorhead, Gonzalez, Hanna, Grabowski, White, Gettys, 
Todd, Cabell, McGrath, Hansen, 'Widnall, Fino, Stanton, and Mize. 

The Chairman. The committee will please come to order. Mrs. 
Sullivan? 

Mrs. Sullivan. Mr, Chairman, although I am a day late in doing 
80, 1 want to welcome the Secretary in his appearance before the com- 
imttee on a matter of great interest to the Subcommittee on Consumer 
Affairs, which has jurisdiction over coinage legislation in the com- 
mittee. I might say that Ghau-man Fatman and I discussed on 
numerous occasions this year the procedures to be followed when the 
administration finally made its report to us on its 2-^ear study in this 
matter, and we agreed that the subject was of such nature that full 
committee hearings were advisable. So I don't want anyone to think 
that we were bypassed. 

I am only sorry, however, Mr. Chairman, that after waiting so long 
for this report — -naving had it promised to us first in February and 
Uien April— that when it finally did come up it was on such short 
notice that I had already gone to Omaha for hearings on Thursday, 



Friday, and Saturday of the National Commission on Food Market- 
ing — the only out-of-to ' " • ■ - 
able to attend. 



ing — the only out-of-town hearings of the Commission I have been 



These are the hazards, I suppose, of ever leaving Washington on 
any official assignment. 

Since I could not attend the hearing Friday, I am grateful to the 
Chairman for arranging this opportunity for those of us who were 
necessarily absent Friday to question the Secretary this morning. 
And when my turn comes for questioning, I do have some questions. 

The Chairman. I will place in the record at this point a telegram 
from Carl MiUman, president of Automatic Merchandising Corp., 
endorsing the new coinage bill; also a statement from the Silver Users 
Association endorsing parts of the bill; and a similar statement from 
the National Association of Photographic Manufacturers, Inc., New 
York, and one from Thomas B. Hungerford, executive director 
of the National Automatic Merchandising Association, endors- 
ing the bill. 



■dbyGOOgIC 



54 COINAGE ACT OF 1065 

(The documents referred to follow :) 

Hon. Wright Patuan, 
Hoiue of Reprtientatives, 
Waahington, B.C.: 

Strongl}' endorse the new coinage proposed by the President. No other new 
coins will work properly in our machines causing public confusion and irritation. 
Bequest you support this proposal since the welfare of our emi^oyees and our 
cuBtomers ia dependent upon passage of this bill. 

Carl Milluan, 
Preaidenl, Automatic Merehanditing Corp. 



Staisuent on tbe Prebident'b Coinaob Mesbage 

Commenting on proposed legislation submitted to Congress concerning th» 
metallic composition of U.S. subsidiary coins, John B. Stevens, chairman of the: 
executive committee, Silver. Users Association, stated: 

"The Silver Uaecs Association endc»'ses the action taken by the adminiatratioD . 
in recommending the minting of dimes and quarters without silver. 

"The association strongly opposes the recommendation calling for a half dollar 
with a 40-percent silver content. Based on the number of these coins mintedl 
laet year, this new coin would consume approximately 33 million ounces of silver,. 
an amount which is almost equal to the entire U.S. annual productioD. 

"Only laat week the administration reversed ite 9-day-old decision to mint 
silver dolors because it was concluded they would immediately disappear into- 
the hands of speculators and would waste 35 million ounces of silver. 

"A silver clad coin, unique in monetary systems, would also disappear as fast 
as minted, for it too would be another collector's item. 

"No purpose would be served by the use of silver in this coin other than to U8» 
up Treasury stocks of silver and ultimately force the Treasury into the silver 
market where there is even now a 25 percent deficit between production and 
consumption. 

"Speculative interest in silver will be increased and will result in even ^eater- 
hoarding of present silver coins at a time when mint facilltiee will be stramed to- 
the utmost in the production of new quEu^rs and dimes,'as well as other coins. 

"Every ounce of sOver used up in a ailver-clad coin would be at the eKi>enBe of 
the industrial users of silver and the consuming public. Retention of silver m 
the half dollar would again provide a vehicle for a price rise for the benefit of 
silver-producing interests. It is unbelievable that the administration should 
propose a new coin made of a material which is already in short supply in the- 



National Association of Photographic Manufactubers, Inc. 

The U.S. photographic manufacturers approve the President's legislative 
proposals for the elimination of silver from dimes and quarters, but are concerned 
about the retention of silver In the half dollar. 

Arthur W. Taber, chairman of the Silver Committee of the National Association 
of Photographic Manufacturers, Inc., and vice president-secretary of Peerless 
Photo Products, Inc., expressed the concern of the industry that the retention 
of any silver in coinage will only aggravate the existing shortage of this precious- 
metal in the market. 

Silver is vital in photography and the possible effect of this action will affect, 
broad segments of the American economy using photographic products, especially 
the printing industry, the use of medical X-rays, the graphic arts field, and th& 
GovBmment iteelf . 



■dbyGoogIc 



COIMAQI! ACT OF 19SS 



The vending industry wholeheartedly Bupporta the U.S. Treasury bill on 
coinage and commends the administration for this practical and imaginative 
solution to the problem of diminiatung silver reeervea. 

Because the proposed coins will work reliably in present vending machines, 
they will be welcomed by the millions of American consumers who mcreasingly 
depend on coin-operated equipment for goods and services 24 hours a day. 

The new coins have been thoroughly tested in existing coin mechanisms and 
will work side by side with present coins in all coin-operated devices. This is 
A critical requirement for more than half of the 12 million coin units now in opera- 
tion hroughout the country. 

From the 1.5 million Americans who obtain at least one meal a day from 
vending machines to the young housewife who depends on the neighborhood 
Jaundromat, coin-operated services are a vital part of the modem economy. 
More than 30 billion coins are used by Americans annually in merchandise vending 
machines alone. 

The distinctive appearance of the new coins offers greater protection against 
counterfeiting and the abundance of the new coin metal will assure an ample 
■coin supply in the future for all retail businesses. 

The vending industry urges passage of the bill because it provides an ideal 
solution to the crucial coinage problem and assures an adequate and modem 
■coin supply tor the American economy in the years ahead. 

The Chairman. I have an unusual letter here which I think I will 
read and then place in the record. It is from Hawaii. 

"It seems to me the most economical way to conserve silver would 
be to discontinue the coin^e of the half doUar entirely. Half dollars 
are a nuisance. They are too much for the average tip. They can- 
not be used in coin telephones. They are too large for most vending 
machines. I would surest, first, elimination of the half dollar. 
Then after testing the effect, consideration might be given to reducing 
the silver content of other coins, if this should still seem necessary, 

"Mr. John T. Harcourt." 
(The letter follows:) 

HoNOLVLu, Hawaii, June 4, 1985. 
Hon. Wright Patman, 
House of Representalives, 
Washingtim, D.C. 

Dear Mr. Patman; It seems to me that the most economical way to conserve 
silver would be to discontinue the coinage of half dollars entirely. 

Half dollars are a nuisance. They are too much for the avcraf^e tip. They 
-cannot be used in coin telephones. They are too large for most vending maohineg. 

I would suggest, first, eliminate the half dollar. Then, after testing the effect, 
-consideration might be given to reducing the silver content of other coins, if 
this should still seem necessary. 
Sincerely yours, 

John T. Harcourt. 

Mrs. Sttllivan. Mr. Chairman, while we are inserting material 
in the record, may I ask if you have the President's message of last 
"Thursday included in the record? 

The Chairman. Yes; immediately following the bill in the first 
part of the proceedings. 

Mrs. Sullivan. Then I wanted to ask permission to have the 
"Treasury Staff Study of Silver and Coinage" also inserted in the 
record, and the Battelle Report also. It just seems to me 

The Chairman. Suppose we make that available to the members 
of the committee, and then we will have the staff select the portions 
that should go in. I doubt that we should put the entire study in. 
Would you want it in? 



■dbyGOOgIC 



66 COmAOE ACT OF 1066 

Mrs, Sullivan. Yes, sir; I believe the Treasury staff study and tho 
Battelle Memorial Institute technical report are of such lon^-range 
interest and importance to all who are mterested in the subject of 
our coins and coinage — and that includes most Americans — that our 
printed hearings on this hbtoric change in our coins should include 
these valuable DaG)^;round materials. 

The Chairman, ft covers the subject thoroughly. Let's put it in. 
We will put it in the appendix. 

Now, the members who were not here the other day I think should 
be given first consideration, Mr. Barrett, and Mrs, Sullivan, Mr. 
Beuss, and Mr. Cabell. Mr. Barrett? 

Mr, Barrett, Mr, Chairman, I will pass my opportunity to ques- 
tion at the present time to Mrs. Sullivan. 

The Chairman. Mrs. Sullivan? 

Mrs. SoLLivAN. I understand that on Friday the Secretary was 
asked by Mr. Moorhead if the proposed solutions to our silver and 
coin problems contained in this legislation were satisfactory to the 
vending machine industry, and he replied that he beheved they were, 
Since we apparently will not be calling witnesses from the industry, 
I think it might be useful to have at this point in the record, with 
the committee's permission, several communications I have received 
over the weekend from two firms in St. Louis which are leaders in 
this industry: the Universal Match Co., one of the biggest, and its 
subsidiary, National Rejectors, Inc., which makes the sensor mech- 
anisms which measure the weight, size, and electrical resistance and 
conductivity of coins. 

These communications rive clear evidence of the fact that the 
Treasury has devised a solution satisfactory to that industry— and 
I believe every congressional office received numerous wires, letters 
and telephone calls from the vending machine companies expressing 
concern on this point before the report was made public. 

The Chairman. Without objection, they will be placed in the 
record at this point. 

(The documents referred to follow:) 

Universal Match Corp., 
St. Louia, Mo., June 4> 196S. 
Hon. Leo NO K K, Suluvan, 
Banking and CuTrency ComTnitUe, 
Home of Representatives, Washington, D.C.: 

Universal Match Corp. strongly endorses the new coins proposed by President 
Johnson aa contained in his message yesterday. The new coins will work side 
by side with present silver coins and will require no adjustment to present vending. 
machine mecnanisma for coins. Present coins will be in use for a long time and 
it is very iBoportant that both types work in the miUions of vending machines now 
in use by the American public. Failure of the Congress to adopt the coins pro- 
posed by the President would Lead to great economic loss since there woula be 
wide confusion on the part of the public using the machines, and it would be neces- 
sary to make costly clianges in all vending machines which could lead to chaos in 
this very important segment of the Amencan economy aa you know, we are one 
of the leading manufacturers of automatic vending machines and the world's 
largest producer of coin mechanisms for vending machines. As such, we employ 
directly approximately 2,500 people in the vending machine manufacturinK 
o]>erations and coin mechanisms for vending machines. These manufacturing 
facilities, located primarily in the State of Missouri, are a major factor in keeping: 
Missouri in the forefront of this growing and necessary industry. We trust that 
you will give prime and favorable consideration to the approval of the President's^ 
recommendation. 



■dbyGOOgIC 



COINAGE ACT OP 1966 57 

a helping our industry in the past and we are most 



National Rejbctors, Inc., 

June S, 1966. 
Hon. Leonob K. Sdllivan, 
Smtae of Bepreseniatiwea, Waikinglon, D.C.: 

As manufacturers of coin handling ecjuipment for use in vending machines, 
we have been greatly interested in and vit^ly concerned with the recommenda- 
tion of the Treasury Department with regard to new coinage material. We 
realize that in your position as chairman of the subcommittee of the Committee 
on Banking and Currency, you are also greatly interested in the present coinage 
proposal. We are in complete accord with the recommendation by the Treasury 
Department of the so-called sandwich coin material, since it wUl not only be 
accepted side by side with present coins in all vending machines and other coin- 
operated devices, but will be accepted without ai^ complicated or costly adjusts 
menta to coin handling equipment. National Rejectors, Inc., has conducted 
thorough tests of various metals and alio™ proposed as new coinage material, 
but the material, as recommended in the Treasury Department proposal, is the 
one which is properly and reliably accepted. Since you were successful in spon- 
SOrii^ the antislug law several years ago, we are respectfully urging that you also 
support and vote for the Treasury proposal for new coins. Thank you. 

Emc Sokoi^ 
Executive Vice President. 

The Chairman. They are favorable to Uie bill? 
Mrs. Sullivan. Yes, completely so. 

STATEMENT OF HON. HENKT H. FOWIEH, SECRETAB7 OF THE 
TREASURY; ACCOUFANIED BY ROBERT A. WALLACE, ASSIST- 
ANT SECRETARY; FRED B. SMITH, ACTING GENERAL COUNSEL; 
EVA ADAMS, DIRECTOR OF THE MINT; FREDERICK W. TATE, 
DEPUTY DIRECTOR OF THE MINT; AND JOHN H. AUTEN, 
DEPUTY DIRECTOR, OFFICE OF FINANCIAI ANALYSIS— 
Eesnmed 



Mrs. Sullivan. Now, Mr. Secretary, I note the gre 
the Treasury demonstrated in coming up with a solution for having 
coins compatible in the existing vendmg machines. But perhaps not 
all of the members know why this is so important from a Federal 
criminal enforcement standpoint. I am afraid I had a lot to do with 
that in the sponsorship of Public Law 87-667, 3 years ago, the slug 
law, which makes it a Federal crime to use slugs of any denomination 
in an "automatic merchandise vending machine, postage stamp 
machine, turnstile, fare box, coinbox, telephone, parking meter,'' 
and so forth. 

Formerly it was a Federal crime only if it involved a 1-, 2-, 3-, or 
5-cent piece. 

So perhaps it might be helpful to tell the conmiittee the extent of 
the law enforcement problem Uncle Sam would have had if the 
Treasury had not devised a new coin material with properties siniilar 
to silver, so that electrical resistivity tests in the vending machines 
could continue to reject the slugs easily. 

So this is, thereforCj not just a matter of convenience to the vending 
machine industry, is it? 



■dbyGOOgIC 



58 COINAGE ACT OF lfl6S 

Secretary Fowlbh. No. It is a matter that really goes to the value 
of a coin as a medium of exchange, from the standpoint of the classic 
and traditional value. If the development of merchandising tech- 
niques promises to continue to employ these various vending-machine 
devices in a much greater degree — if the curve of utihzation continue 
to go u^) as it has m recent years — it seems to me that it is not only 
appropriate, but necessary, for the Congress and the Treasury, who 
are concerned with providing the type of coinage that will serve the 

Eurpose of a medium of exchange m the modem world in which we 
ve, to try to adapt any new coin to the merchandising conditions 
which surround us. Our coinage proposal is made not with particular 
regard to any given group of manufacturers nor with regard to any 
given group of distributors who utilize the vending macmne in their 
establishment, but because of the public interest and the pubhc neces- 
sity in many cases to resort to these vending devices, and the incon- 
venience to the public that would be involved in developing coins 
that woidd not be compatible and would not add to the law and 
tradition and good manners and general honesty, and so forth, under 
the saf^uard that the present machines provide in the technique 
which you have referred to of resisting slugs and coins other than the 
ones that are normally employed. 

So looking at it from the overall standpoint of what is necessary 
for the trade and commerce of the country, it seemed to us that we 
should search for a substitute coin for the silver coin that would be 
as close to compatible with the silver coin, and thereby make possible 
the continued utilization and continued development of this method 
of distribution. It was in that spirit and that attitude that Treasury 
came down, you might say, for the particular coins that are recom- 
mended to the committee now. Omerwise, I think we would have 
had a long period of disruption of the utihzation of the current devices; 
we might have had a period of doubt as to whether or not this par- 
ticular form of distribution coidd continue to develop in line with 
the needs of commerce, and it would have been a period of disruption 
that would have caused us all great difficulty. 

Mrs. Sullivan. Thank you. Mr. Secretary, I would like to pursue 
the proposal in the bill for a Joint Commission. I notice that you 
specify as members in addition to the Secretary of Treasury as Chair- 
man, which is appropriate, the Secretary of Commerce, the Director 
of the Bureau of the Budget, the Director of the Mint, along with the 
chairmen and ranking minority members of the House and Senate 
Banking and Currency Committees, one other member from each 
House to be appointed by the Speaker and President of the Senate, 
and four public members appointed by the President. 

In Commissions of this nature, with Cabinet officers and other 
high governmental officials serving, I believe the Cabinet officer often 
assigns the responsibility to an assistant when he cannot personally 
be present at a meeting. 

Would a similar flexibility be given to the congressional members? 
Could Mr. Patman or Mr. Widnall assign another member to attend 
a meeting in his place, or is it your intention that onlj^ the principals 
will actually participate, not assistant secretaries or assistant directors 
and so on? 

Secretary Fowler. I would think, Mrs. Sullivan, that the ground 
rules of the operation of the Commission probably ought to be de- 



DigitizcdbyGoOgle 



COINAQB ACT OF 19«S J9 

tormined by the Commission itself wben it meets and conrenes. 
A certain amount of flexibility must neeessarily be retained insofar 
as participation in meetings are concerned. I think we aU recognize 
as a practical matter the tremendous demands for tltae that are 
placed on both my office and the Director of the Budget and the 
chairmen of the respective committees. 

Certainly if I were serving on such a Commission and asked to 
advise, I would think I would come out with saying that we wodld 
hope the principals could be in attendance a good paj*t of the time, 
but whenever it was not convenient for them to be there, th^ could 
be represented by an alternate. 

By the same token, I think it would also be wise to have an altera 
nate available and familiar with the on-going work of the Commis^on 
so that there would be the continuity that would be neceesary. 

There might be rare occasions in which it would be desirable from 
the standpomt of the Commission to en^lude staff from the room anil 
exclude alternates, and just for the members of the Commission 
themselves to deliberate and act. But I would hope when the 
Commission was set up and in operation, that not only the Secretair: 
and the Director of the Mint, but also the Assistant Secretary, who is 
the channel from the Secretary's Office to the Mint, various staff 
members of the staff of the Mint and members of our Office of Financial 
Analysis could be available for the convenience and service of the 
Commission. 

Now, it goes without saying, thwefore, the chsirman and rankii^ 
minority member of the Banking and Currency Committee ough't to 
have alternates that they could call on to attend and participate iq 
theses^ons. 

Mrs. Sdllivan. Well, it juat seemed to me that -this- ^lould he 
spelled out somewhere, either in these hearings or in Ae formatioB 
of the Commission, so that the ground rules were set. I raised this 
question because I know how busy all of the principals are in their 
official responsibilities and because of the common practice in the 
Qovenunent of assigning assistants or alternates to sudi commission 
meetings. 

Secretary Fowler. I would think that would be very appropriate— 
tmd perhaps some comments in the committee r^ort might clarify 
eve^one's intention in that r^ard. 

Tvu-s. StiLLiVAN. Thank you. My time is up. 

The Chaibman. Mr. Reuss? 

Mr. Rbuss. Thank you, Mr. Chairman. 

I want to congratulate you and your associates, Mr. Secretary, on a 
very progressive coinage program here. The logic of removing the 
ffllver from the dime and the cjuarter, I think, is inescapable. But I 
am so impressed with your logic I wondered why you did not apply it 
to the half dollar. 

How much would it cost the Treasury and the taxpayers to keep 40 
percent silver in the half dollar, based on anticipated use? 

Secretary Fowler. I think perhaps the major cost element to be 
considered is the cost in the stocks of silver themselves. I imagine 
that is your primary concern. 

Mr. Rbuss. May I ask first, what will the new cupronickel quarter 
cost? I know it is practically nothing. But what is it? 



■dbyGOOgIC 



60 COINAGE ACT OF 196S 

Secretaij Fowler. Just one moment, sir. In terms of a thousand 
dollars of face value of quarters, the cost would be $58.61. 

Mr. Reobs. That is the new quarters? 

Secretary Fowler. That is the new quarter. 

Mr. Rbuss. Now, how about a thousand dollars worth of 

Secretary Fowler, Of the old quarters? 

Mr. Recbs. Well, let's have the old quarters, and then 

Secretary Fowler. A. thousand dollars worth of the old quarters 
would cost $935.27. 

Mr. Rbuss. Coi^atulations. This is turning off the lights with & 
Tfii^eance. 

Now let's have this on the four-bits. 

Secretary Fowler. Right. Now, the old 50-cent piece 

Mr. Reuss. That is 90 percent silver. 

Secretary Fowler, Right. $935.27 is the cost of the metal in 
the old 50-cent piece — a thousand dollars worth of 60-cent pieces 
contain $935 of silver. 

Mr. Redss. The present quarter and the present 50-cent piece 
are both 90 percent silver? 

Secretary Fowler, That is right. 

Mr. Reubb. And how about the new? 

Secretary Fowler. The new one would be $432.37. 

Mr, Reuss. Well, I have a bright idea for saving you $400 on 
every thousand. Why don't we do that? Why don't we make a 
cupronickel 50-cent piece, in order to achieve multimillion-dollar 
economies? I guess before I pursue this I should ask you the antici- 
pated use or coinage of 50-cent pieces, per year. 

Secretary Fowler. I think our contemplated production schedule 
for the new 50-cent piece would be about 100 mdUon a year. That 
would be a high figure. 

Mr. Reuss. A hundred million a year. Has somebody done the 
arithmetic? 

Secretary Fowlbk. We have done it in terms of the silver. You 
see, our primary concern, Congressman, was arriving at the type 
and kind of coinage that we thought would meet the coinage needs 
of the country. This profit on seigniorage and the cost of metal as it 
were is an incidental benefit that is achieved, not as a primary purpose 
of this program. 

Mr. Rbuss. Right. But any time you can get incidental benefits 
which will work out at about $400, tunes 100,000, as I compute it, 
it seems an incident worth groping for. 

Secretary Fowler. It is a usefm figure for the record. 

Mr. Reuss. I make it that the use of a cupronickel half dollar in 
the future, such as the proposed cupronickel dune and quarter, would 
save about $40 million a year to the taxpayers of the United States 
over the proposal to use a 40-percent silver half dollar. 

Secretary Fowler. Your shde ride is working faster than mine. 

Mr. Reuss. It may not be working at all. 

Secretary Fowlbr. I think that is what the mathematics may 
work out to. 

Mr. Reuss. If ray $40 milhou estimate is grievously in error 

Secretanr Fowler. We will correct it for the record; yes, sir. 

(The information follows:) 



■dbyGOOgIC 



COmAOE ACT OF 1965 61 

Saoings in seigniorage of euproniekd half doUan over silver clad half doUart 

Ck)st of metal in $1,000 face value of eUver clad half dollar $432. 37 

Cost of metal Id $1,000 face value of cupronickel clad half dollar 5& 61 

Difference - 373. 76 

100,000,000 half dollars=S50,OO0,O0O face value. 

$50,000,000 face value at a savings of $373.76 per $1,000 face value=a savings 
of $18,688,000. 

Mr. Redss. I make, then, a8 point 1, that though the aaving be 
incidental, $40 million isn't hay. 

Point No. 2, 1 note that already 50-cent pieces are, I believe, next to 
silver dollars, the shortest item m our coinage offering, are they not!" 

Secretary Fowler. That is right. 

Mr. Reu&s. Aren't they about the scarcest? 

Secretary Fowler. That is right. 

Mr. Reuss. Well, isn't some sort of perverse Gresham's law likely 
to operate whereby a lot of people who should know better but don't 
are going to be a little leery of me new dimes and quarters and think 
that this new half dollar is the one that still has 40 percent silver in it, 
and isn't there going to be a tendency to take those off the market by 
hoarding, and require the Treasury to coin more of them than antic- 
ipated? 

Secretary Fowler. Certainly insofar as I suppose those who buv 
coins for their grandchildren and want them as family gifts there will 
be some withdrawal of the 50-cent piece. Certainly we have witnessed 
that in connection with the John F. Kennedy half dollar. They are 
used as gifts and held more or less out of the mainstream of commerce. 

However, if the new half dollars are made and released in the 
quantities anticipated — in terms of the quantity production that we 
have in mind— I believe their attractiveness for coin collection, 
amateur as well as professional, will be less. And while certainly you 
are quite correct in saying that there would be more of a tendency to 
take a new 50-cent piece and to hold it than it would th^ new quarter 
or the new dime, I would hope that the differences would not oe too 
appreciable over a period of time as it became a rather commonplace 
element in our coin system. 

Mr. Reuss. Let me ask this question: In view of the indicated 
saving to the Treasury, would the executive branch have any objection 
if Congress should deem it wise to amend and improve and perfect 
the legislation before us by treating half dollars on the same basis as 
it is proposed to treat dimes and quarters? 

Secretary Fowler. Yes; the answer to that is "Yes." We have 
thouebt a good deal about this. We don't have any feeling certainly 
of infallible judgment in this matter. But we did come to the con- 
clusion that the new 50-cent piece would maintain a link in our 
coinage with traditional metal tnat we bave come to accept as tradi- 
tionaL It would provide — although there was some concern aboub 
the use of the term the other day— a prestige coin. This is something 
that other countries that have left silver seem to do. I don't mean 
that we are just keepii^ up with the Joneses in this regard. But 
many of the Western European countries that have now gone to 
baser metals than silver for their subsidiary coinage, do retain a 
particular coin with either 400 or 500 fineness of silver to keep some 



Digitized byGoOgle 



62 COmAQB iffr OP tft8S 

And while I don't want to represent that the case is such a Bolid 
one that it is not open to question or judgment — I think obviously 
it is a matter for the Congress to decide— it is our positive recom- 
mendation^ — and we feel it is important certainly for tne time being — 
to maintain this link and to try, over a period of time, to see if the 
new silver 40-percent fineness 50-cent piece cannot come to occupy 
a, very real place in our coinage system. 

Now, I would be reasouably sure, Congressman Reuss, that the 
topic we are discussing here today is probably going to be a topic 
that the Joint Commission would nave to consider siter a period ot 
3 years, when the new coinage system is working, when there nas been 
an opportunity to appraise the coinage problem in the context of the 
overall supply-demand situation for silver, in what I would hope to 
be a more normal frame of reference than the current situation where 
we are all concerned with the first and the primaiy step of moving 
out from a complete dependence upon a metal which doesn't promise 
to be in adequate supply. 

I think actually this question will be debated during these hearings. 
We certainly anticipated that it would be. And that the resolution 
of the Congress in tnis particular bill may not he the last word on it, 
if it follows the administration proposal. But I think it is an effort 
t^at is worth a trial until we see a little more clearly what the long- 
term future of silver may be. 

Mr. Reuss. Thank you, Mr. Secretary. 

The Chairman. In announcing the members who have not inter- 
rogated witnesses, I made an error by indicating Mr. Cabell — I should 
have said Mr. McGrath. 

When Mr, McGrath is finished, we will start all over again and give 
each member an opportunity. 

And we must note the appearance at this time of Miss Eva Adams, 
Director of the Mint. She was unavoidably detained Friday, because 
she had other official duties that prevented her attendance. Any 
others who were not here? 

Secretia-y Fowler. I believe that is all. 

Mr, Wallace. Mr. Chairman, I wonder if I could add just some* 
thing to what Secretary Fowler said about the half dollar, because I 
think it is a very important part. 

In working out the program, we had to take into account preserva- 
tion of existing coins. Now, there are three types of possible hoarding. 
One is hoarding of coins for the silver content. We beheve that the 
program will prevent that by maintaining the price of silver at $1,29, 
ana also by having standby authority to prohibit the melting or export 
of coins. 

The second type of hoarding is the numismatic, or speculator, who 
buys coins in quantities in the hopes of increasing values. The fact 
that we have nearly 12 billion of these coins in circulation will make 
them anything but rare, which we think will take care of that problem. 

The third type of hoarding is much more difficult to tackle. 

Mr. Ashley. 12 billion 50 cent pieces? 

Mr. Wallace. No; 12 biUion total silver coins. We are talking 
about hoarding — the speculators taking silver coins because we would 
not be making any more of them. 

Mr. Ashley. It I may say so, I thought you were directing your 
remarks to the 50-cent piece. 



Digitized byGoOgle 



COINAQB ACT OF IOCS 63 

Mr. Wallace. No; I am talking about all silver, the hoarding of 
silver, and the relationship of the 50-cent piece to the problem of 
hoarding silver coins. 

Mr. Abhlbt. Of the 12 billion in coins, how many are 50-cent 
pieces? 

Mr. Wallace. 1.1 billion. 

Now, just to finish this point, Mr, Chairman. The grandfather- 
type hoarding, whereby an uncle, father, grandfather or other relative 
might say "Son, we are not going to have any more silver coins, so I 
wanted to save one for you." The fact that we would be continuing 
silver in our coinage we believe would lessen that type of hoarding. 
If you were to go off of silver completely, such as Congressman Keusa 
has suggested, there would be absolutely no silver in coinage, and we 
beheve this would have a great tendency for people to hold back silver 
coins, because there is no more silver in coinage. If you continue 
silver in coin^e to this degree, we believe it wiU lessen that type of 
hoarding. 

The Ckaibman. Mr. McGrath? 

Mr. McGbath. I have no questions, Mr. Chairman. 

The Cbaibman. Mr. Fine? 

We have just started questioning the witnesses again this morning. 
Mr. Fowler testified Friday when you were not here. We have Mr. 
Fowler back and Mr. Wallace, the Assistant Secretary, and Misa 
£va Adams, the Director of the Mint. 

Would you like to ask any of them any questions at this point? 
You will be given an opportunity later. 

Mr. Pino. Not at tins time, thank you, Mr. Chairman. 

The Chairman. Yes, sir. 

May I ask you, Mr, Fowler, about this Joint Commission. I con- 
sider that a very important CommisEdon with the Secretary of the 
Treasury as Chairman, and the Secretary of Commerce, the Director 
of the Bureau of the Budget, the Director of the Mint, the chairman 
and ranking minority member of each of the Banking and Currency 
Committees of the House and Senate, one member to be appointed 
by the President of the Senate, one appointed by the Speaker of the 
House, and four public members. 

I hope Mrs. Sullivan will take into consideration, in evaluating this, 
that it is all right to have alternates up to a point. But I don't 
think alternates should be allowed unless you nave a quorum. If 
you were to adopt a poUcy like that, I am apprehensive that you 
woidd wind up sometimes havii^ 14 alternates and not having any 
members of the Board. 

What do you think about that? 

Secretary Fowler. That certainly is one of the ground rules I think 

rou would have to impose. I think these procedures probably, as 
indicated to Mrs. Sullivan, can perhaps be determined dv the prin- 
dpals themselves when they meet in Commission assembled. With 
these bodies it is always a problem, I think, of assuring the continu- 
ity, as it were, of the voting members, of those who have the final 
authority. And while I tliink the use of alternates is probably going 
to be a practical necessity, I would think that the suggestion you 
made^ that the meeting should necessarily include a majority of the 
principals, is a safety factor that would be useful. 



Digitized byGoOglC 



64 COINAGE' ACT OF 1965 

The Chairman. The Cominission will be important, as I see it, 
regarding the needs of tfie economy for coins, the standards of coinage, 
technological developments in metallurgy and coin selecting devices, 
the availability of various metals, renewed minting of the silver dollar, 
the time and circumstances under which the tmited States should 
cease to maintain the price of silver and other considerations. 

So the Commission will certainly be an important one. 

Mr. Barrett, would you hke to ask questions? You are recognized. 

Mr, Bahbett, Yes, sir. Mr, Chairman — I would like to ask Mr. 
Wallace this question: Will this metal, after annealing, be able to be 
rolled with the same equipment now in the mint in Philadelphia, or 
will the new mint in Philadelphia acquire new machinery for rolliBg 
in order to coin this metal? 

Mr. Wallace. Mr. Barrett, the new mint which is underway in 
PhUadelphia now will have to be constructed so as to accommodate 
the cladding featiu"ea of the new material. It will require extra space 
for that. It will require extra equipment and personnel for that 
operation. 

As far as the rolling is concerned, once the material is clad, a simi- 
lar type of rolling equipment would be used, although of course in the 
Philadelphia Mint we would plan to get new rolling equipment. 

Mr. Bakkett. Let me ask you just one academic question. What 
would be wrong with recalling the silver dollars and the half dollars 
as we recalled the gold or the gold certificates, to get that silver out of 
circulation and put it under our protection in the event that we need 
it? What would be the expense? 

Mr. Wallace. Are you talking about recalling all the existing silver 
coins? 

Mr. Barrett. I am talking about recalling the half dollars and 
the dollars now coined in the alver content that we have. 

Mr. Wallace. Well, the problem with the half dollars is that this 
would cause a very tight supply of them, and if the Government 
were to call them in in addition to other people 

Mr. Barbett, I am speaking after you get a supply minted of the 
new metals, and set a deadline for the return of the silver coins like 
liiey did on the gold and gold certificates. 

Mr. Wallace. My only hesitancy would be the fear that with this 
in the offing, people would be holdmg them in moderate quantities, 
and yet the total quantity being held off would be substantial, in the 
case of the half dollar. Of course the dollars are already off. But I 
think this, again, would be one of the questions that the Joint Com- 
mission could consider after the new coinage is in effect. 

Secretary Fowler. If I may add one comment to that — we felt, as 
Secretary Wallace has indicated, that this is the type of question 
which is much better considered subsequently by the Joint Commis- 
sion after the new coinage is in and in volume form. At that time, 
if you attempted to accelerate the normal process of simply retiring 
old and worn out coins, the impact of any hoarding that might be 
stimulated could be much better absorbed without any damage to the 
coinage system that might cause you to lose a bit of control over the 
silver, as it were, that is in those coins — but that rather than face 
into that problem now and make even that tentative decision now in 
connection with this program, we would prefer that it be deferred — 
otherwise we might excite hoarding some of the existing coins that 
otherwise people would not think of at this time. 



Digitized byGoOgle 



COIKAaE ACT OP 1905 65 

Mr. Babbett. I assume that you and Mias Adams, as well as Mr. 
Wallace, have given a great deal of thought to this situation. 

Secretary Fowler. Secretary Wallace and Miss Adams have been 
working strenuously on it for years, you might say^ — since the problem 
emerged, I, mysea, have only been able to come close to it since I 
assumed office on April 1. It has been a real problem, along with all 
other things, to take the time that was necessary. I apologize for the 
fact that there was an interregnum between April 1 and today, but I 
really had to take a great deal of time, just to familiarize myself with 
the issues that are involved in this program, and to take the necessary 
decisions. 

I obtained what I thought would be adequate advice from my 
colleagues and dSsociates, and share the responsibihty with them of 
the decisions that had to be made. And this did take some time. 

I recognize, therefore, that the members of this committee will have 
some time to take in resolving the questions that come to them. I 
hope that— we tried to make available to you, Congressman, the fruita 
of our labors and decisionmaking, not only as they appear in the 
Treasury staff study but in the other reports, and in the President's 
message, we tried to have a fairly full review of not only the answers, 
but also the issues and the situation out of which the answers emei^ed. 

But we have, I think, given this particular problem — internally in 
the Treasury, at least — as careful a study as any problem I am aware 
of in recent times. 

■Mr. Barrett. Thank you very much. 

The Chairman. Mr. Fino? 

Mr. Fino. Mr, Secretary, I am very much concerned about what 
might occur and what might follow if we start going off on these 
different tangents, minting these new coins. My first reaction would 
be that all of the other coins are going to start gomg out of circulation, 
not coming back to the Treasury but going into the pockets, the safes 
and the tm boxes of everyone. 

Now, we have seen the experience we had with the Kennedy half 
dollars. We minted about 250 million pieces. We don't see any 
around in circulation, it is pretty hard to see or get any. 

Now, I don't know whetner you are familiar — I introduced a piece 
of legislation, I think it was in January, and this is in line with the 
shbrtage, the coin shortage. During this period of emergency, in- 
stead of |;oing into this metal business and cutting down tiie amount 
of silver m the coin, that during this period of emei^ency the Treasury 
Department should authorize the issuance of paper scrip, in denomina- 
tions of 25, 50-cent pieces. Nobody is goim to hoard paper. It will 
be in wide circulation, and you wouldn't have the problem that I 
think you are going to be presented and confronted with if you start 
minting these new coins. 

I would like to have your reaction to that. 

Secretary Fowler. Yes, I do not think there will be any more 
tendency to hoard the new coins than there would be to hoard the 
new scrip, because the new coins, when they come on the market, as 
I tried to explain in the statement— and we did discuss it some on 
Friday — the new coins will be produced in a very, very substantial 
■quantity before any of them are mtroduced into the market. In other 
words, you build up a very large inventory of the quarter, the new 
nonsilver quarter, and do not release them into the market until you 



Digitized byGoOgle 



66 COtNAQE ACT OF 1965 

have a very lai^e supply, with a follow-on heavy production, so that 
the normal incentive to hoard the new coin will be avoided. There ie 
a provision requested here also that we be allowed to use the year of 
fii^t production for a period of time. Except for a few days or a few 
weeks, perhaps, or at most a month, when it is a novelty, it will become 
the most commonplace element in our medium of exchange, and I 
would not think that there would be any more tendency to hoard 
that than there would be to the new paper scrip. Indeed, it might 
work out the other way. 

If it were thought that the new paper scrip was going to be just a 
temporary emedient, and it would be at some point sharply cut off, 
there might be some tendency to put a few of them away, pieces 
away, mst so that you had it for your collection. 

Mr. Find. Well, Mr. Fowler it would be to the advant^e of the 
Govenunent if l&O million people hoarded $100 of this kind of money, 
and just put it away. Whereas, when they are hoarding corns that 
have silver content, they ore hoarding something of value. 

Now, let me ask you this. Is it your intention to just temporarily 
mint these types of coins that you have now with this alloy in it? 

Secretary Fowlbh. Oh, no, this is permanent. This is being pre- 
sented for as far as we can see the coinage base for the dime and the 
quarter. 

Mr. Find. All ridit. 

Now, we get back to the scrip question. 

There is a pressing need to try to save as much silver as possible. 
There is a great demand for silver. Wouldn't it be more advantageous 
to the Government to hold onto all of its silver and just issue this 
paper, until things sort of work out? 

I think it would be a tremendous advantage to the Government if 
we had hoarders among the people of this paper scrip. 

Secretary Fowlkk, In the continued use of the mmting of the pres- 
ent silver coins — which will go on contemporaneously with the pro- 
duction of the new coins in volume — it is true that we will be con- 
suming substantial amounts of the silver stock. We think, however, 
in view of the present situation with regard to the coinage we still 
have some need for further heavy production — that any temporary 
shift at this time to the paper money, which would have a very short 
life, 18 months perhaps, and would not be compatible with the 
merchandising devices, the vending machines which I have indicated, 
would add a new and more or less complicating factor to an already 
complicated situation. The silver we have was more or less acquired 
for, and its use contemplated as, coinage. Therefore, we felt it was 
desirable to go ahead and mint the dime and the quarter, the one that 
we have today, continue to mint it, until we had in sufficient quantity, 
the new compatible coin of the nonsilver content, that could go into 
the stream of commerce. Now, this again is a question of judgment, 
sir, and it may well be that — it may be that we have made the wrong 
judgment here. 

However, I can only say it has been given very careful consideration, 
and we have just come down 

Mr. Fino, When you say careful consideration, you mean to the 
paper scrip? 

Secretary Fowler. That is right. Indeed, and some other alter- 
natives. 



■dbyGOOgIC 



COINAGE ACT OF 1965 67 

Mr. Find. I mean this is not a novelty. It is not something new: 
Most of the European countries have that, don't they? 

Secretary Fowler, Certainly some of those countries do. 

Mr. FiNO. The Scandinavian countries ; Sweden, I think. 

Secretary Fowleh. Yes, sir; it is used in other countries. 

Mr. FiNO. I would like to see that, because this would be a nov- 
elty — 25 cents in paper. And you have millions of American people 
lioarding that. Wouldn't it be a boDanza for the Treasury De- 
partment? 

Mr. Wallace. Mr, Fino, a year ago this question came up before 
the Fascell subconunittee, which was looking into the coinage aitua^ 
tion. At that time they took the testimony of various business 
groups. They testified in horror at the idea of having to count all 
this paper, wmeh would be floating around. 

Another thing which entered into our studies was the fact that the 
last time paper currency was used, for fractional currency, was during 
the Civil War, where it was derisively referred to as shinplasters. 
There seems to be just general agreement that, all things considered, 
this would not be a very effective solution, 

Mr. Find. Well, of course, it all depends on the amount of trust 
that people have in the integrity of our Government. You fellows, 
through our efforts, took the silver from the silver dollar. No one 
paid any attention to it. They have confidence in their Govern- 
ment — they know the money is worth every dollar it says it is. The 
same thing applies to scrip. If you had 50 cents or 25 cents scrip 
or even 10 cents scrip, as long as Uncle Sam is behind it — I don t 
blow for how long — ^but at the present time as long as Uucle Sam is 
behind it, it still had the value that it should have. 

Mr. Gbttts. Will the gentleman yield, please? 

Mr. Fino, the thought occurs to me — what would happen to the 
vending induatoy with paper money? 

Mr. Fino. Well, they could pump out all kinds of coins without 
any silver in it, if that is the problem. It doesn't have to have 
silver. All it has to have is some amount of electrical properties to 
make those machines work— ^just like we have in New York City, 
turnstile coins— those things have a certain amount of electrical 

froperty that makes the machine work. So that is no problem, 
am trying to save the Government all of this worry and concern 
about the silver. I say leave the silver alone, stock it, pile it up, 
and let's get some paper out and take care of this problem. 

Secretary Fowleb. I think, Mr. Chairman 

Mr. Fino. I was just told my time has expired. 

Secretary Fowler. I think for the record I might just include the 
comments in the sixth report of the Committee on Government 
Operations. 

The Chairman. If you think it is important, it will be placed in 
the record. 

Secretary Fowleh. It is on page 29, and carries over to the top 
of page 30 of that report. It is House Report No. 194 of the 89th 
Congress. 

The Chairman, We will be glad to have it in the record. 

(The information referred to follows :) 



Digitized byGoOgle 



68 COINAGE ACT OF 1965 

while the procesuug of ooine to meet severe shortages takes considemble time, 
scrip, in large amouate, can be printed quickly. It could be held in stock at 
Federal Reserve offices, in readineaa for use in the event of a shortage. Some 
companies have wanted to issue scrip of their own for use during the shortage, 
but their efforts have been considered usurpations of Government powers. 
While there was support at the hearings for the issuance of scrip by the Treasury, 
these objections were raised; The impracticability of counting individual pieces 
of paper with the rapidity with which coins can be counted; the relative ease of 
counterfeiting such paper, the inabihty to substitute scrip for coins in vending 
machines, parking meters, and other coin devices; and its very short life, which 
would be costly to the Government. From the Treasury's standpoint, the 

Elicy questions wlitch would be involved in determining whether or not to seek 
dslation which would authorize it to issue scrip apparently had not been con< 
Bidered. 

The Chairman. In order to clarify the record, this fractional cur- 
rency was put out about a hundred years a^Oj if my information is 
correct. .Aid some is circulated even now, is it not, Mr. Secretary? 

Secretary Fowlbb. I am not famiUar with it. 

The Chairman. You seldom see any of it. But collectors have it. 

Secretary Fowler. I would think so. 

The Chairman, I assume under existing law it could not be done. 

Mr. FiNO. In what denomination? 

The Chairman. Fractional currency: 10 cents, 25 cents, 50 cents. 
And about Uncle Sam being behind this, Mr. Fino was not here the 
other day, but I think we made a good case, showing that all this 
money is l^aJ tender, and being l^al tender it is good for the pajrment 
of all debts, public or private. And, of course, the debts are rather 
large now: about $1.3 trillion. And anything that is good to pay 
debts, and that people must accept in payment of debts and taxes, 
public and private, I don't think there is any question about the 
money not being good. Mrs. Sullivan? 

Mrs. Sdllivan. Mr. Secretary, your predecessor thought 26 million 
Kennedy half dollars would satisfy the initial demand, so there 
would he no rush for the coins and no hoarding or speculation. He 
was just about as wrong as could be. The mint has turned out over 
10 times that many, and vet none of them show up, except rarely. 
The drugstores sell them for $2, with a 39-cent keyring. You were 
asked, I beUeve, whether any steps were contemplated to assure 
that the new coins would not oe diverted. And you said, I believe, 
there would be so many available from the start that thia would be 
no problem. I just hope that you are not falling into the same trap 
that Secreta^ Dillon did on the Kennedy half dollar. 

Secretary Fowler. I certainly want to qualify that "no problem." 
I hope that we can minimize that problem by quantity production 
and mitial quantity distribution, so that we don't get into this pattern 
that unfortunately occurred at that time. 

Now, I could as easily be wrong as anyone else. But we do think, 
looking back on that experience, that it would be wise in the future, 
in issumg a new coin, particularly one that might be susceptible to 
collecting, to have a very large quantity of it initially issued so that 
there would always be a possibdity that anyone who wanted one 
would be able to get one in the normal course, shall we say. 

Mrs, Sullivan. I asked Miss Adams this question once before, 
and she was rather horrified at this idea, but why couldn't the Treasury 
defeat this insatiable demand for bright shiny new coins to be hoarded 
away for future speculative numismatic value by turning out for the 



Digitized byGoOgle 



COINAQS ACT OF 1*65 69 

remainder of the shortaee period coins which have heen dipped in 
some sort of solution to aarken or mottle them, so that they are not 
possibly of any attraction for fut»u"e collectors? They could be made 
to look drculated even if brand new. 

Secretary Fowler. Anything that is different the collectors might 
find ^-eat value in. 

Mrs. Sullivan. They would be looking for the dirty ones, then? 

Secretary Fowler. That is right. 

Mrs. Sullivan. I want to ask you about the dates on these coins, 
Mr. Secretary. You said in your statement Friday that the coins 
would be dated as of the first year of their issue, and that would 
mean probably 1966, But the bill pves you authority, I believe, to 
continue the 1964 date, is that correct — in section 9? 

Secretary Fowler. Yea. That is the significant part of it, I 
think. 

Mr. Wallace. The bill would provide the Secretary authority to 
start with the date of coinage or issuance and continue it until he is 
convinced that there is no problem of coin shortages. 

Mrs. Sullivan. Wouldn't it be advisable to continue using the 
1964r date if the half dollars so strongly resemble present coins, and 
if the dimes and quarters are also so close to the present ones, except 
for the edge? In fact, if you followed my advice and roughed up or 
dirtied the coins a bit, no one casually receiving one of them woidd 
have any occasion to even notice the difference. Isn't that so? 

Secretary Fowler. We did talk about continuing the 1964 date at 
some length. I think it is a point — it is not a black and white question 
whether it would be more desirable to use 1966, 1965, or 1964, but 
the particular provisions I think that we would now request is that, 
notwithstanding the pertinent section, all coins minted from the date 
of enactment shall be inscribed with the year of the coinage or issuance 
unless in the judgment of the Secretary of the Treasury such inscrip- 
tion is likely to contribute to a shortage of coins, in which case the 
particular coins involved may be inscribed with the last preceding year 
whose date has been inscribed on coins of the same denomination. 

Mrs. Sullivan. So you could continue, then, the 1964 date, if you 
felt it was de3ira,ble? 

Secretary Fowler. Either 1964, 1965, or 1966, or whatever the 
date of issuance was. It is optional. 

Mrs. Sullivan. I have some questions for Miss Adams, but my 
time is up. 

The Chairman. Mr. Reuss? 

Mr. Kbuss. Mr. Secretary, I think the presentation on pages 14 
and 15 of your testimony, on the protection of existing silver coinage, 
is impressive. You dispose of one hazard, that there will be hoarding 
in anticipation of a com shortage during the production period for 
the new coins, and you point out, I think, quite properiy, that your 
production capacity would be so impressive that you could beat 
that one. 

You then point out vour abihty to control the melting down prob- 
lem by two methods— ^y maintaining a $1.29 an ounce offer to sell, 
and secondly, as a find resort, instituting direct prohibitions over 
the melting down of silver coins if you need to. 

I think as far as it goes that answers it pretty well. 



Digitized byGoOgIC 



70 eOBfAQB, ACT OF 1865 

But what about the third possibility, which I don't think is a very 
real one — that a numismatic craze would cause people to hoard all or 
part of this 12 billion presently circulating silver corns? 

I would like your answer. 

My tentative one would be if they do that, great. Instead of the 
stuff coming into the Treasury in 25 years, it m^ht take 50 or a 
hundred years, but meanwhile the Treasury is doing just fine, it 
issues the new coinage as needed, and suffers no loss. 

Secretary Fowler. Well, insofar as there is a risk of hoarding of 
the existii^ coins, we believe that the decision recommended to the 
Congress, to continue the existing coinage alongside of the new coinage 
for awhile and then to cease the production of the old coins, but 
still, diuing this period of transition, to have it generally understood 
that the old coins would continue to be in circulation until some sub- 
sequent decision might be taken by the Government to accelerate 
their withdrawal, wUl diminish any tendency for people to grab up, 

fou might say, the existing coin^e during the period of transition. 
f you are going to face the problem of possibly withdrawing the exist- 
ing coins worn circulation m any massive way, or accelerated way, 
that is something that should be done well after the new system ie 
installed and is operating, and everyone is generally used to it. 

Mr. Reuss. From where we sit now, Mr. Secretary, is it not likely 
that this country could allow the old 12 billion coinage to circulate 
for its 25 year life, or whatever it is 

Secretary Fowler. For the full 25 year life, that is right. Twelve 
billion coins is a lot of coins — even in terms of 

Mr. Rbuss. In the light of that, what becomes of the ai^ument 
that it is necessary to keep issuii^ a 50-cent piece with some silver 
in it to take the pressure off the 12 billion pieces circulating? I 
shouldn't think there really would be much pressure on that. 

Secretary Fowler. I thmk there is probably more of a pressure 
on the 50-«ent piece than on the other kind, althoi^h anyone who 
wants to save a silver coin — the grandfather type of collector — I 
hesitate to use the word "hoarder," because I don't think that is the 
thought — but the person who wants to put some silver coins away 
for gifts, for the children or grandchildren, wiU always know he can 
get a new 50-cent piece which has silver in it, as it appears here in the 
exhibit. There wiU be no need or desire to hoard or save silver coins 
generaUv) because silver is continued in the half dollar. 

Mr. Reuss. He would also know that he can also get an old 60- 
cent piece in about the same ratio to old quarters and dimes as the 
new. 

SeCTetary Fowler. The two things I think working together 
would be continued circulation of the existing coinage, 12 billion 
silver coins, plus the fact that there is a new silver type coin constantly 
coming into circulation. If the instinct to hoard sdver coins can be 
arrested or retarded in any way, I think it would be through that 
device — that combination. 

Mr. Reuss. You don't think there is class legislation deseed to 
benefit 50 cent numismatists at the expense of dime and quarter 
numismatists? 

Secretary Fowler. It was not so designed. 

The Chairman. Mr. Stanton? 

Mr. Stanton. Thank you, Mr. Chairman. I have one question 
for Miss Adams. 



Digitized byGoOgle 



COINAOE ACT OV'IOSS 71 

Miss Adams, I have been contacted for the last several months by 
representatives of the metallic powder industry. They happened 
to be in Washington the date the PrMident'a message came over. I 
showed them a copy of the bill. They were very happy on the estab- 
lishment of the Joint Commission on Coinajre. I informed these 
people I felt this was the organization that they would work with 
m pursuing their particular objective of pursuing the idea of moldiDg 
metal powders into coin blanks. I just wondered if you would darify 
the view. Am I correct in that— that this Commission would l>e 
one of those studying this? 

Mias Adamb. I am sure, sir, that is the purpose for the Joint Com- 
misfflon on the Coinage— is to keep in step with, to be familiar witii, 
to weigh and give consideration to these new developments which 
have occurred in these fields. 

We, too, have talked with representatives of these companies. We 
have tried throi^hout to be very certain that every potential material 
was considered. 

Now, they, themselves, have been working toward improving their 
techniques, and the potential of their own materials. So certainly 
this should be watched along the way. And I am sure the Commis- 
sion — I am speaking not for the Chairman of the Commission — but I 
am confident that would be one of the things which it would be their 
purpose to investigate. 

Mr. Stanton. They left me with the impression they are not 
ready yet to present this themselves. 

Miss Adams. I think, that is quite true, sir. 

Mr. Stanton. Thank you, Mr. Chairman. 

The Chaihuan. Yes, sir. Mr. Ashley? 

Mr. Ashley. Mr. Secretary, don't you think we can say that 
within the next 25 years we can anticipate the disappearance for all 
intents and purposes of our present silver coinage? 

Secretary Fowler. Yes — I think depending somewhat on the 
decision of the Congress as to the future of the 50-cent piece and the 
subsequent decision, somewhere ahead, on the provision about what 
ultimately happens to the silver dollar. 

Mr. Ashley. We can expect the disappearance will be speeded up 
toward the end of the period, wouldn't you say? 

Secretary Fowler. Yes, I think there will be that time when it is 
apparent they are about to disappear, then there will be an accelera- 
tion of acquisition among those who want to hold them for collection 
purposes. 

Mr. Ashley. And, of course, this is true ot 50-cent pieces, our 
present 50-cent pieces. 

Secretary Fowler. That is r^ht. 

Mr, Ashley. And it this disappearance accelerates, of course the 
production will be increased to compensate for that, wouldn't this be 
true? 

Secretary Fowler. Oh, yes, the production of the new coins would, 
by that time have taken care of the Nation's coin needs. Perhaps it 
vnll be feasible long before to reduce the volume of the mitial pro- 
duction of the new coins, which will be at a very high rate initially, 
to really put the coin shortage to rest once and for all. 

Mr. Ashley. But what we are talking about is the manufacture of 
12 biUion new coins, really, or the increased amount over and above 
12 biUion that is going to be necessary for our growing population. 



Digitized byGoOgle 



72 COINAQE ACT OF leOC 

Secretary Fowlek, That is ]%ht. 

Mr. AsHLBT. It just seems to me that, in connection with what 
"Mr. Wallace said, that we are trying — the tiinking with respect to the 
three reasons that you mentioned, Mr. Wallace — silver content, 
fflieculative value, and so forth — that the speculative value realty — 
tne speculative aspect of it, over the long haul, can be rather consid- 
erably discounted, because we are talking about a dbappearine com- 
modity, disappearing entity, namely, silver coins. Why would you 
be concerned about whether they disappear in the next 5 years or the 
next 25? 

Secretary Fowler. Well, I think certainly our primary concern, 
speaking from the standpoint of the Treasury, is that we want to do 
everythuig we can to be sure that these existing coins are around 
during the next year, ^ or 3 years, while the new coinage production 
buildup is underway. 

I thmk after a 3- or a 5-year period, the decision about what happens 
to the old existing coinage is more closely related not to the coinage 
problem but to what the Government wants to do about silver as 
such— whether it wants to stay in the silver business. 

Mr. Ashley. Your principal consideration, I take it, Mr. Secretary, 
is the utilitarian consideration. 

Secretary Fowler. Right, I think this is one of the reasons we 
should iiave the Secretary ot Commerce on this Joint Commission, 
because the question of what happens to the silver using industries 
will be an important consideration in connection with whatever you 
de(ade to do about the existing supply of these 12 biUion coins that 
are then in circulation. 

Mr. Ashley. Now, do we need one or two prestige coins, Mr. 
Secretary? 

Secretary Fowler. The recommendations of the President can be 
properly interpreted as saying that we need at least one, and that the 
decision as to whether or not we need two, namely the silver dollar, 
as well as the half dollar, is a decision that can better be taken some 
time later, after this silver supply and demand situation comes into 
focus. Certainly it is not practical to distribute at this time a small 
amount of silver dollars — they would not serve a coinage purpose; 
they would serve another purpose. Therefore, the decision as to 
whether or not there wUl be a further minting of silver dollars is one 
that we wished not to take at this particular time, at least in submitting 
a recommendation. 

Mr. Ashley. Well, if you persist, and if the Congress wanted to 
persist in the proposal tor the new 50-cent piece, I don't quite see how 
we can help out really label both the silver dollar and the 50-cent 
piece as a prestige coin, at least based on the experience we have had 
with the Kenneov silver half doUar. Is there any measure of howmany 
Kennedy silver half dollars are actually in circulation, being used? 

Secretary Fowler. I don't think there is any accurate measure, 

Mr. Ashley. We do know there has been some 240 milli on 

Secretary Fowler. 274 million, as of April 30, 1965. 

Mr. Ashley. 276 million minted — as gainst an original estimate 
of somewhat less than 30 milhon. 

What was the original estimate as to how many would be minted? 

Secretary Fowler. I think the 30 million, actually 26 milhon, were 
just for initial distribution. I don't think there was any ceiling fixed 
at the time of the initial adoption. 



Digitized byGoOgle 



coinage: act op loes 73 

Mr. Ashley. If the new half doUar is the only coin with a signifi- 
cant amount of silver in it, wouldn't you expect the same kind of 
hoarding to take place, unless they are introduced in such volume, 
really over and above the utiUtarian purpose? 

Secretary Fowler. 1 think the difference between the silver content 
is a very significant one. 

The new 50-cent piece would have only about 20 cents worth of 
silver. There is a very considerable difference there, In its attraction 
for what I would call the speculation or hoarding that has to do with 
the price of silver. 

Mr. Ashley. But isn't it possible you may have to have two or 
three times as many 50-cent pieces of the new variety in order for 
that 50-cent piece to serve the utilitarian purpose because of the fact 
it is the only coin with a respectable amount of silver in it? 

Secretary Fowlbb. I would say that there is some possibility that 
you would have to have more than you would ordinarily produce in 
order to make it a circulating medium, and to exhaust 

Mr. Ashley. And wouldn't this increase as we get toward the end 
of the 25-year period where all of the silver coins are disappearing 
except the 50-cent piece, the new SO-cent piece? 

Secretary Fowleb. Well, I think that would depend a lot on what 
had happened to the price of silver in the meantime. 

Mr. Ashley, Thank you very much. 

The Chairman. Mr. Gonzalez? 

Mr. Gonzalez. Thank you, Mr. Chairman. 

Mr. Secretary, since Mr. Fine was talking about paper currency, 
I have a good supply of wooden nickels left over from my caiupaim, 
and I might hke to interest you in a good supply of wooden niekws, 

But, seriously speaking, it seems to me that in bringing about a 
transition to the new coinage, the big problem would be the present 
problem — -and that is safeguarding the Treasury's adequate supply 
of silver. Would you agree with that? 

Secretary Fowleb, Yes, I think this is certainly one of the real 
overriding considerations in moving from the one system to the other 
without encountering any coin shortage on the way. 

Mr. Gonzalez. Well, do you believe, then, that the biggest problem 
in this transition period, assuming we enact this, woidd be raising 
adequate safeguards against hoardmg? 

Secretary Fowlek. Welt; I will have to answ^ that question this 
way. I think this is a big problem. But I think that the choice of 
means to avert or to retard or to arrest the tendency to hoard is a 
fairly subtle business. As I indicated the other day in answering a 
similar question, sometimes the excessive use of controls and of mak- 
ing a fairly dramatic thing out of this has a coimterproductive ^ect. 
And we would hope that the assurances that were outlined in the 
statement about protection of the existing coinage would avert or 
arrest or retard this tendency certainly during the period that the 
new coin system is coming into operation. 

I don't think it can ever be completely averted over the long 25-year 
pull, as my colloquy with Congressman Ashley indicated. 

There may come a point — ^when the Government has decided, in 
effect, to withdraw the old coins from circulation, or when the 25-year 
period or whatever period of maximum use seems to be approaching 
an end, somewhere in this period, between 5 years and 25 years — when 



Digitized byGoOgle 



74 COINAGE ACT OF 1965 

there will be this inevitable tendency of people to accumulate for 
remembrance sake and for collections and whatnot some of the old 
coins. 

Now, what happens to the tendency to collect these old coins 
because of their silver content will depend a lot upon what happens to 
the price of silver after this transition period, and that, in turn, will 
depend a good deal unon decisions that we don't surest the Congress 
take now, but that it take sometime later after the new system is 
inaii^rat«d. 

Mr. Gonzalez. However, though, there are some threats in the 
immediate future — ^the nossibihty of a run on the Treasury through 
the redemption of silver certificates. Is there anv possibility at all 
there? Anybody holding a certificate today can redeem it, can he not? 

Secretary Fowler. Yes. We have enough silver to take care of 
that situation, and have a goodly supply left over. So we are not 
too apprehensive about that. 

Mr. Gonzalez. In other words, you feel that the supply ia adequate 
to continue a rate of redemption and, at the same time, fulhll the 
coinage requirements? 

Secretary Fowleh. Yes, sir. 

Mr. Gonzalez. And since the Government is still in the silver 
market — I was very happy to hear you say that eventually perhaps 
it would not be, and I guess this is a solution that we would ultimately 
be traveling toward. But in the meanwhile, I am correct when I 
say that any holder of a silver certificate can redeem the silver cer- 
tificate, r^ardless of his nationality or the ultimate use of that silver 
he has so redeemed. 

Secretary Fowleh. That ia right, 

Mr. Gonzalez. The reason I ask this is that I was across the border 
recently, and went over to a shop in Mexico, and I saw some silver cer- 
tificates on sale for $1.65, American money, with a picture of Presi- 
dent Kennedy instead of the usual figure — in other words, it was a 
Kennedy dollar they were selling for $1.65, They cut out a picture, 
and pasted it on the dollar. I don't have it with me, because I left 
it back home. But I notice that every one of these dollar bills on sale 
were silver certificates. 

Now, what I am getting at is that conceivably a Frenchman could 
come over and redeem any number of silver certificates, get the silver 
from the Treasury, help deplete its stock, take it to France, and ulti- 
mately this silver bullion would be converted to French francs. And 
what happens there is a real good source of free foreign aid for France, 
becauseif that bullion is ultimately struck into franca, it increases from 
its $1.29 per ounce value in the United States to over $3 its monetary 
value as a franc. 

Now, is there anything we can do to put a stop to this kind of 
practice? 

Don't you feel alongside some of the recommendations the Presi- 
dent is asldng now that we ought to reinstate the transaction tax, for 
example, andbave some export controls, such as the President is re- 
questing now as a standby request? 

Seeretaiy Fowler. In view of the general world market situation 
today in silver, we are reluctant to ask for that and to go into export 
controls on silver bullion or silver in that form, which is, I guess, 
what you are talking about, because we think it would lead very 



Digitized byGoOgle 



COINAOE ACT OF 1«»5 75 

quickly to a, two-price Bystem -with, all the attendant black-market 
and gray-market type of operations that would be very disturbing. 

We don't see currently m the world market situation the kind of 
practices that you have indicated. 

Now, they could develop and they could occur. But I really believe 
in a kind of letVnot-rock-the-boat attitude, and take these things 
oidmly as tte r^ht approach now. 

Mr. Gonzalez. In other words, you don't see any real apeculativ© 
effort at this moment in the international market. I don't know what 
we can do to control the internationfJ market. But tJiere is a lot 
#6 could do to control the domestic- 
Secretary FowLEB. That ia right. 

Mr. Gonzalez. I just wonder if we have any idea of how much of 
this redeemed Treasury silver is going out of the country, such as to 
France, for example. 

I wonder how much of our American silver is going into their 
new minting of 20-franc pieces. 

Secretary Fowlbh. Our export figures on silver indicate that for 
1964 we exported 52,893,000 ounces to the United Kingdom, 1 5,481 ,000 
ounces to France, 10 million to West Germany, and there are figures 
for all other countries — but the total exports, 109 million ounces. 

Mr. Gonzalez. I notice in this little booklet, which interestingly 
ffliough had some various statistics put out by Handy and Harman, 
and I think it was sent to me some time in January — it made a very 
emphatic statement. "For the first time since the lend-lease ship- 
ments of World War II, the United States was a net exporter of 
silver." 

Secretary Fowler. That is right. Last year we imported, I 
understand, about 52 million ounces of silver. 

Mr. Gonzalez. My time has expired, Mr. Secretary. 

The Chairman. If someone presented a $1 silver certificate or a 
$10 silver certificate, you are not obligated to ^ve them coins for 
that? 

Secretary Fowler. No. 

The Chairman. You can give them bullion, silver in a raw state? 

Secretary Fowler. That is right. 

The Chairman. Is that what they are doing now? 

Secretary Fowler. That is the practice now. 

The Chairman. Mr. Mize? 

Mr. Mize. Thank you, Mr. Chairman. 

Mr. Fowler, on Friday you told me that a melted-down present 
50-cent piece was worth about 44 to 47 cents, is that correct? 

Secretary Fowler. 46 cents, I believe. 

Mr. Mize. That is close enough. 

Secretary Fowlek. The silver content of the proposed new 50-cent 
coin is worth 19.7 cents. 

Mr. Mize. Well, now, with a guaranteed purchase price of silver 
at $1.25 a troy ounce, what wUT be the melted down value of the 
present silver dollar? 

Secretary Fowler. The present silver dollar? 

Mr. Mize. Yes. If the price of silver is at $1.25. 

Secretary Fowler. It is slightly below a dollar. 

Mr. Mize. Between 90 cents and a dollar? 

Secretary Fowlek. That is right. 



■dbyGOOgIC 



76 COINAGE ACT OF 1965 

Mr. MizE. And the 25-cent piece would be 

Secretary Fowleb. I can give you the intrinsic value of the present 
coins, 9.4 cents for the dime, 23.5 cents for the quarter, and 46.9 
cents for the 50-cent piece, 

Mr. MizE. Now, that is with the purchase price of silver at $1.29, 
roughly? 

Secretary Fowler. That is r^ht. Those figures are translated in 
terms of $1.29 price. 

Mr. MizB. I assume that the Treasury Department has a good 
educational and public relations program lined up to explain to the 
American pe tple what this is all about, using the National Advertising 
Council, like you do onyour savings bond sale, and so forth. 

Secretary Fowler. We have a very limit«d public affairs office, 
Mr. Mize. We have kept it fairly well down. I think we are going 
to have to depend for general understanding in this area on the businesa 
and trade press, as well as the general press, the banking community 
and other various organizations that nave a professional or institu- 
tional interest in this problem. Whether it wul become necessary to 
call on the Advertising Council, which has many, many requests, is 
still a question. We are certainly conscious of the public relations 
aspect of this. We have our own staff geared up to provide informal 
tion as much as possible, considering otner demands upon it. But I 
think the hearings of this committee, the hearings of the Senate 
Banking and Currency Committee, the debates, the normal public 
coverage of an item that is of interest and curiosity to most Ameri- 
cans — this is what we are really depending upon. 

Mr, Mize, Of course, the basic difference of opinion appears to be 
whether or not we should continue having silver in the new 50-cent 
pieces. The old cliche, "eventually, why not now," seems to be the 
feehng of a lot of us. 

Secretary Fowiek. I think the real question is whether the Con- 
gress wants to go along with the President's recommendation. 

Mr. Mize. Thank you, Mr, Chairman. 

The Chairman. Mr. Hanna? 

Mr. Kanna. Thank you, Mr. Chairman, 

There is a great concern, as I have learned, from the users of copper 
in my district. Copper has been advancing rather dramatically is 
price. I think it has gone up about 50 percent in the last year. 
The technical study you made says that the use of copper in coins is 
only a tiny fraction of the total consumption of copper. Can you 
give ua some idea about what the present use of copper in the coins 
IS with the old coins, and what it will be with the new coins? 

Secretary Fowleb. I will supply that for the record, sir. I think 
the figures, when you actually nave them, wiU show it is a very, very 
minor requirement in the total requirements picture, I should also 
like to add for your information it is our expectancy and plan to use 
the copper necessary for this purpose out of the excesses that are 
present m our Government stockpile. 

(The information referred to follows:) 



■dbyGOOgIC 



COINAas ACT OF 1966 
Copper TequiremerUs based on fiactd year 196S prodttetio 





Cplwre) 


'S5~ 


Nbw»U07' 




3,78^000,000 
1, £73,000, 000 

'Sffiffl 

191,500.000 


24,623,000 
662.000 


21,623,000 

■ass 

7,771,000 
















7,2S^S0O,0OO 


3^673.000 


62.920,000 





D mpper, to cents— sUvar [olad Oi 



Mr. Hanna. In other words, the United States will not be in the 
copper market as a competitive buyer at this time? 
Secretary Fowiek, That is correct. 
Mr. Hanna. I think that is an important point to be made to the 

{>ubhc, because I think there might be other indications being circu- 
ated, and they may not have a favorable effect on the price of copper. 

One other point I noticed. There was an indication in the Treas- 
my's report that you would be using cupronickel cladding on your 
€opper core in a strip form providea by private suppliers. 

Secretary Fowler. Yes. 

Mr, Hanna. Now, do you have strong assurance that a sufficient 
amount of this type of stripping is available from private supphers? 

Secretary Fowler. Yes;wedo. This has not been a casual inquiiy. 
Both members of the Department, the Director of the Mint, her staff, 
Secretary Wallace, and outside experts that are not interested in the 
problem have inquired into this matter. I have had advice from all 
of them, and they all assure me, that the sources of supply are ready, 
willing, able and rehable, to meet our requirements in this area. 

Mr. Hanna. All right. 

I would think that— going back to our first point — that if we could 
^o indicate where we would be in terms of copper, even in, let's 
say on the quarter. If you could provide for the record how much 
copper actually would be in the quarter, and how much that copper 
would be worth in a quarter, assuming the highest price for copper. 
I think the liighest pnce has been a little — about 54.1, it my figures 
are correct. Assuuuug the highest 

Secretary Fowleb. The himest price of record; yea. 

Mr. Hanna. All right. Thank you, Mr. Chairman. 

(The information requested follows;} 





Coat of copper in quarters (based o 


n 1,000 pieces) 




Price per poand 


Coat of copper 
in 1,000 sUvBT 
quftrlers,90O 


Co^ of copper 
Gl^quBiten 




CtKf 
0.196 
.718 


1-^ 

















db,Google 



78 COmAOE ACT OF 1965 

The Chairman, Mr. Grabowski? 

Mr. Grabowbki. Mr, Fowler, is either the Denver or Philadelphia 
Mint capable of making the silver strips you are going to have in thi» 
new silver-clad 50-cent piece? 

Secretary Fowler. The mints are capable of making the strip, 
but not the dad material. 

Mr. Qbabowski. How many companies can make the required 
silver strips now, and who would they be, do you know? 

Secretary Fowler. There are at least four. There may be more, 
but there are at least four. 

Mr. Grabowski, Would you know who they might be at the 
present time? 

Secretary Fowler. I think that can be supphed to you. 

Mr. Grabowski. Can you supply for the record who m^ht be able 
to do it in the future? 

Secretanf Fowler. Yes. 

(The information referred to follows:) 

Those that have ezpreseed an intereat in the making of silver clad strip for the- 
mint include: Composite Metal Products, E. I. du Pont, Engelhard Industries, 
Handy dc Harman, Olin-Mathieaon Co., Texas Instruments, Inc. 

Mr. Grabowski. How long do you think it will be before the 
mints can furnish enough silver strips that they will be needing? 

Secretary Fowler. How long before the mints can furnish — ■ — 

Mr. Grabowski. The silver strips that they will be needing in the 
future. 

Secretary Fowler. Well, I think the strip can be furnished now. 
We cannot do the actual cladding process untU we get the new cladding 
facilities and become once again a completely vertically integrated 
operation from the basic raw materials, 

Mr. Grabowski. You know, Mr. Fowler, I associate my remarks- 
with Mr. Mize, that on all this legislation, a very weak point in my 
mind is the advisability of having any silver at all in the 50-cent piece. 
I know you have mentioned for the record that this is sometliing that- 
causes you concern. But what if we just didn't have any silver in it 
at all? Would this overall program just not be able to be brought 
about? 

Secretary Fowler. Oh, no. I think I should make it clear that 
I know of no reason why as a physical or a technical matter the 
processes by which you arrive at the new dime and the new quarter 
could not be apphed to produce a similar 50-cent piece. The question, 
however, is not a physical question, but a policy question of whether 
or not Congress wants to make a complete break from silver or whether 
it wants to take that decision as to retaining some silver in a coin as 
a part of our coinage syst-em. 

The Chairman. Mr. Widnall? 

Mr. Widnall. Thank you, Mr. Chairman. 

Mr. Fowler, do you have the information I requested at the last 
hearing concerning minting of coins in Denver, the silver dollars? 

Secretary Fowler. I don't know whether that is available here 
this morning or not. 

Miss Adams. We were waiting for a figure from Denver. They 
have to estimate the actual. You wanted the number of pieces. 

Mr. Widnall. Yes. 



■dbyGOOgIC 



COINAQK ACT OF IflflS 79 

Miss Adah3. We have the wei^ts. But an estimate had to be 
made, because, as you Imow, these were trial strikes. None of them 
were delivered. 

As a result they were not counted and b^ged. And so we have 
to get from Denver — and it is 2 hours earUer out there otherwise we 
would have this figure for you. But we will have it later. 

Mr. WiDNALL. What is the date on those coins? 

Miss Adams. 1964, Because under the law 

Mr. WiDNALL. 1964? 

Miss Adams. Under the law all coins can be dated 1964. The 
trial strikes of silver dollars are all melted down now, as you know. 

Mr. WiDNALL. But the other information is going to be supplied 
for the record? 

Miss Adahs. Yes; it is just a matter of the chanee in time, 2 hours 
earUer, or we would have had the full information for you. I apolo- 
gize. 

(The information referred to may be found on p. 25.) 

Mr. WiDNALL. Mr. Fowler, even though it will undoubtedly cost 
more to manufacture the sandwich coins, there would be a terrific 
savings in the cost of metals used as $1 .29 silver is replaced by 36-cen te- 
a-pound copper. Would you supply for the record the seigniorage 
profit for tM calendar year 1964 for each of the subsidiary silver coins; 
namely, the dime, quarter, and the half dollar? 

Secretary Fowlek. We are supplying seigniorage data with last 
Friday's hearing, and I could also supply that right now, if you would 
take it in terms of ^timated seigniorage at fiscal year 1965 production 
rates. 

Mr. WiDNALL. Would you supply that now? 

Secretary Fowler. Fot the new 10-cent piece, the estimated 
se^iorage at fiscal year 1965 production rates would amount to 
$96 miUion. 

Mr. WiDNALL. Ninety-six? 

Secretary Fowlbe. Yes. 

For the new 25-cent piece, $162.9 miUion. And for the new 50-cent 
piece, S54.5 million. Total, S313.4 million. 

Mr. WiDNALL. Well, now, in 1964 that would probably run higher, 
because 1965 production rates are considerably lower, are they not? 

Secretary Fowleh. No; they are higher. 

Mr. WiDNALL. I am thinking now about putting out the new coins 
at the same time as the old coins. 

Secretary Fowler. Well, without trying to give you any approxi- 
mate difference, the figures I have giveu you now represent a much 
higher %\ire than the figures you wiU get for the 1964. 

Mr. WiDNALL. Are you in a position to supply for the record the 
estimated seigniorage that will take place, profit, through producing 
the same number of these coins produced in 1964 by using the metallic 
composition in the new bill? 

Secretary Fowler. Yes; the computation we made was in terms 
of fiscal 1965. When the matter was raised on Friday, the computa^ 
tion was made over the weekend, based on the fiscal year 1965 pro- 
duction rates — since they are the liighest we have of record. 

Mr. WiDNALL. Well, do you have that estimate now? 

Secretary Fowler. That estimate b included in the figures I have 
pven you. Oh, you want it for the old coins as well as lie new? 



Digitized byGoOgle 



80 COINAGB ACT OP 1965 

Mr. WiDNALL. I want a comparison. 

Secretary Fowler. Oh, yes, let me give you that for the old coins, 
then. 

Using the same fiscal year 1965 production rates — for the 10-cent 
piece it is $6.6 million. For the 25-cent piece, it is $11.2 millioD. 
For the 50-cent piece, $6.2 million. 

A total of $24 million— as compared with the $313.4 million for the 
new coins. 

Mr. Hanna. Would the gentl»nan yield for just a minute? 

I asked this question the other day. 

Does that seigniorage indicate the amount of profit that is made on 
the coin after the total costs, including the materials and the labor? 

Secretary Fowler. No, that is just the difference in the material 
costs. The production costs differentials are not figured into that 
computation. 

Mr. Hanna. But I think it is important that the committee realize 
that those figures do not include the cost of running the mint, which 
is the labor and the investment and amortization of the equipment. 

Secretary Fowlbh. That is correct. Nor do they mc^ude the 
additional cost in the cladding process that would be involved. 

Mr. Hanna. Thank you. 

Secretary Fowlbb. I beg your pardon. That does include the 
cost of the cladding process, which is included as a part of the cost of 
the material on whicn these figures are computed. 

Mr. WiDNALL. Mr. Fowler, I think you have indicated in your 
previous testimony that your estimated production rate for 1966 and 
1967 will be even higher than for 1965. 

Secretary Fowlbb. That is correct. 

Mr. WiDNALL. So that it can be anticipated that there would be 
an even greater seigniorage profit. 

Secretary Fowler. That is correct. 

Mr. WiDNALL. That is all. 

The Chairman. Mr. Gettys? 

Mr. Gettys. Mr. Chairman — Mr. Secretary, do I understand your 
position is that the hoarding of silver-content coins will be minimized 
by the retention of some silver in the 50-cent coins? 

Secretary Fowler. Yes. Secretary Wallace outlined three dif- 
ferent types of hoaf'ding, and this will counter one of them, the 
grandfather type 

Mr. Gettys. But it is your position that if experience proves that 
hoarding is very prevalent, that the Joint Commission would have 
the duty and authority to recommend corrective measures? 

Secretary Fowler. That is correct. 

Mr. Gettys. Could the Joint Commission's recommendations be 
effective — ^be made effective expeditiously enough to correct the 
problems or woidd we have to go through the whole legislative process 



Secretary Fowlbb. Well, I think — you are speaking now in terms 
of the new 50-cent piece? 

Mr. Getttb. Yes — or any of the defects that may possibly come 
to l^ht with experience. 

Secretary Fowlbb. I would think that the problem of making an 
adjustment in the program once it is well underway, such as going 
from the 40-percent-fineness silver half doUar to a half dollar made 



Digitized byGoOglC 



COINAQB ACT OF 1865 81 

out of the same material as the quarter would be minimal. We would 
have a great deal of flexibility in making changes of that sort once the 
program was well underway and the production processes were all 
behind us, and the new type of coin was out and in full circulation. 
We would be dealing with one aspect of a problem rather than with 
the total problem. You will have together in this commission, 
representatives of both the executive and the l^slative, and you will 
have a well ordered way of arriving at any decision that should b© 
taken. 

This question of later adjustment of the program is one of the 
reasons, I think, for not really refusing to fight the bull on these issues ; 
but simply that you can take the decisions better in the light of experi- 
ence, and execute them more effectively with the benefit of this 
Commission. 

Mr. Gbttys. Thank you, sir. 

The Chairman. Mr. Cabell? 

Mr. Cabell. Thank you, Mr. Chairman. 

Mr. Secretary, during the course of this hearing, I have heard 
several questions raised as to what would be the reaction if we dnln't 
get public acceptance of this new coinage. Now, can you conceive 
of any possible situation of how they could refuse to accept it? 

Secretary Fowler. I really cannot. I think there would be a 
certain amount of passing comment. But except for some possible 
isolated funmaking 

Mr. Cabell. Four of these new quarters will buy exactly what a $1 
certificate will. It is l^al tender. It operates in vending machines. 
So what? How could there possibly be any possible dislocation 
because of a temporary- — - 

Secretary Fowler. I don't think it becomes a dislocation. I think 
it would come to, well, comments and criticisms of this or that. But 
this is the way the world works. 

Mr. Cabell. I would like to close with one suggestion, if I mav — 
that if these people heard those new 21-cent half dollars which tney 
say they will, and which I hope they do, and you have a sufficient 
productive capacity, maybe we could, pay ofiF the national debt that 
way. 

Secretary Fowler. Well, it is a promising outlook. 

Mr. Cabell. Thank you. 

Mrs. Sullivan (presiding). Mr. McGrath? 

Mr. McGrath. Thank you, I have no questions. 

Mrs. Sullivan. Mr. Hansen? 

Mr. Hansen. Secretary Fowler, is it correct there are approximately 
12 billion coins in existence? 

Secretaiy Fowler, Yea, sir — at least if we assume a 25-year life of 
the subsidiary coins of the type under consideration before th& 
committee. 

Mr. Hansen, You mean up to and including the 50-cent piece, or 
the silver dollar as well? 

Secretary Fowler. Yes, sir. The 12 billion figure does not include 
the silver dollar. 

Mr. Hansen. Of course the number of those doesn't amount to a 
great deal. 

I share the concern of Congressman Gonzalez, which he indicated 
a bit f^ when he made reference to the existii^ coins in his question. 



Digitized byGoOgle 



s 



82 COINAGE ACT OF 1965 

Now, if it is true that we have 12 billion coins, and there are 170 
million people in the United States, less than a htmdred coins per 
person would more than soak those up. 

Secretary Fowler. Right. 

Mr. Hansen. I think we are being a little naive in our approach 
to this proposition. I have no concern at all — and I am not really 
an expert on this busmess of what the numismatist thinks or does — 
but if you can rev up your production on the new coins, as you say 
you can, then I would just let them go ahead and hoard them, because 
?ou are going to make a big profit on them. And you can continue to 
:eed them to them. 

But the thing that I am concerned about, and rather deeply, is the 
eflFect that this whole move will have on tne existing coinage. The 
numismatists whom I know say "you can't lose, all you have to do is 
go buy it — it has an intrinsic value." More than that, with the way 
these people are soaking up the supply, the 25 years that you estimate 
as its life, you know, on a continumg basis, is going to shrink down to 
just a few years, in my judgment. I think that this piece of legislation 
ought to have in it some provision, not for immediate withdrawal of 
the existing silver coinage, but eventual withdrawal of it, and to 
handle it in a way that these people could not gain anything by step- 
ping out and buymg the existing supply and stashing it away. 

I know of instances where people might now have as much as a 
ton and a half of it in bonded warehouses, on certificates — not too 
many, but a few. 

Secretary Fowlbr. We have certainly scratched our brains on 
some method of preventing this by law. And we have not been able 
to come up with anything that has sufficient merit — that we felt 
would commend it to the Congress, or that would not be outweighed 
by the efforts along this line of the people in the coin business who 
may try to get 180 miUion Americans so excited, that they are going 
to go out and buy coins. 

Mr, Gettys. Mr. Chairman, would the gentleman yield? 

Mr. Hansbn. Yes. 

Mr. Gettts. Mr, Hansen — Mr. Secretary, isn't the real intent of 
this program that you have suggested to reduce coins as things of 
intrinsic value, and to make them useful solely as a medium of ex- 
change? Isn't that the purpose? 

Secretary Fowler. That is the purpose. The sooner we do that, 
I think, the less opportunity there is to excite the general pubfic, and 
in effect doing the job that the coin is supposed to do. 

Mr. Gettys. Thank you. 

Mr. Hansen. Mr. Secretary, the thing that concerns me is that 
I don't want to leave here, in my later days, with it on my conscience 
that I was a party to an arrangement that made it possible for a 
group of smart speculators to maie a fistful of money unduly on this 
proposition. 1 think there is a danger that this can happen in this 
matter. In fact, a ve^ real danger. 

Secretary Fowleh, I share your view. And I share the same con- 
cern. The issue is how is the best way to prevent it. And you would, 
I think, Sliest that it best be prevented by a harsh law that gets 
everybody aU excited and sthred up and gets us back to >ther periods 
of law enforcement, that have been fairly few. I am suggestir^ that 
we get through this period of the next 5 years, of the adjustment to 



Digitized byGoOgle 



COINAQB ACT OF 1966 83 

this pn^am, by deferring this decision about the ultimate withdrawal 
of the existing coinage until it can be made away from any impaet on 
this new pr<^atn. 

There are calculated risks, Mr. Hansrai, in this business, every way 
we turn. And I think it is a question for the judgment of the Congress 
as to what is the course of conduct that is leaat apt to encourage this 
tendency to hoard. 

Mr. Hansen. Well, Mr. Secretary, I would like to see you folks 
tliat have had this sort of thing on your hands before, who have studied 
this proposition, make some sort of analysis. 

Secretaiy Fowler. We have made an analysis, and you have the 
benefit of it right here. 

Mr. Hansen. Well, thank you very much. But I still am con- 
cerned about the problem. I wish tnere were acme way we could 
figure out to elimmate this possibility, which I think is very real. 

Secretary Fowler, I do, too. This has certainly been a problem 
that we sweated blood oyer, and we have not in any sense had a 
cavalier attitude about the possibility that you mention. Sometimes 
there are these questions of whether you choose one path or the other, 
and there are various ways of getting along. , 

Mr. Wallace. Mr. dhairman, it should be noted, first of all, 
that it is to the advantage of coin dealers to stir up the fears of such 
a shortage in order to get more people to use their services. But it 
should also be noted that under section 5 of the bill, there is standby 
authority to prohibit the melting and export of coins, so that if anyone 
hoards coins for the sake of their intrinsic value in hopes of ultimately 
melting them down and making a profit, they stand to lose a good deu 
of money in terms of what they could be earning on their investment 
in a bank deposit or a savings and loan account or a blue chip stock. 
This is true because if the hoarding of silver coins were to become a 
problem, the Secretary of the Treasuiy would have the authority to 
prohibit the melting of these coins. Thus it would be rather futile 
for anyone to hoard the existing coins in the hopes that they could 
melt them down and make a profit thereby. 

I should also like to point out that in terms of general hoarding, 
12 billion coins amounts to $2.3 billion, and that is a great deal of 
money for people to take off the market and freeze, so to speak. 

The Chairman. We have this situation. Wo would like to have a 
30-minut6 executive session. We have some requests for questioning. 

Mrs. Sullivan, you didn't finish, I know. Mr. Widuall has a 
question, and Mr. Fino. If we can finish pretty soon, we could have 
an executive session and not have to come back. 

Mrs. Sullivan, This is very brief, Mr. Chairman, to Miss Adams. 

Miss Adams, I wish you would clear up the confusion, in my mind 
at least, of how much silver we are using in coinage- The President 
has said 300 million ounces a year. The Secretary said 203 million 
ounces in fiscal 1964, and 268 million in fiscal 1965, the present year. 
You testified before the House Appropriations Committee we were 
using 215 million ounces this year, and wUl use 252 million ounces 
in the coming year, 

Are the three of you using different 12 month periods — fiscal and 
calendar? 

Secretary Fowler, Well, the figure I used to give you that one 
%ure is the one in the table in my statement of 203 million ounces — 
that was for calendar year 1964. 



Digitized byGoOgle 



84 COINAGE ACT OF 196-5 

Mrs. Sullivan. For the record, I just felt if you could clear tlii3 
up, to show exactly how these three different figures were obtained 
on actual usage and how it can be explained — I know that you keep 
track of every ounce and every scrap of silver in the mint, and silver 
dust, so there is no question about the availability of exact figures. 

(The information referred to follows:) 

Clarification of Fiaumsa Used for Silver Conbtim&d in Coinage 

Figure used by the President: 300 million ounces — This is the annual rate of 
consumption of silver in coinage at our current rate of coin production. 
Figures used by Secretary Fowler: 

203 million ounces — This is actual silver consumed in coinage during 
calendar year 1964. 

268 million ounces — This is a current estimate of silver to be used during 
fiscal year 1965. It is based on actual silver consumed in coinage for 11 
months, July 1964 through May 1965, plus an estimate for June 1965. 
Figures used by Miss Adams before House Appropriations Committee: 

215 million ounces — These ounces represent the amount of silver recjuired 
for the production of the subaidiarj coins in our fiscal year 1965 budget 
estimate. However, this production was not sufficient and had to be In- 
creased. 

252 million ounces — These ounces represent the amount of silver required 
for the production of the subcridiary coins in our fiscal year 1966 budget 
request. 
Mrs. Sullivan, Miss Adams, I want to express my personal con- 
gratulations to you for the fine job that you have done as Director 
of the Mint in expanding mint production to meet this shortage. I 
don't know of any business executive in this country, or production 
executive, who could run (dl of the plant facilities 24 hours a day, 7 
days a week at full capacity, and get away with it as long as you have. 

1 think you are to be congratulated. 
Miss Adams. Thank you. 

Secretary Fowler. I would also like to thank Mrs, Sullivan for 
that comment, and to underscore it by saying that if there were E- 
awards and whatnot, one would certainly be merited here. 

The Chairman. Mr. Widnall? 

Mr. Widnall. Mr. Secretary, who determines how many coins 
shall be coined each year? 

Secretary Fowler. I suppose ultimately it is the Secretary of the 
Treasury on the advice ana recommendation of the Director of the 
Mint. I look to Assistant Secretary Wallace, working with the 
Director of the Mint, to devise those production schedules and runs. 
And so far as I know, in terms of my current experience, over the last 

2 months, these are not haid-and-iast decisions that are made with 
any great fanfare. We really delegate that responsibility primarily 
to the Director under the general supervision of Mr. Wallace- 
Mr. Widnall. Miss Adams? 

Miss Adams. Mr. Widnall, may I say that this area is one which has 
occupied a great deal of our time and attention, because the Mint and 
the Treasury is just as anxious as you are and as Mr. Fascell's com- 
mittee was m being sure that the mint makes exactly the amount of 
coin which is necessary to supply the commerce of the country. We 
are utihzing every possible device, every avenue of information, and 
everything that we can in cooperation with the banking industry to 
find out how many coins will be needed and, upon that, we baae tho 
Amount of coins we make. 



■dbyGOOgIC 



COINAQE ACT OF 1965 85 

There was a time, as you well know, when our facilities were not 
quite geared up to do even what we would hare liked to have done. 
Congress was generous in giving us sufficient money to go on the crash 
program and, with that fine cooperation, we were able to do what we 

Mr. WiDNALL. Do you presently have the estimated number of 
coins in each categoiy for 1966 and 1967? 

Miss Adams. We have a general estimate, sir, but we could not 
finalize that because, as you know, we are only — we only do what the 
law permits us to do. Bjiowing that this legislation would be coming 
out, we have not actually made out our production program that far 
ahead, although wo have, of course, budgetwise, estimated what we 
would probably need if — when you change the coinage alloy, we 
undoubtedly will have to go up for a supplemental appropriation, 
because we will increase our production. 

Mr. WinwALL. Do you have those figures available? 

Miss Adaus. We can supply those figures to you for 1966 — the 
r^ular production figures which we estimated prior to the l^islatiou. 

(The mformation requested follows:) 

The following is the estimated production contained in our budget request for 
fiscal year 1966: 

EilimaUd production 
[In billions ol plecca) 

I cent ,,, 6,510 

Scents _ - 1. 116 

10 cents - - - - .930 

25 cents- , -,. .465 

50 cents - - .279 

Total — 9.300 

Mr. WiDNALL. Mr. Secretary, one more question: Could any vast 
increase in the production of coins have a very material economic 
impact? 

Secretary Fowlbr. Will the increase 

Mr. WiDNALL. Could an increase have? 

Secretary Fowleb. I do not see any material impact. You are 
speaking in terms of the amounts of labor employed, the amoimts 
of new materials that a^e used, the amounts of, macninery and .equip- 
ment — I tlunk it wotild be a minor program in those general terms — 
nothing compared with the large major production programs of 
many of our individual companies today or many of the iodividual 
programs in the Defense Department. 

Mr. WiDNALL. You don't think that the material increase in 
production of coins would affect the general economy? 

Secretary Fowler. Well, I will put it the other way. The absence 
of an adequate supply could have a very disruptive effect. But I 
think assuring an adequate supply would not nave any additional 
effect. It is just preventing an unfortunate thing from happening. 

Mr. WiDNALL, That is all, Mr. Chairman. 

The Chaibhan. We have additional members who have brief 
questions. 

But it would be all r^ht with you, Mr. Fowler, and Miss Adams, 
for any member desiring to do so to submit a question in writing, 
and you will answer it? 

Secretary Fowler, Yes. 



■dbyGOOgIC 



86 COINAQE ACT OF 1965 

The Chairbian. Mr. Fino? 

Mr. FiNO. Mr. Secretary, both the new nickel and the new dime, 
being of the same metallic composition 

Secretary Fowler. There is no new nickel, sir. You mean the 
existingnickel? 

Mr. FiNo. Yes; that is right. So that the nickel and t^e new dime, 
being of the same metallic composition will undoubtedly present ua 
with a situation where the intrinsic value of the 5-cent piece will 
actually exceed the intrinsic value of the new dime. Does this bother 
you insofar as public acceptance of the change is ctmcemed? 

Secretary Fowler. No, sir; it does not. I believe as Icm^ as Ute 
general purchasme power of the dime and the nickel retam t^eir 
current relative relationships, which they would under the new law, 
this does not present a problem. Actually, however, it costs more to 
produce a dime because of the cladding process. 

Mr. Fiso. Miss Adams, just one question. 

How far has the mint gone in preparation for the mintii^ o( these 
new coins? 

Miss Aqams. The mint has incurred no actual experience or any- 
thing of that kind, naturall;^ because under the law we are to make 
coins of the existing alloy. The mint has, I hope, intelligently sou^fc 
to estimate what our financial problems would be, how much tilings 
would cost, and all of that sort of thing, and those figures we can give 
you if that is what you mean. 

Mr. FiNO. Well, assuming that the Congress passes this bill within 
the next few days, how long will it take you to get these new emns in 
production? 

Miss Adams. We can go into production actually as socm as the 
material is available from private mdustry, and we have made surveys 
of this, and found that rather shortly we can get some supply of the 
new material which, if you approve the recommended l^;islation, we 
would be using. However, the mint has not gone beyond finding 
out what the situation is. In other words, if you are askmg if we have 
made any contractual obligations, we have not. 

Mr. FiNO. We have gotten the Secretary's opinion on the frac- 
tional currency. What is your opinion on fractional currency, in 
order to relieve this shortage of coins? 

Miss Adams. Sir, it rather concerns me a bit, from the feeling thafr 
the coinage of the country should be one which is efficient, which is 
economical to produce. If we make fractional currency — as you 
know, the fife of a httle piece of paper, at least in my pocbetboofc 
would be rather short. I rather think you would have a tremendous 
manufacturing problem. It doesn't cost much to manufacture this 
little piece of paper, but you would have to manufacture many more 
even than coins. Then as you yourself said, to make this material 
usable in the vast automated machinery, the merchandising setup 
which has all over this country, and on which so many taxpayers 
depend, someone will have then, also, in addition to manufacture the 
piece of metal, because I rather doubt that even the most skilled of 
the automated vending machines could be transferred to use pieces 
of paper. 

So you would have not only to make the fractional currency, but 
someone would have to provide for the metallic pieces which would 
work these vending machines, on which all of you depend, as well as 
all the other 192 million people in the country. 



Digitized byGoOgle 



COINAOE' ACT OF 1965 87 

Mr. Fiifo. Most of the coin machines require dimes. The bill I 
introduced in January of this year provides for the issuance of scrip 
paper in denominations of 25 and 50 cents, to help alleviate this 
«hortage. 

Just one question of the Secretary of the Treasury: In view of the 
present situation, and the great concern of the public, wouldn't it be 
a good idea if we had on these new coins "In God We Trust"? 

SeCTetary Fowlek, Oh, yea; by all means. 

Mr, FiNO. Thank you. 

TTie Chairman. Mr. Gonzalez? 

Mr. Gonzalez. Mr. Secretary, would you favor the revival of the 
transaction tax and the end use certificate law? 

Secretary Fowleb, I, myself, have not studied that to the degree I 
could give you my own answer. I would prefer to have Secretary 
Wallace deal with this question. 

Mr. Wallace. Mr. Gonzalez, this question of the end use certifi- 
cates woxild mean that you would have to certify, before you could 
get silver from the stockpile, as to what the use would be. Therefore, 
you would wind up with a problem of a two-price system ; that is, 
silver which is available for use specifically in industry, and sort of a 
free floating supply of silver which would be available to speculators 
and for the world market. 

It was this problem of having a two-price system and its pressures 
in terms of gray markets and so forth which caused us to decide against 
that. 

Moreover, with the program which we have — namely to eliminate 
the silver in the dime and the quarter, and continue it in only very 
modest amounts in the half dollar — there should be sufficient silver 
for all purposes, and there should be no reason for any speculation in 
silver. 

Mr. Gonzalez. But you have no present way of really knowing the 
ultimate use of your present sales or redemptions. So I just wonder 
if it would not be wise to revive these practices that worked effectively 
during the period they were in force for precisely the same reason that 
we fear now might happen, that we want to avoid. 

I was Just wondering if it would not be wise to have concomitant 
legislation of this type as we go into this new system. 

I just wondered what the thinking was among the Treasmry officials. 

Tne Chairman. You may elaborate on that, Mr. Wallace, when 
you examine your transcript, and give a full answer, 

Mr. Wallace. Thank you, Mr, Chairman. 

(The following information was subsequently submitted for in- 
clusion at this point in the record:) 

We believe that the basic problem is to maintain the existing silver coins in 
circulation, particularly during the period needed to manufacture the new coins 
in adequate quantities, and the basic answer to this problem is maintenance of 
the $1.29 plus per ounce for silver with indications that the Government is pre- 
pared to do this indefinitely. Lirnitations on the use of silver such as the licensing 
of the sale thereof to industrial users, and inauguration of an end-use certificate 
system, may tend to create a two-price system for silver, with all of its attendant 
difficulties, as indicated above. Moreover, institution of these and other controls 
which have been suggested would, we believe, tend to create a psychological re- 
aotion which would be counterproductive. In other words, excess indications of 
a worry about scarcity could tend to create the scarcity. The fact is that we are 
convinced that silver supplies are adequate for the program. 



■dbyGOOgIC 



88 COINAGE ACT OF 1965 

The standby authority id the bill to prohibit the melttsg and exporting of 

coins.will also deter the hoarding of them Decause the potential hoarders will not 
be able to count on their ability to realize on their investments in coins if there is 
a possibility that they cannot be melted or exported. If we were planning to 
take the exist ing- coins out of circulation right away, then it might make sense to 
have an antihoarding provision as a complementary measure as was .the case in 
1933 when gold coins were recalled from circulation. However, our present pur- 
pose is just the opposite ; namely, to keep as many of the existing coins in circula- 
tion as possible. 

A prohibition on ihe export of silver bullion may also tend to create a two-price 
system and additional difficulties. However, it shoidd be pointed out that thero 
is already authority on the statute books in the Export Control Act for the insti- 
tution of controls over the export of ailvw bullion if such controls should prove 
to he-ni 



The CKAiaMAN. Now, our schedule is prepared. We expect to 
have this executive session. 

Tomorrow morning we will meet at 9;15, We will hear all outside 
witnesses tomorrow morning. 

We e^ect to have an executive session for the purpose of votmg 
on the bid some time after 11 o'clock tomorrow. 

With that understanding, we will have an executive session now. 
We will ask those who are not eligible to be in the room to give u» 
the use of the room as soon as you can conveniently, so we can have 
this executive session. 

(Whereupon, at II :40 a,m,, the committee adjourned, to reconvene 
at 9:15 a.m., Tuesday, June 8, 1965.) 



■dbyGOOgIC 



COINAGE ACT OF 1965 



tuxbdat, june 8, 1965 

House of Repbesentatives, 

COMMITTBB ON BaNEINO AND CuRBENCT, 

Washington, D.C. 

The committee met, pursuant to recess, at 9:15 a.m., in room 2128> 
Raybum House Office Building, Hon, Wright Patman (chairmaa) 
presiding. 

Present: Representatives Patman, Multer, Barrett, Mrs, Sullivan, 
Reuss, Moorhead, Stephens, St Germain, Gronzalez, Minish, Weltner, 
Hanna, Grabowski, White, Gettys, Todd, Cabell, McGrath, Hansen, 
Annunzio, Widnall, Fino, Haipem, Brock, Johnson, Stanton, and 
Mize. 

The Chaibman. The committee will please come to order. 

I will present for the record a letter from Prof, Lester V, Chandler, 
professor of economics, at this point. 

(The letter referred to follows :) 

Princeton Univbebitt, 
Depabtment 07 EcoNowics, 

Princeton, N.J., June 4, 1966. 
Hon. Wbiqht Patman, 
'Chairman, Banking and ( 
U.S. House of Repreeenta 

Deab Mr. Patuan: Please permit me to comment on President Johnson's 
proposal for replacement of our present fractional silver coins. Such a replace- 
ment is eseential if we are to escape the iaconveaience of a serious shortage of 
coins ia these denominations. The President's proposal concerning quarters and 
dimes ia practical and economical and I urge its adoption. He quite properly 

"For many decades now the value of a particular coin has depended not on the 
value of the metal in it, but on the face of the coin. Today's coinage must bo 
primarily utilitarian. The new coinage will meet this requirement fully, while 
dispensing with the idea that it contain precious metal." 

Accepting this principle, which is completely valid, there is no justification for 
retaining any silver in the half dollar. Half dollars made of the same metals as 
the proposed new dimes and quarters would be utilitarian, economical, and com- 
pletely acceptable. To retain silver in this coin would add nothingto its usefulness 
as money and would be expensive for both the country and the Federal Govern- 
ment. I am informed that there are how in circulation approximately 1,664 million 
half dollars. Since the gross weight of each half dollar is 0.4019 ounce, the total 
weight of the half dollars now in circulation is approximately 628,571,600 ounces. 
To replace these with coins having a 40-peroont silver content would thus require 
251,428,640 ounces of pure silver, which at $1.2929 an ounce would be worth 
$325,072,088. Thus merely to replace the existing half dollars, leaving aside the 
amounts of silver that would be required for future coinage, would look up 
251,428,640 ounces of the precious metal that would be highly useful for other 

Surposes. And it would add nothing to the efficiency of our monetary system, 
loreover, it would be highly and unnecessarily expensive to the Treasury. Ab 
already not«d, it would require silver with a value of $325,072,088, If this silver 
were not included in coins the Treasury could sell it. It would be far cheaper for 
the Treasury to make half dollars of the same copper and copper-'nickel alloy to 



Digitized byGoOgle 



90 COINAGE ACT OF 1065 



more than $280 million. Even in these days of huge Federal budgets this amount 
is not insignificact. 

Perhaps the proposal to retain silver in the half doUar reflected a desire to 
protect silver prices and American silver mining. But surely both the prospective 
demand-supply rdationships for silver and the proposal to purchase domestically 
mined silver at not less than Sl-25 sn-onnce make this unnecessary. 

In summary, I urge prompt enactment of the proposals for dimes and quarters 
and application of the same principle to half dollars. 

Respectfully submitted. 

Lester V. Chandler, 
Professor of Economics, Princeton UniversUy. 

The Chairman. We have two separate groups of witnesses this 
morning, and we would like to hear from each one individually, and 
then we will interrf^ate the witnesses together as agreed upon. 

Mr. Hardy, will you come around, sir, and Mr. Strauss, of the 
American Mining Congress. 

Mr. John Stevens, executive vice preadent of the International 
Silver Co., and Mr, Wemple, and you other gentlemen from the Silver 
Users Association will then be heard before the committee questions 
any of the witnesses. 

We will first hear from Mr. Hardy and Mr- Strauss. 

Representative Conte is here. Mr. Conte has 5 minutes, and he 
has a statement to bring out the main points. I think we will hear 
from you first, sir. You may ttike your seat there. Then we will 
hear from you gentlemen next. 

You may identify yourself, sir, and proceed. 

STATEMENT OP HON. SILVIO 0. CONTE, A KEPEESENTATIVE IN 
C0N6XESS FROH THE STATE OF HASSACHVSETTS 

Mr. Conte. Mr. Chairman, members of the committee, I welcome 
the opportunity you have afforded me this morning to present my 
views on the proposals now before this committee for a new coinage 
system. 

I do not believe that the President's proposals are characterized by 
the breadth of vision or commitment to the total problem which 
must be the absolute requisites of today's legislation if we are not to 
find ourselves confronted with another coinage decision in the very 
□ear future. 

As Members of this Congress, we are confronted with the responsi- 
bility of making the most fundamental change in om- coinage system 
since its inception in 1792. That responsibility will only be met by 
l^slation that is as farsighted as that of our distinguished predeces- 
sors. I do not beUeve legislation that includes the retention of silver, 
in any quantity, in the half dollar will meet this challenge. 

I have placed before you a complete statement, together with a 
proposed amendment, containing my views with respect to the pro- 
posed new half dollar. In the interests of time and expediency, I 
will only briefly summarize it tor you. 

There are two facets of the coin and silver dUemmas that call for 
an across-the-board elimination of silver from our subsidiary coins. 



■dbyGOOgIC 



COOJAOB ACT OP 1968 91 

First, we are in the midst of a critical silver sui^ly and demand 
situation. We have reached the point where the annual industrial 
use of silver, exclusive of coin^e, is in excess <^ the total annual free 
world production of silver. The continued use of any silver in the 
subsidiary coins will only aggravate the silver situation^ 

The position that silver coinage ia a luxury this country ean no 
longer afford is not merely a prosuver user nor an antisilver producer 
argument. The excellent and comprehensive "Treasury Staff Study 
of Silver and Coinage" indicates that: 

There would be an appreciable gap between silver consmnptJon 
and production even if tnere were no demand for silver for coinage; 

Existing market demand for sUver would not be affected since the 
U.S. coinage requirements have been met from Treasury's stock of 
Eolver and not from silver boi^ht each year on the world market; 
and 

The existing silver supply held by the Treasury ia likely to be no 
more than adequate for the short-run stabilization of world silver 
prices essential to the interests of this country in making the tfansi- 
tioD to a new coinage system. 

Secondly, the purpose of new coinage l^^slation must be to estab- 
lish and maintain a coinage system fulfilling its primary function, that 
"of a circulating medium of exchange. I am convinced that so long 
as we are mintmg a silver content coin, we will be minting a coin that 
will not be circulated. This would be especially true if we were 
minting only one silver content coin. 

The present 50-cent piece is the coin that is in shortest supply at 
this very moment. It has been accorded new stature in these pro- 
posals, which, unfortunately, may well spell its demise as one of our 
circulating coins. It has been tagged with the ignominious title of a 
"presti^" coin, a coin that will retain a link with the traditions of the 
past. But, at the same time, I am sure it has been relegated to the 
fate of the silver dollar. 

To those who would argue that we must have a prestige coin, I 
would reply that it will be a sorry dav for this country when its pres- 
tige will be equated to a pinch of suver in one of our coins. How 
prestigious is that coin at any rate, when we have before us a proposal 
that would cut the measure of that prestige more than in half. We 
need not a half dollar in the tradition of U.S. silver content coins nor 
in the tradition of European tokens of a country's prestige. We need 
a half dollar as a medium of exchange. 

Mr. Chairman, the concern of this committee should not be diverted 
to symbohc prestige coins. The prestige of our present silver content 
coins is responsible for all of us being here today. We cannot continue 
to supply the unrealistic demands tnat are being made for these coins. 
The only answer to this situation is a viable subsidiary coinage system 
where every coin, the half dollar, as well as the dime and quarter, is 
circulated as a utilitarian instrument of conunerce. 

Let's take the coins out of the pockets of the speculators and put 
them into the pockets of the spenders. 

Thank you, Mr. Chairman. 

The Chairman. Thank you, Congressman. We appreciate it. 

(The prepared statement of Mr. Conte follows:) 



48-938 — 85 7 



■dbyGOOgIC 



COINAGE ACT OP 1065 



I have given long and careful conaideration to the desirability and inevitability 
of a change in our coinage system. My interest in the problems facing our 
coinage system waa not initiated last Thursday when the President's message 
was presented to CJongress. I have worked for many years with the Treasury 
Department, as a member of the Treasury-Post Office Subcommittee of the Ap- 
propriations Committee, to maintain a workable coinage system in the face of 
seemingly unrealistic demands for our present silver content coins. On April 5 
of this year, on the floor of the House, I called for a system of subsidiary coins 
which contained no silver. Today, you, the members of the Banking and Cur- 
rency Committee, are taking the first step which will lead to the needed changes 
in the coinage system aa we know it today. I urge you to give ^our thoughtful 
consideration to a system of subsidiary coins thai does not contain silver. 

The coin and silver dilemmas are inextricably interwined. A decision affecting 
one must, of necessity, bear heavily on the other. A piecemeal approach, re- 
solving today, for example, the coin needs of the Nation and leaving the silver 
situation for another day can only serve to weaken the proposed solution and 
compound the problem still existent. 

The weakness in the proposals now before this committee is the retention of 
silver, in reduced quantity, in the half dollar. The President's message and the 
testimony which has been received from the officials of the Treaaury Deportment, 
while exhibiting an impressive grasp of an enormously complex situation and a 
lucid presentation of the position they espouse, are undermined by the tailura 
to propose an aerosa-the-board elimination of silver from the subsidiary coins. 

I believe the first question which must be answered, of the many with which the 
committee is now faced, is: Can we afford 15 million ounces of silver a year t& 
maintain a link with silver through the 50-cent piece? 

My answer is that we cannot aSord to maintain this link nor is it necessary for 
us to do ao. And, I believe that an arrival at that answer has not been through a 
piecemeal approach, but only after careful consideration of the coin needs and the 
silver needs of all. 

We arc facing a difficult transition period ahead if any change ia made in the 
coinage system. But that transition will only be ntade more difficult by the 
proposed new half dollar. We must ask the public acceptance of silverhss dimra 
and quarters having substantially no intrinsic value while retaining silver and 
intrinsic value, not juat in a coin, but in one of the new coina which is part of the 
proposed legislation. 

You know, and I know, that there must be a change in our coinage syat«m and 
the time for that change is now. We know that the measure of a coin a worth is 
not tied up in the metal content of that coin, but in the goods and services that 
can be bought with that coin by ita holder. Hut, we are leaving ourselves wide 
Open for attack with the proposed 50-cent piece. We know, but are we convinced 
when we continue in the same legislative package a sQver-content coin having 
intrinsic value? 

It certainly does not appear that we arc convinced and I don't believe that the 
milliona of coin users are going to be confident that we have given tbem a viable 
new coin system, effective in all of its aspects to meet the needs of the country 
as a medium of exchange. 

"The members of this committee are wrestling with the difficult problems posed 
by the need for a new coinage system. That need arises from two basic reimona: 
The decreasing supply of silver at a time when industrial, art, and defense uses of 
that metal are increasing, and the needs of this country for a coin that will stay 
in circutntion. The proposed half dollar contradicts both of these premises. 

We have reached the point where the world uses of silver, exclusive of any 
that Is used in coins, exceed the total annual free world production of that m<-ttu. 
This gap, has, to some extent, been Piled by the redemption of silver certificates 
by the industrial users, tapping the Treasury's stock of silver, now approximately 
1 billion ounces, aa a supply source. In 1964, for example, 141.4 million ounces 
of that silver atosk were withdrawn to meet the legal requirement to redeem these 
outstanding certificates. The average monthly certificate redemption for ItlfiS 
has been 10 million ounces and at the end of March of this year there were the 
equivalent of 763.9 million ounces of silver bullion remaining in circulation in 
the form of these certificates. The Treasury stalT study said it Is not necessary 
to Immobilize the existing Treasury stock of silver in readiness to meet possible 
redemption demands, but It is a significant factor, and one required by law, that 
must be taken into consideration. I would counsel that we should attempt to 



Digitized byGoOglC 



COINAGE ACT OF 1965 93 

Iteep the Government's accounts in as proper an order as we would our own. 
The slightest chance that the silver supply might fall below the amount necessary 
to redeem the outstanding certificates would give impetus to increased redeeming 
activity. 

Pursuing further the silver Bituation, it will be necessary to continue minting 
the present silver- content coins until we ha^e built up a sufficient quantity of 
the new coins that they can be safely pLaL;ed in circulation, and circulate. During 
that period, at the earliest it will continue until early or mid-ld66, based on the 
average monthly use of silver for coinage thus far this year, we will be consuming 
26.3 million ounces of silver per month, .^t the most favorable estimate, we wiC 
continue this use for about a year and consume more than 300 million ounces of 
silver from our present stock. In addition, the Office of Emergency Planning has 
proposed a silver stockpile for national defense needs. The estimated amount 
of silver for that purpose is 165 million ounces. 

I don't see, in the midst of tb^ae figures a spare 15 million ounces for a sin^ 
year's production of half dollars. Nor do I envision a year's productioa of h^ 
dollars that would require only 16 million ounces of silver. The 50-cent piece is 
the subsidiary coin that is in shortest supply in this country today. In 1964, we 
minted 206 million 60-cent pieces and did not meet the demand for that coin. 
At the proposed 40-percent silver content, that would have used up approximately 
30 million ounces of silver, almost exactly equivalent to a year's production of that 
metal in the United States. And, as you know, there must be a backlog of these 
coins before the first can be put into circulation and that backlog must serve double 
duty if it is to go into circulation as the coin that is presently in shortest demand. 
So, it isn't just 16 million ounces of silver a year that we must worry about. It 
is the amount of silver that will be uaed to bring the inventory of the half dollar 
up to thepoint where it will, in fact, circulate when placed in the hands of the 
public. That amount of silver must be taken from a stock that is also called 
upon to meet the demands of certificate redemption, continued transitional mint- 
ing of the present silver-content coins, and defense stockpile needs. It just isn't 

And the same could be prophesied for the proposed new silver-content half 
dollar once it ia placed in circulation. It just won't be there. It will be an 
exception to an otherwise functional coinage system and, whOe the eminent 
danger of its being hoarded for spesulation in its silver content has been some- 
what alleviated by reducing that content, it will be the only coin placed in circu- 
lation by the Treasury to contain silver. 

I am convinced that it will disappear from circulation as quickly as it is placed 
into con»mercial channels. With that disappearance will come increased demands 
for the coins from banks and commercial users across the country and a spiraling 
coi^umption of silver. We have had increasing trouble keeping an entire pro- 
gram of silver-content coins in circulation and those problems will not disappear 
when the h^f dollar is retained with any silver content. We have managed to 
bring the supply of pennies and nickels into a reasonable line with the demands 
for those coins. I know that everyone here today believes that the new silverlcSB 
dime and quarter can resolve the supply and demand conflicts for those coins. 
By minting a 50-cent piece of comparable metal content, we would once again 
have a coinage system equal to the demands that will be placed upon it. 

I do not believe that we should back ourselves into a corner with the half dollar. 
We should not legislate a coinage program that will be two-thirds successful and 
find that it would be folly to place in circulation a silver-content half dollar late 
in 19G6 and then have to retrace a portion of the difficult road that we are now 
traveling. 

There are, in addition to the silver use and circulation problems of the proposed 
new half dollar, production difficulties that the reduced content coin would entiUL 
These problems are not encountered with the present silver-content coins and 
which will serve only to compound the mint adjustments to the proposed dime and 
quarter. For instance, the mint has only a limited capacity for melting and rolling 
silver-copper alloy strips and would have to purchase those strips from an out- 
side source. All of the bonding or cladding operations for this proposed ecdn 
would have to be performed in private plants. 

The justification for the continuation of some silver in the half dollar can 
hardly measure up to the potential ramifications of such action. The tradition- 
alist calling for a link with the past, in the words of the Treasury study "must 
not be allowed to obstruct the transition to a secure coinage system, adequate to 
the needs of the present." 



■dbyGoogIc 



94 COINAGE ACT OF 1985 



PKOPOSED CONIE AUXNDUDNT TO H.B. 87M, TBS GOIHACIII ACT OP IHI 

!riiUI 

Section 1-a-l ie deleted. 

Section 2 beeomes Bection 1 and reads ae follows: "A half dollar, or 50-cent 
piece, a quarter dollar, or 25-ceat piece, and a dime or lO-cent piece each of which 
Blmll be composed of an alloy of 75 percent of copper and 25 percent of nickel 
clad on a core of pure copper." 

The Chairman. Now we will hear from these two gentlemen. 
And next we will hear from Mr. Stevens and his group. 
Mr. Hardy and Mr. Strauss? 

STATEIHENT OF ROBEBT H. HABDT, JZ., CHABtHAM OF THE 
SUVEB COHMITTEE OF THE AHERICAX mSSSQ CONOKESS 

Mr. Hardy. Thank you very much. 

My name is Robert M. Hardy, Jr., and I reside in Santa Barbara, 
Calif. I am chairman of the Silver Committee of the American Mining 
Congress. 

It is a privil^e and a pleasure to appear before you today to discuss 
the legislation confrontmg you. I wb grateful for the opportunity. 

The American Mining Congress has brought to the attention of the 
executive branch of the Government and both Houses of Congress its 
views on the constitution of silver eoina^. We feel very strongly 
that a coinage of intrinsic value is the comage that will demand the 
respect not only of all people but of all nations and will best serve the 
purpose as a circulatmg medium. We have pointed out that the 
silver content must be raluced; the simple reason being that there is 
too much silver in the individual coins now being minted. We have 
considered the ai^uments advanced for the elimination of silver in the 
35-cent piece and the 10-c(mt piece, and we do not find that they 
override our viewpoint. We feel that there is enough silver for reten- 
tion of some in not only the 50-cent piece but in the 25-cent piece 
and in the 10-cent piece. 

The main problem seems to be one of looking ahead to the supply 
of silver that will be avMlable. I would like to point out that the 
present price of silver has existed since September of 1963 and that 
the short time since then has not really been long enough to properly 
assess the potential of the future. We of the American Mming 
Congress have been studying this problem for some time and last fall 
released some of the results of oin- studies in that we would see by 
1968 an increase of 38 million ounces in worldwide sUver production, 
which I must say was a very conservative estimate and in no way 
optimistic. The figures were derived from projects either already 
underway or for which the capital had largely been committed, and 
was a first appraisal of a situation which changes continually and, I 
must say, on tne upward side. 

We see underway throughout the world at the present time not 
only the reopening of old mines, but the exploration for and the de- 
yelopment of new properties which will, I am sure, increase that 
prociuction potential remarkably over the 38 million ounces seen last 
fail. After all, the production of a metal from the ground is not a pro- 
tedure in which you plow, seed, fertilize, cultivate and harvest. It 
is a process in which you must find the deposit and then force the earth 



■dbyGOOgIC 



COINAGB ACT OF 1965 9& 

to disgorge it. This is a project which takes time, toil and effort aod, 
I must say, a good deal of money. 

I would like to call to your. attention the story of uranium which, 
while not under discussion here today, illustrates so well what happens 
when one considers a metal that must be found and produced. 

Back in 1949 we supposedly had very little uranium in this country, 
being dependent upon the Great Bear Lake deposit in Canada and 
mostly upon the Belgian Congo. Russia had just exploded her 
first atomic bomb and we were desperate. 

After due deliberation, a price of $3.50 per pound for uranium oxide 
was announced and the search commenced. By 1953, the develop- 
ment of the Colorado Plateau deposits was underway. Soon the 
extensions of the area into New Mexico and Wyoming were outlined, 
as were the Blind River, Ontario, and other Canadian projects. 

Ten years from the ajmouncement of the guaranteed price, we had 
more uranium in sight that we could use for the time being, whereas 
we had been woefuOy short in 1949. 

Again, the point is that it takes time and effort to bring about the 
devdopment of a mineral deposit so that it goes into production. 
It does not occur overnight, yet production does answer the call of 

Erice. Price in this instance does not mean that the producer is 
loking for a higher profit. It means that price must cover the cost 
of exploring for, developing and pajdng the cost of production so that 
the mineral may become ore and pass into trade and commerce. 

Another example that I might point out to you has already beeu 
brought to your attention through the introduction into these hearings 
of the Treasury Staff Study of Silver and Coinage bythe Secretary, 
Mr. Fowler, and I quote r 

Inoreasee in copper and zinc production in the postwar period have far exceeded 
tiie expectations generally held in the early 1950'b. It ifi interesting in this con- 
nection to compare the actual increases that have occurred with the projections 
for 1975 made by the Paley Commission in 1952. 

The Treasury study goes on to show that by 1962 copper production 
had already exceeded the Paley Commission's estimate (or 1975 by a 
wide margm, that world copper reserves are very large and that the 
Paley estimate for 1975 is quite unlikely to be accurate. 

I m^ht say the same is true of any Treasury estimate of the pro- 
duction of silver. 

Another aspect which has received little attention is that of the 
newer techniques of exploration which are just beginning to be 
utilized. You have all heard of the Timmins discovery of Texas gulf 
sulfur. That was made by the diamond drilling of an anomaly 
initially outlined by airborne electromagnetic detection methods. 
There was no surface exposure, but the techniques piapointed the 
deposit. 

These geophysical technigueB are strikingly effective, and we have 
many areas in this country alone which are susceptible to their employ- 
ment. For instance, I hare information concerning a deposit of over 
a billion tons located in the California desert, which has been outlined 
by the newer techniques and is said to contain minable values in 
molybdenum and gold, with about one-half an ounce silver per ton. 
If this is brought into production on a large scale, the U.S. production 
of silver will be enhanced remarkably. 



■dbyGOOgIC 



96 COINAGE ACT OF 1985 

In summation, there ia silver to be had, enough to satisfy the needs 
for coinc^e and for industry. However, it must be wrested from the 
earth by toil and effort, and will not spring forth readily in answer 
to a cry of panic. On the other hand, wiat cry of panic will not stop 
it from coming forth in answer to a need. 

Thank you very much. 

The Chairman, Thank you, Mr, Hardy. 

We will hear from Mr. Strauss. 

STATEMENT OF SIHON D. STRAUSS. VICE FRESISENT, AHERICAN 
SHELTING & BEFmiNa CO. 

Mr. Strauss. Mr. Chairman, members of the committee, my name 
is Simon D. Strauss. I am a vice president of the American Smelt- 
ing & Refining Co,, a large miner and refiner of silver. 1 am also a 
member of the Silver Committee of the American Mining Confess. 

For 173 years the subsidiary coinage of this country, based primarily 
on silver, has been maintained without substantial change, a record 
that ia unique in economic history. The legislation before this com- 
mittee would end that era, primarily because of the dwindling reserves 
of silver held by the Treasury. 

Silver miners have been calling attention for years to the problems 
that would certainly arise because new silver production, lacking 
sufficient incentives, was lagging behind demand. Until recently 
these representations were given little heed. 

We agree that a change in coinage cannot now be avoided. But 
in agreemg, we do not mean to imply acceptance of the suggestion 
made by some that silver has no place whatever in the country's 
coinage system. 

On the contrary, we believe the lesson of history is clear, that 
currency systems oased exclusively on flat money are in the long run 
doomed to drastic devaluation. 

The ancient Greek city states and the great Roman Empire started 
out with coinage of intrinsic value. But as they gradually watered 
tiieir coinage down, so did their economy suffer. 

In modem times we have seen the currencies of great industrial 
nations, Germany, Japan, Italy, and France, depreciate in value 
almost to the vanishing point as their governments resorted more 
and more to the printing presses and to token coinage. It is to combat 
the loss of confidence by their citizenry as a result of this harrowing 
experience that all four of these countries in the postwar period have 
resumed the coinage of silver. These governments could realize a 
larger seigniorage profit today by issuing coins only of base metals. 

Why do they spend the money to buy silver instead? 

Because they seek the confidence of the man in the street, and they 
know that silver coinage helps. It touches a deep instinct in the 
average human, the desire to possess something of intrinsic value 
or to have it readily available to him. 

One cannot deny that a base metal coin bearing the imprimatur 
ot the U.S. Government will be accepted at full face value over the 
shop counter. It will be legal tender if the Congress say« it is, and as 
your chairman remarked yesterday it can be used in the discharge of 
all debte. 



■dbyGOOgIC 



COINAGB ACT OF 1965 97 

But, in the long run, if only base metal coins and paper bills are 
available to the average citizen, will his confidence in his currency, 
will the purchasing power of the dollar hold up as well as under a 
system where part of the circulating medium of exchange carries 
intrinsic value ? 

The learned economists may give you one answer, but the history 
of the world gives another. 

Today it is true that Great Britain does not have in circulation any 
currency of intrinsic value, the change having taken place in 1946. 

My prepared text incorrectly gives the date of 1964. It was 1946. 

Whether the British will succeed in the long run has yet to be 
determined. 

So, gentlemen, while we agree that a change in coinage is now un- 
avoidable, we ui^e you to retain silver to the maximum extent feasible. 
The Treasury Department is recommending to you the retention of 
silver in the 50-cent piece, and is suggesting that the question of the 
dollar coin be reexamined by the proposed Joint Commission on the 
Coinage after the termination of the transition period for issuing the 
new subsidiary coins. 

This strikes us as an absolutely minimum program with respect 
to silver. 

Just as we called attention to the deficit in silver supplies when 
others considered the supplies ample, so now we believe many of the 
statements with respect to the shortage of silver are exaggerated. 

For example, attached to Secretary Fowler's statement before 
this committee on June 4 was a tabulation that showed a deficit 
of 205 million ounces in supplies in 1963, and 335 million ounces in 
1964 — huge figures in relation to the present Treasury stock of 1 
billion ounces. 

But the Secretary compared total demand for silver, industrial and 
coinage, with new mine production. 

Those of us in the metal industry know only too well that on the 
supply side, one cannot overlook the flow of metal salvaged from 
scrap and residues. Good figures on this supply are hard to come by. 
Handy & Harman estimated that in 1964, 20 milhon ounces were re- 
covered from demonetized coin of countries other than the United 
States and that salvaged scrap amounted to about 1,400,000 ounces. 
But, frankly, our impression as a lai^e refiner or silver is that this latter 
figiu'e is much too low. Work now being done on recovery of silver 
from photographic scrap shows great promise for increased yields. 

More sigmficant in judging the extent of the true gap between de- 
mand and supply are two other factors — the acciunulation of inven- 
tories by speculators and consumers, estimated by Handy & Harman 
at 70 million ounces last year, and the inflated demand for alver coin- 
age in the United States. 

A major factor in the latter was, of course, the minting of the Ken- 
nedy half dollar, most of which disappeared into private hands and 
did not circulate. It would take a mmdreader to ascertain how much 
of this withholding was due to sentimental desire for a memento of our 
late President, and how much of it was due to hoarding for the silver 
content. But our own guess is that sentiment rather man greed was 
the major factor. 

In any case, over one-third of our total 1964 use of silver for coinage 
was in tne Kennedy half dollar. 



Digitized byGoOgle 



98 COINAGE ACT OF 1&66 

The heavy demand for the dime and the quarter was out of all 
proportion to previous years, even allowing for growth in population 
and the higher rate of business activity. 

Thus, in our view, the realistic gap betwewi demand and supjily in 
silver, instead of being 33S miUion ounces is more probably m the 
order of 150 to 180 milhon ounces annually, based on 900 fineness 

We agree that part of this gap must be met by cutting down on 
coinage requirements. The figures in the Treasury staff study indi- 
cated that the 900 fineness coin normal demand would be on the order 
of 100 miUion ounces a yeax, and that a 400-fineiiess-clad coin for the 
10-, 25-, and 50-cent pieces would require about 50 to 60 miUi<m 
ounces annually, after the transition period had been ended. 

To meet this, the Treasury has available not only the biUion ouscee 
of silver in its stocks, but also the silver content of 1,900 million 
ounces contained in coinage now circulating. 

How much of this the Treasury would recover is perhaps debatable.^ 
But no one should make the mistake of assuming that this huge stocls. 
o£ silver has forever disappeared from the marketplace. In one form 
or (uiother, most of it will eventually find its way back, and it will be 
available either for the minting of new coins, or for the satisfaction 
of industrial requirements. 

Mr. Hardy has dealt in detail with the outlook for supply. Let me 
say only that the failure of mine production in this coimtry to rise' 
has been due primarily to the \&ck. of economic incentives. While 
the price of silver is up, it has risen less than the prices of other major 
nonferrous metals in the postwar period, and much less than operating 
costs. Nevertheless, because two-thirds of the increase in price has 
occurred within the last 3 years, more exploration and development' 
work is now underway on silver projects than at any time in the last 
30 years. If exploration expenses could be written off currently for 
tax purposes, this would give a further incentive for more prospecting. 

In any case, nune production is now rising. 

In the first quarter it was up 17 percent over the corresponding 
period of 1964 in the United States, and substantial further increases 
can be expected. 

The legislation befOTe you contemplates the fixing of a minimum 
price of $1.25 an ounce for domestically mined silver. This floor 
price was not sought by the mining industry, nor do we attach any 
great importance to it. Past experience has taught us that, if we 
accept floors, we may also expect ceOings. So far as we are concerned, 
we would be just as happy without it. 

We share with the Secretary of the Treasury his grave'reservationa 
about a system of elaborate controls on exports, boarding, et cetera.: 
We recognize and sympathize with the motives that prompt Isolators 
to outlaw speculation and accumulation of silver at this crucial time 
with respect to coinage. 

However, silver is a very valuable commodity, and controls that 
win be observed by honest people are an open invitation to the 
racketeer and the criminal. A two-price system in silver with higher 
prices abroad would invite reverse smuggling across the borders. 
Considering the large number of our citizens who work in Mexico and. 
Canada, and of Mexicans and Canadians who work in the United 
States, and cross the borders daily, policing regulations would be a 



Digitized byGoOgle 



COINAQE ACT OF 1966 99 

Herculean task. They would involve invasion Of personal privacy 
to a degree that mi^t be intolerable to many. 

Gentlemen, we fully recognize the gravity of the situation but we 
do not believe it justices swingmg to 5ie extreme of completely elim- 
inating silver from coinage. We feel that the Treasury program for 
continuing silver in the haU dollar is a minimum step, and that 
actually a greater use of silver could be contemplated with reasonable 
safety. 

Thank you, gentlemen, for the privilege of appearing. 

The Chairman. Thank you, sir. We appreciate your statement. 

You gentlemen remain available, if you will, please, and we will 
caUyou back later for questioning. 

We will now hear Mr. Stevens, Mr. Frank Wemple, Mr. Fraakovich, 
Mr. Ramsey, and Mr. Welfling. 

Now, you gentlemen have statements to make. You may inseri 
any remarks you desire in addition to the statements that you actually 
deliver. 

We appreciate your cooperation in the interests of time. 

Also, Mr. Moms is here. 

Mr. Stevens, you may identify yourself, sir, and proceed. 

STATESEHT OF JOHN B. STEVENS, EXECTTTIVE VICE FEESIDENT, 
INTERNATIONAL SILVER CO., AND CHAXSHAN OF THS EXECU- 
TIVE COMinTTEE OF THE SILVER USEES ASSOCIATION; AC- 
GOUFANIED BT FRANK WEMPLE, TREASURER, HANDT & 
HARUAN; GEORGE E. FEANEOVICH, EXECUTIVE DIRECTOR, 
MANUFACTURING JEWELERS & SILVERSMITHS ASSOCIATION; 
DONALD J. RAMSEY, WASHINGTON LEGISLATIVE COUNSEL, 
SILVER USEES ASSOCIATION ; DR. WELDON WELFLING, WESTERN 
RESERVE UNIVERSITY; ALSO ACCOMPANIED BT JOSEPH T. 
MORRIS ON BEHALF OF THE NATIONAL ASSOCIATION OF 
PHOTOGRAPHIC MANUFACTURERS 

Mr. Stevens. Thank you, Mr. Chairman. 

I would like to say at the outset that I will make a brief statement 
first, and then would hke to ask in this order — Admiral Ramsey, Mr. 
Wemple, Dr. Welfling, Mr. Morris, and Mr. Frankovich to make 
their statements. 

Mr. Chairman, I welcome the opportimity to appear before your 
committee. I am John B. Stevens, executive vice president of the 
International Silver Co., Meriden, Conn., and general manager of its 
silverware division. I am also chairman of the executive committee 
of the Silver Users Association. My purpose in being here today is to 
testify before this committee as to the effects the proposed legiiation 
to change the content of our coins will have upon the thousands of men 
and women who depend upon silver for their livelihoods. 

At the outset, may I commend this committee for its prompt and 
efficient response, and the Secretary of the Treasury for his clear and 
well spoken testimony before this committee. I am pleased with the 
President's decision to eliminate the use of silver in dimes and quarters, 
but greatly concerned over the proposal to mint half dollars of a 40- 
percent silver content. 



■dbyGOOgIC 



100 COINAGE ACT OP 1966 

The retention of any silver in subsidiary coinage is of vital concern 
to manufacturers of suverware, both lai^e and small. 

This legislation represents one of the first major changes in our 
coinage system since 1792; it includes a new type of coin, a silver-clad 
50-cent piece, which bears the likeness of President Kennedy. This 
would create a collector's paradise; hence, a downright waste of 15 
million ounces of silver, or close to 80 percent of 1 year's requirement 
for silverware. Think of this in terms of productive returns to our 
economy, in terms of employment, or lack of it. 

As you know, the silverware industry is one of the oldest industries 
in the United States, first established by the early settlers of New 
England. To quote one of my associates, "its history is the history 
of American industry in the best of traditions." How true this is. 
We believe in tradition, but not at the expense of jobs which would be 
jeopardized by the continuation of silver m coins. 

Our industry grew with our country. Our industry improved with 
the development of new manufacturing techniques, and our industry 
prospered through the hard labors of our self-priming economy. The 
question of supplies of silver is of vital concern to the silverware 
industry for, without it, we have no business whatsoever. The 
question of price is also of great concern to us, because the proportion 
of raw material to total manufacturing cost is extremely high. We 
take great pride in our craftsmanship, and we strive to provide the 
public with fine silver products at the lowest possible price. This 
may no longer be possible. It is believed that the prestige and tradi- 
tions of the silverware industry far outweigh the rather intangible 
prestige that one silver-clad half dollar is supposed to impart to our 
coinage system. Our silver dollar is still our only prestige coin and, 
as one of the members of this committee pointed out last Friday, 
this is the reason why it has disappeared from circulation. 

The silverware industry, whicii I represent, is besieged with many 
of the same problems which other industries face, but by far the most 
important consideration is the availability of silver itself. In sterling 
silver flatware, for example, about 75 percent of our manufacturing 
cost is the cost of silver itself. We use a very high percentage of 
silver in tenns of our actual product. You are all familiar enough 
with silver to know that the price of silver has increased tremendously 
over the last 10 years. For example, in 1952, the price of silver was 
85 cents an ounce. Today, silver is at the current level of $1,293 
per ounce. This represents a 52-percent increase, gentlemen. This 
IS a very large cost to absorb. Our market has been narrowed be- 
cause we must pass on this cost to our consumers in order to stay in 
business. We have many would-be consumers who feel they cannot 
afford to buy silverware. The silverware industry feels that the 
upward spiral action on the price of silver was created by Govern- 
ment option, taking such a large stock off the market at above market 
prices. This may have been necessarv at the time to protect the 
mining industry, but it is certainly no longer necessary for the Gov- 
ernment to resume buying of silver. The cost we have had to pass 
on to our consumers and would-be consumers is beyond our control. 
Mr. Simon Strauss, vice president of American Smelting & Refining, 
has raised a question of priorities. He asks in the February 1966 
issue of Mining Engineering: 



■dbyGOOgIC 



COINAGE ACT OF 1966 101 

Is it more important to have silver for spoons and forks than to have silver for 
coina? MiltioiiB of people every da; are eating meals with atainless Steel flatw&re; 
others, understandably, prefer silverware. But is it more important to satisfy 
this preference than to have silver for coins? 

Certainly people can eat with stainless st«el. They can even eat 
with their fingers if they prefer. I ask Mr. Strauss why it is important 
to have silver for coins. It the proposed half dollar b to be looked on 
as a "prestige" coin, then our national prestige has dropped as a 
ratio from 90 to 40. 

I repeat, we are very pleased with the Treasury's recommendation 
to eliminate silver from dimes and quarters. Given the facts, this ia 
the only logical conclusion one could arrive at. Mr. Chairman, I 
submit that the national interest would be better served if the legida- 
tion now under consideration were to be amended in such a way to 
permit the minting of half dollars of the same alloy as dimes and 
quarters. I believe your decision should be utilitarian, rather than 
political. 

In summary, the silverware industry endorses the action taken by 
the administration in recommending the minting of dimes and quarters 
without silver. 

Admiral Ramsey, legislative counsel for the association, will discuss 
the proposed legislation in more detail and other members representing 
different segments of our industry will also testify briefly. 

I would Hke to say there are other factors in the silver using industry 
which are important, some of them larger users of silver than the 
silverware industry. I believe that many people are under the 
impreHsioi> that the most important user is the silver and jewelry 
industry. But in actual fact, the photographic and electrical indus- 
tries are greater users of silver. 

Thank you very much. 

The Chairman, Mr. Stevens, would it be satisfactory for these 
other five gentlemen to file theii statements, and one speak for all of 
you, or would you like each one to say a few words and present his 
statement? 

Mr. Stevens. Mr. Chairman, we would like each one to say a few 
words. 

The Chairman. Well, suppose you present them, then, in the order 
which you want them presented, and take care of the time on it, 

Mr. Stevens. Fine, sir. 

Admiral Ramsey will be the first. 

STATEMENT OF BEAR ADU. DONALD J. KAMSET, n.S. NAVT. 
RETIRED, LEGISLATIVE COUNSEL POR THE SUVER USERS 
ASSOCIATION 

Admiral Ramsey. I am Rear Adm. Donald J. Ramsey, U.S. Navy, 

retired, legislative counsel for the Silver Users Association, whose 
members use approximately 75 percent of the amount of silver con- 
sumed in the United States. A list of the members is attached to 
my statement. 

I should also like to compliment the Treasury and the President for 
their efforts to find a solution to a very complicated problem. 

I also would hke to compliment the chairman of this committee for 
his prompt action in handhng this legislation as well as the legislation 



Digitized byGoOgle 



102 COINAGB ACT OT 1966 

which became Public Law 88-36 on June 4, 1963. At that time there 
were dire predictions as to what would happen to the country if we 
demonetized silver and issued $1 Federal Reserve notes. The chaii^ 
man persisted in his efforts and the Nation seems to have surviv&d. 
I think it will survive without silver in coins. 

There has been considerable talk about there being something for 
everyone in ^s bill. It has been said that the vending maoiine 
industry came out first, followed by the producers, then the users. 
If silver is completely removed from our coinage, and if it becomes 
available for industrial users where it is essential, I would say the 
public has come out on top. 

At the hearings held yesterday, Mr. Chairman, a tel^am was put 
in the record which indicated the endorsement of the Silver Users 
Association of this bill. There must be some mistake, and it is re- 
quested the record be corrected. The position of the association is 
as follows : 

The Silver Users Association supports the proposals contained in 
H.B. 8746 to mint quarter dollars and dimes composed of an alloy of 
75 percent copper and 25 percent nickel clad on a core of pure copper. 
The composition of these coins was determined by the requirements 
of coin-operated machines. 

The association strongly opposes the proposal to mint half dollars 
containing 40 percent sUver. It urges the minting of half dollars of 
materials which contain no silver. 

Opposition to the use of a^ silver in subsidiary coins is based on 
the silver supply situation. It is estimated that the deficit between 
free world production and industrial demand in 1965 will be 75 millioQ 
ounces. The deficit between U.S. production and demand will be 
about 90 million ounces. These deficits will increase because industrial 
requirements will be increasing fast«r than new production increases. 
This deficit is now made up by the U.S. Treasury through the redemp- 
tion of silver certificates for bullion. The use of any silver in sub- 
sidiary coins reduces the amount of silver available to make up this 
deficit. 

The President and Secretary Fowler have pointed out that there is 
no dependable or likely prospect of new, economically workable sources 
of silver that would appreciably narrow the gap between supply and 
-demand. The Secretary stated this to be the opinion of experts both 
inside and outside the Treasury. Both stated tnat optimistic projec- 
tions envision an increase of no more than 20 percent over the next 
4 years and the President aptly pointed out that this would be of 
little help. 

Secretary Fowler has stated that after the proposed new coins are 
in full production, no more than 15 milhon ounces of silver should be 
required for the minting of half dollars. While even this amount of 
needless consumption is undesirable, we believe it to be a low estimate. 
Two hundred and six million Kennedy half dollars were minted in 
1964 and with the proposed silver content of 40 percent this would 
require 33 mill ion ounces of silver. After 16 months of production 
the Kennedy half dollars are still in short supply. No one can predict 
the normal coinage demand. 

Secretary Fowler said that what he calls "the industrial and arts 
problem" will not be solved by whether we do or we do not utilize 
silver in our half dollars; however, the minting of these coins at the 



Digitized byGoOgle 



COIKAQE ACT (JT 1066 103 

1964 rate would tisis up enough silver in 4 years to supply U.S. industry 
for 1 year or make up the free world deficit for 2 years. Such facte 
cannot and should not be overlooked. 

The stated reasons for maintainiog silver in the half dollar are for 
prestige and to continue the tradition of silver in coinage in spite of 
the fact that the President's statement and Treasury report dispute 
the need for any value in our coins other than that they serve aa a 
circulating medium of exchange. These considerations, plus the 
fact that the proposed coin is unique in its composition, can only meaa 
that instead of representing preatige it will become a collector's item 
at least as much in demand as the silver dollar and Kennedy half 
dollar, neither of which is seen in circulation. 

Why does this country need a prestige coin? Only now, after 173 
years, when the proponents are hard pressed to justify a 40-percent 
silver clad coin are we told we must have such a coin. No nation on 
earth presumes to mint a "prestige" coin with only 40 percent silver. 

France, often cited as a major nation using silver in coins, mints 
two silver coins. But both have paper equivalents. The 5-franc 
coin containing 83.5 percent silver has disappeared from circulation. 
The 10-franc coin containing 90 percent silver ia designed for hoarding 
in order to combat inflation. Italy mints a 500-Ure coin containing 
83.5 percent silver with a paper equivalent which is bein^ withdrawn. 
Both countries have had volatile monetary and financial histories. 
Perhaps they need a high content silver "prestige" coin. 

The United Kingdom shifted all silver coins to cupronickel in 1947. 
In 1964, while the United States was consuming 203 million ounces of 
silver, the rest of the world, excluding commemorative coins, used only 
40 miUion ounces in coins, with Canada using an estimated 14 million. 

The silver policy of the United States as set forth in the President's 
Economic Report to the Congress in January 1963 is "to reflect the 
status of silver as a metal for which there is an expanding industrial 
demand." Public Law 88-63 was enacted to carry out this pohcy. 
This law spelled out the obligation of the Treasury to redeem silver 
certificates on demand with either silver dollars or sUver bullion at 
the rate of $1.29 per ounce. This law also authorized the Treasury 
to use excess silver for coinage and to sell excess silver to other depart- 
ments and agencies of the Government. While redeeming sdver 
certificates the Treasury has also been retiring certificates to obtain 
silver for coinage. It is this coinage drain on the Treasury stocks far 
in excess of any anticipated amounts which has created the critical 
coinage situation. It was estimated that 80 milhon ounces for coinage 
would be required annually. In the 2 years since the passage of the 
act, 366.9 million oxmces have been required. This is an average of 
ISO million ounces, and the rate is now 27 million ounces per month. 
On the other hand, redemption of silver certificates during the 2-year 
period amounted to only 207 million ounces. 

It should be borne in mind that the Treasury, although authorized 
to sell silver, does not sell silver outside the Government, nor does it 
fix the market price for silver. However, the fact that the Govern- 
ment carries out its legal obhgation to redeem sUver certificates at 
the rate of $1.29 per ounce obviously keeps the market price from 
rising above that level. 

The Treasury stocks of silver bulUon now amount to 1 billion 
ounces. It has been indicated that 300 million ounces of silver will be 



Digitized byGoOgle 



X04 COINAG£ ACT OF 1965 

required for the necessary continued minting of present silver coins, 
A stockpile requirement of 165 million omicea has been announced by 
the Office of Emergency Planning. Redemption of silver certificateB 
at the present rate may require 125 million ounces this year. Thus, 
Treasury stocks may be reduced to around 400 million ounces during 
the next year. This amount would be available to those who desire 
to have silver certificates redeemed with silver as guaranteed by the 
Government when the certificates were issued. 

The Treasury stock of silver was excess silver removed from the 
market over a period of 30 years in order to raise the price. Ability 
to obtain this silver now makes up the deficit between production and 
consumption in the market. This in turn protects our silver coins in 
circulation by stabihzing the market price at the guaranteed redemp- 
tion rate of $1,29 per ounce. 

Any coinage requirement for silver, however small, would be of 
serious consequence. In addition to reducing the supply it would 
maintain a speculative interest in silver which would result in increased 
redemption for speculative purposes. When the Treasury stocks are 
exhausted, the Government would be forced into the market to buy 
■silver where there is £in ever-increasing deficit in supplies. 

As previously pointed out, the Treasury could control the minting 
of the proposed 50-cent piece, but this would in fact only serve to 
make it more desirable. It would disappear down the way of the 
silver dollar. If a 50-cent piece is required as a medium of exchange 
in our monetary system, it should be minted in sufficient quantities 
to insure its circulation. 

The Chairman. Admiral, will you cease just a moment, please. 

Now, of course, obviously we do not have time for each witness 
to read all of his statement. If each witness will present just a part 
of it, the members will ask questions of the panel, which will enable 
the witnesses to bring out many of the points that they desire to bring 
out. That way it will save a lot of time, 

Mr, Stevens. All right, Mr. Chairman. I would like Admiral 
Bamsey to comment on this. 

Admiral Ramsey. Mr. Chairman, we have some specific objections 
or suggestions to this bill which only I will bring up. 

The Chairman. Veiy well. We would like to have the members 
given a privilege of asking some questions after you gentlemen take 
the time you have indicated, 

Mr. Stanton. Mr, Chairman, of course you know there are a lot 
of new members on this committee, and this is an extremely important 
subject. Even if it is going to take a couple more days, I think it is 
wtJl worthwhile for the members of the Banking and Currency Com- 
mittee to Hsten to the testimony in full from these gentlemen and 
anybody else who has something to say on the subject. 

The Chairman. It is my understanding that these gentlemen favor 
the bill generally. Is that correct? 

Admiral Ramsey. We oppose the minting of sUver half doUars. 
And we do have 

The Chairman. I wish you would confine your argument to what 
you are opposed to. 

Admiral Ramsey. I have two pages, Mr. Chairman, which will 
spell out our fpelinfrs and objections to this bill. 

The Chairman. Gu right ahead. Admiral. Your statement is 
very interesting. 



Digitized byGoOgle 



COINAGE ACT OF 10«S 105' 

Admiral Eauset. Thank you, sir. 

We urge this committee to amend this bill to provide for a 50-cent 
piece ma^e of the same material as the <juarters and dimes or al- 
ternatively of some other suitable material not containing silver. 
The Treasury staff study of silver and coinage concladed that cupro- 
nickel is the best permaneDt material for nev subsidiary coinage, 
ignoring the vending machine problem. 

Section 4 permits the continued muiting of coins now authorized by 
law. Secretar-y Fowler in his prepared statement said this section 
provides for the continued minting of the existing coins as needed 
until production of new coinage is adequate. It is recommended that 
a sentence be added to this section which speUs out the Secretary's 
intention. Suggested wording i.s as follows; 

However, the minting of the half doUars, quArtera, aad dimes shall be confined 
to the colas provided for in this act when the production of such coins is con- 
sidered by the Secretary of the Treaaury to be adequate. 

There is no limitation in the bill now as to how long the Secretary 
m^ continue to mint silver coins. 

We feel that there should be some limitation on this authority. 

Section 5 authorizes the Secretary of the Treasury to prohibit the 
exporting, melting, or treating of the coins of the United States. 
The views of the association concerning controls were expressed in a 
letter to the Secretary of the Treasury dated May 10, 1965, a copy of 
which in attached to this statement as exhibit 2. 

The proposed penalty for violating any rule or regulation or license 
issued for melting down corns is $10,000 or imprisonment for not more 
than 5 years or both. While this may be intended for lai^e-scale 
violators, it makes criminals out of individuals who, for instance, may 
even today melt down silver coins to obtain a few ounces of coined 
silver for the purpose of making silver trinkets. Articles of coined 
silver have been very popular throughout the ages. Persona who 
obtain silver coins pay for them. It is not their fault that the intrinsic 
value of our coins is nigh enough to make them worth melting down. 
It is urgently requested that if the Treasuiy b forced to resort to 

{irohibition against melting down, such prohibition be in effect only 
ong enough to serve its purpose and that the right of citizens to do 
what they wish with coins is restored. The Silver Users Association 
is not opposed to standby controls so long as, if invoked, they are 
abandoned when no longer necessary. 

Section 6 gives the Secretary of the Treasury authority to sell 
excess silver at "not less than the monetary value thereof." Section 
7 not only authorizes but directs the Treasury to purchase domestic 
sUver at a fixed price when tendered. The Secretary of the Treasury 
has stated that section 7 was designed to provide a floor, inasmuch as 
section 6 provided a ceiling. It is felt that this ceiling should be 
swelled out and that the Secretary of the Treasury should also be 
directed to sell silver at the fixed price of $1.2929 per ounce. 

The Silver Users Association is concerned over the wording in 
title II, section 3, which provides that the Joint Commission on 
Coinage shall review and give advice and recommendations with 
respect to, among other things, the time when and circumstances 
under which the United States should cease to maintain the price of 
silver. Although, because of coinage considerations, the United 
States must stand ready to sell in order to maintain the price of 



Digitized byGoOgIC 



106 COINAGE ACT OP 1965 

silver, it is the redemption of silver certificates as required by law 
which stabilizes the market price at Sl-293. This redemption is the 
fulfillmeDt of a pledge to redeem certlQcates with buUioa on demand. 
It is not dear whether this reference to "maintain the price" refers 
to the $1.25 buying price established by title I, section 7, or to tho 
redemption value of silver bullion for silver certificates of $1.29. It 
shoula be clear that the Treasury does not currently have any obli- 
gation to fix a market price for silver, but it does have a commitment 
to redeem silver certificates with 0.7734 ounce of silver per dollar. 
Only when free market prices rise to this point does redemption take 
place. 

It is hoped that the committee will take action to remove these 
imcertainties. Thank you. 

The Chairman. Now, you have in connection with your statement 
a list of the members of your association and also a letter to Secretary 
Fowler, which, of course, will be inserted in the record at this point 
in connection with your statement. 

Admirri Kamsbt. Yes, sir. 

(The material referred to follows :) 



Members or the Silveb ITberb Asbociation 

The members of the Silver TIaers Aasociation ubc approKimately 75 percent of 
the amount of silver consumed in the United States. The total consumed in' 
1964 is estimated to be at 123 million ounces. 
Photographic materiale: 

Eastman Kodalc, Rochester, N.Y. 

Kilbom Photo Paper Co., Inc., Cedar Rapids, Iowa. 

Xeroi Corp., Rochester, N.Y. 

General Aniline & Film Corp., New York, N.Y. 

Powers Chemco, Inc., Glen Cove, N.Y. 
Silverware! 

Gorham Corp., Providence, R.I. 

International Silver Co., Meriden, Conn. 

Samuel Kirk & Son, Baltimore, Md. 

Lunt Silversmiths, Greenfield, Mass. 

Oneida Limited, Oneida, N.Y. 

Reed & Barton, Taunton, Mass. 

Stieff Co., Baltimore, Md. 

Tiffany & Co., New York, N.Y. 

Towle Manufacturing Co., Newburyport, Mass. 

Wallace Silversmiths, Wallingford, Conn, (subsidiary of Hamilton Watch 
Co., Lancaster, Pa.) 
Dental supplies: 

L. D. Caurk Co., Philadelphia, Pa. 
Chemicals; 

Ames Chemical Works, Inc., Glens Falls, N.Y. 

Catalyst Development Corp., Little Ferry, N.J. 
Fabricated and industrial products: 

Dixie Bronze Co., Birmingham, Ala. 

Engelhard Industries, Newark, N.J. 

Handy & Harman, New York, N.Y. 
The Silver Users Association also represents the following associations: 

Manufacturing Jewelers & Silversmiths of America, Inc. 

National Association of Mirror Manufacturers. 

Retail Jewelers of America, Inc. 



■dbyGOOgIC 



COINAGE ACT OF 1966 107 



May 10, 1965. 
Hon. Hbnrt H. Fovi^bb, 
Seerdary of tht Treasury, 
Waahinglon, D.C. 

Dbab Mb. Secbetart: At v&riouB meetings with Treasury officials, the Silver 
TTserB Association has been asked for its views on the subject of controls and other 
actions which might t>e taken in connection with silver bullion and coins, with 
particulfir reference topropoaed chimges in coins. At a meeting on May 4, with 
Assistant Secretary Wallace and Acting General Counsel Smith, the former 
Bu^ested that a letter be written to you expressing the views of titc asBociation.' 

The question of controls arises from the possibility that present high-content 
coins may disappear from circulation to the extent that trade would be disrupted. 
This situation will occur if these coins are more valuable for their metal content 
than they are for their face value as a purchasing medium, or if the public believes 
this will be the case. 

The basic position of the association is that controls will not be necessary if — 

(1) The public is aasured that the Treasury will continue indefinitely the 
redemption of silver certificates at the present rate as required by law, and if 

(2) The use of silver is eliminated in subsidiary coinage. 

The TreaBury must continue the redemption of silver certificates at the present 
rate at least until sufficient new coins are in circulation to meet our coinage 
requirements. This redemption, or Treasury sales at this rate, should be con- 
tinued indefinitely in order to stabilize tlie market. This silver was originally 
acquired to foroe the market price up to its present level at $1.29 per ounce. It 
should now be used to stabiliae the price at this level. As long as bullion is 
obtainable through the redemption of silver certificates, at the present rate, coins 
will not be melted down for their bullion content. The retention of silver in any 
amount in any subsidiary coin will increase the current speculative interest 
which obviously results in hoarding of coins. 

LegisUtivc proposals now before the Congress call for a minimum silver content 
of 30 percent in all silver coins. They also call for a new redemption rate for 
silver certificates of $4 per ounce, which would also be the minimum "monetary 
value" of a proposed new silver dollar. The retention of silver in any coin at a 
reduced level will raise the monetary value of the coin, thus adding to the confusion 
and speculative interest. The monetary value is believed by many to be tied into 
the market price, and today they are almost identical in the case of the silver dollar. 

The retention of any silver in subsidiary coins means that sooner or later the 
Treasmy will be forced into the market to buy silver. Statistics which are avail- 
able clearly indicate that there is now a 25-pcrcent deficit between production and 
industrial consumption. This deficit is increasing and is made up with silver 
obtained throuEh the redemption of silver certificates. Consequently any possi- 
bility of the Treasury entering the market for any amount of silver can only 
iLccentuate the speculative bterest. The market supply situation is such that 
there is no longer any necessity to provide a market for the producers of silver 
through Treasury purchases. 

Regardless of the material used in new coins, there will be increased interest on 
the part of the numismatists and collectors. This will apply to new coins as well 
as old. It is believed, however, that the problem will be minimized and within 
tolerable limits if the public is assured that the metal content of silver coins will 
not be worth more than their face value. On the other hand, any indication that 
the metal content will be worth more than the face value will result in the disap- 
pearance of such coins. This would be particularly true if the Treasury is required 
to embark on a program which is dependent upon the withdrawal of these high- 
content coins in order to provide silver for low-content silver coins. 

The following actions have been suggested during the transition period: 

(1) Prohibition of the melting down or hoarding of coins. 

(2) Export controls of silver bullion and/or coins. 

(3) Requirement of end-use certificates from those who obtain silver from 
the Treasury, 

(4) Reestablishment of the transfer tax. 

Prohibition of the melting down of silver coins will be unnecessary as long as the 
Treasury redeems silver certificates at the present rate, which it must do until 
sufficient new coins are in circulation. Prohibition of hoarding would be most 
difficult, if not impossible, to enforce. The establishment of a criteria as to what 
titutes hoarduig would be a formidable task. Unlike the situation which 
ed in conhection with gold coins, silver subsidiary coins are fractional money 

48-838— «5 8 



Digitized byGoOgle 



lOS COINAOE ACT OF I»eS 

and are necessary as a medium of exchange. The solution to the hoarding 
problem appears to be the elimination of factors which are conducive to hoarding. 

The association is not opposed to actions which may be necessary to insure the 
circulation of coins as a medium of exchange. However, it is requested that all 
parties affected be given adequate opportunity to be heard prior to such actions. 

It is obvious from the foregoing that the underlying problem and its solution is 
in the intrinsic value of coins. It appears clear that any factor which could make 
present or new coins more valuable for their metal content than their face value 
must be eliminated or avoided. 

In summarizing the position of the Silver Usera Association with reference to 
controls, it is sugacsted that the following steps be taken: 

(1) Eliminate the use of silver in subsidiary coinage. 

(2) Assure the public that the Treasury will continue indefinitely the redemp- 
tion of silver certificates at the present rate. 

(3) Inform the public tliat the metal value of outstanding silver coins wiU not 
exceed the face value. 

(4) Minimise the discussion and use of controls, 

(5) Make every effort to continue the unrestricted use of present silver coina. 
Respiectfully, 

Donald J. Ramset, Legislalim Counsel. 

The Chairman, All these statements are good. I have looked at 
most of them. Yours m particular, Admu'al Ramsey, is very fine. 
In fact, all of them give valuable infonnation. 

The committee members will ask questions to bring out additional 
information, too. All right, you may call your next witness. 

Mr. Stevens. Thank you, Mr. Chairman. 

Realizing the press of tinae, I wonder if this would be satisfactory. 
I would like to ask Dr. Welfling to make his statement, and then 
ask that the formal statements of our other witoesses be filed, but 
that thOT be permitted to briefly summarize their statements. 

The Chaihman, That will be all right, if it is all right with you 
gentlemen. 

You may go ahead, sir, 

STATEMENT OF DS. WELDON WELFLING, CHAIBMAN, BEFABT- 
MENTS OP ECONOMICS AND BANKING AND FINANCE, WESTERN 
RESERVE UNIVERSITY, CLEVELAND, OHIO 

Mr. Welfling. Mr. Chairman and members of the committee, 
my name is Weldon Welfling, chairman. Departments of Economics 
and Banking and Finance, Western Reserve University, Cleveland, 
Ohio. 

Mr. Chairman, the first two pf^es of my prepared statement are 
background material with which I am sure the committee is familiar. 
I can just as well skip that. It is a description of the supply-and- 
demand situation, with which I am sure you are familiar. 

Your committee is meeting in an atmosphere of emet^ency and 
urgency and I will try to cooperate by being brief. If in doing so I 
raise questions I will be glad to try to answer them later. 

The current situation presents an excellent opportunity to eliminate 
silver entirely from the coinage. There seems to be no sound, eco- 
nomic reason to treat the half dollar any differently than the dime 
and quarter. There is no reason to use an expensive, previous material 
for any use where a more economical material will serve as well. The 
Treasury is obviously convinced that the proposed dime and quarter 
will provide a satisfactory currency in terms of appearance, durability, 
machine acceptance, difficulty of counterfeiting, and cost. If this is 



Digitized byGoOgle 



COINAOE ACT OP 1«65 109 

tj-ue, there ia no economic reason why the same change should not be 
made in the half dollar and many reasons why it should. The present 
bill goes a long way toward solving the silver problem, at least tempo- 
rarily, but the opportunity shoiUd be taken to solve it completely for 
the foreseeable future. 

Even if there were no emergency, logic would dictate making coins 
as economically as possible. It must be emphasized that fractional 
coins are purely a convenience. What they are made of, so long as 
they are truly convenient, is irrelevant. Paper would serve, as it 
obviously does in dollar bills, except that in small transactions it 
happens to be leas convenient. The silver dime is no better than two 
nickels or one nickel and five pennies. Ten dimes are no better than 
a dollar Federal Reserve note, unless, indeed, the price of silver 
rises above the coinage value. Then, the 10 dimes become more — 
worth more than a dollar but only as silver, not as coins. Conse- 
quently, they become very poor coins as they tend not to circulate 
at all. 

Under present circimistances, it is clearly preferable to eliminate 
the coinage demand for silver entirely rather than to reduce it. All 
of the available sdver should be mustered to stabilize the market 
price until the new coinage system is fully operative. Unless this 
price hne is held at least that long, we will be without coins until the 
new type is in adequate supply. 

It is natural that this committee will hear arguments favoring 
retention of at least some silver in coins. These arguments have 
httle economic validity. Reference is made to "sound" currency. 
Our convenience coins are sound if they are convenient. The sound- 
ness and value of the dollar have nothing to do with whether we make 
our small change out of silver, copper, nickel, or plastic. 

Intrinsic value has nothing to do with the problem. In the first 
place, nothing has intrinsic value. Value is the result of supply and 
demand. Reduce the demand for, or increase the supply of, gold, 
silver, or peanuts and their value will decline. Actually the less 
so-called intrinsic value a coin has, the better. It costs society lesa 
to make, and it is less Ukely to be used other than as a coin. The 
market price of the metal in a coin is irrelevant; four quarters were 
a dollar when silver has cost the Treasury 50, 71, or 92 cents. We 
certainly do not want full-bodied coins, as they are the most trouble- 
some, as is in fact illustrated now by the silver dollar which has dis- 
appeared, and the fractional coins which are threatened by the 
same fate. 

As to the arguments for retaining some silver, other than appeals 
for intrinsic value, the only ones appear to be tradition and prestige. 
Under existing circumstances, I see no persuasion in either. Tne 
tradition of using silver as a coin in the United States started when 
silver was used as standard money and was fostered by discoveries 
of silver many years ago that made it a fairly economical material. 
Certainly the tradition of using copper must be at least as respecta- 
ble, datmg also from the Mint Act of 1792. As for prestige, I won- 
der in whose eyes the United States of America gains prestige by 
using a half dollar that is 40 percent silver. I see more prestige stem- 
ming from the advanced technology that has created the sandwich 
coin and that releases silver for more urgent uses. 



■dbyGOOgIC 



110 COINAQB ACT OP 1965 

May I conclude by referring briefly to some well-known facts about 
silver. First, silver mining is a minor industry indeed, prodncitw; 
only $45 million worth — at historically high prices — in the United 
States annually in recent years. Mexico and Peru both produce- 
more. Annual output of asparagus, cabbage, and celery each exceed 
domestic output oi silver. The sUver producing industry has im- 
doubtedly received more favorable attention from Congress, from 
1792 to 1964, pel- dollar of output and per employee than any other- 
industry. Second, only four mines in the United States derive their- 
principal income from silver. Most silver is obtained in conjunction 
with or as a byproduct of other ores. And against consumption of 
326 million oimcea in the United States in 1964, production was 36 
million ounces, about 11 percent. Third, it follows that high prices, 
of silver benefit mainly foreign producers at the expense of American 
consumers of photographic supplies, tableware, Jewelry, and dental 
material and as taxpayers paymg for the coinage system and for- 
electronic devices. Fourth, it also follows that the price of silvOT has. 
little effect on output. In spite of the market price rising to $1.29, 
American output was 37 million ounces in 1960 and either 35 or 36 
million in each subsequent year. Since 1934 the price has risen 80- 
percent, but annual production is still the same because it is lai^ely 
tied to output of copper, lead, and zinc. Fifth, and last, silver is just 
another commodity. It has no inherent, intrinsic claim to be corned 
any more than does copper or nickel or anything else unless it is the 
most economical commodity for that use. In today's world, it is mor& 
true than ever that silver is too valuable in other uses to be wasted 
in coins, where other materials are now clearly more economical. 

Thank you, Mr. Chairman. 

The Chaibman. Thank you, sir. 

(The complete statement of Dr. Welfling follows:) 

Statbubnt bt Db. Weldon Welfliko, Chaibuan, Departubnts Ot Eco- 
nomics AND Banking and Finance Western Resebve UNimBsiTT, 
Cleveland, Ohio 

Mr. Chairman and members of the committee, my name ia Dr. Weldon Wel- 
fling, chairman, Departments of Economics and Banking and Finance, Western 
Reserve University, Cleveland, Ohio. 

Your committee is meeting in an atmosphere of emergency and urgenc7 and 
I will try to cooperate by being brief. If in doing so I raise questions I will be 
glad to try to answer them later. 

The solution to the coinage problem cannot be delayed much longer. The 

Seneral nature of the problem has been clear for many months. InduBtrial 
emands for silver plus enormous coinage demands in the United States have 
put upward pressure on the market price of silver. AH that prevents the price 
from rising higher is the Treasury's ability to redeem silver certiacatea in exchange 
for silver at the coinage value of $1.29 per ounce. Estimatea vary as to when the 
Treasury's stock, now down to about a billion ounces, will be depleted but even 
at present rates it will be exhausted in 2 years. As this point ia approached, the 
mra-e rapidly will the stock be depleted. 

In 1964, free-world production of silver amounted to 215 million ounces, only 
36 million coming from the United States. The United States alone used 203 
million ounces in coinage, with other nations using 61 million, for a total of 264 
million ounces. Industrial consumption was 123 million in the United States, 163 
mill i nn abroad, and a total of 2SS million ounces. Coinage and industrial usee 
each eTcceeded total output. Output amounted to 40 percent of consumption. 
The other 60 percent came from accumulated atocks. 

An unknown but significant fraction of the demand is undoubtedly specula- 
tive. When the Treasury is no longer able to supply the market the price will. 
be tree to rise above $1.29. When it reaches $1.38 the silver in dimes, quarters,. 



Digitized byGoOgle 



COINAQB ACT OF 1«SS 111 

-ftnd hftlves will make them full-bodied money, and at h^^er prices these coins 
can be melted for the metal. 

Such eqieiiences have happened twice before in our history. In Andrew Jack- 
son's thne the price of silver was pushed up above SI. 29 and fractional coins 
disappeared. The eventual remedy was the Subsidiary Coinage Act of 1853. 
which was the first legislative recognition of the fact that fractional coins need 
not be full bodies. Ilowever, the silver content was reduced only about 7 per- 
cent, which gives ue the S1.3S figure. Durii^ the Civil War the price of silver 
rose by this 7 percent and more, and again coins were melted while the Treasury 
was unable to buy more silver. Both of these periods illustrated the great incon- 
venience of not having a workable system of coins, and today the inconvenience 
"Would be far greater with our vending machines, coin-operated machines, tele- 
phones, toll boths, and so on. 

Since the 1S70'e, silver supply and demand have been auch as to keep the 
'price below the silver dollar equivalent of $1.29. In fact, at times the price has 
been a quarter of that figure or less. Only a variety of price support programs 
in form of coinage laws, going all the way back to the Bland-Allison Act of 1S78, 
has kept the price from being lower. Today, however, the situation is reversed, 
&nd d^nand far exceeds suj^ly at SI. 2!). 

The current situation presents an excellent opportunity to eliminate silver 
■entirely from the coinage. There seems to be no sound, economic reason to 
(Mat the half dollar any differently than the dime and quarter. There is no 
reason to use an expensive, precious material for any use where a more economical 
material will serve as well. The Treasury is obviously convinced that the pro- 
posed dime and quarter will provide a satisfactory currency in terms of appearance, 
durability, machine acceptance, difficulty of counterfeiting, and cost. If this 
is true, there is no economic reason why the same change should not be made 
in the half dollar and many reasons why it should. The present bill Koes a 
long way toward solving the silver problem, at least temporarily, but the op- 
portunity should be taken to solve it completely for the foreseeable future. 

Even if there were no emergency, logic would dictate making coins as eco- 
nomically as possible. It must be emphasized that fractional coins are purely 
a convenience. What they are made of, so long as they are truly convenient, 
is irrelevant. Paper would serve, as it obviously does in dollar biUa, except 
. that in small transactions it happens to be less convenient. The silver dime is 
no better than two nickels or one nickel and five pennies. Ten dimes are no 
better than a dollar Federal Reserve note, unless, indeed, the price of silver 
rises above the coinage value. Then, the 10 dimes become worth more than 
a dollar but only as silver, not as coins. Consequently, they become very poor 
coins aa they tend not to circulate at all. 

Under present circumstances, it is clearly preferable to eliminate the coinage 
■demand for silver entirely rather than to reduce it. All of the available silver 
should be mustered to stabilize the market price until the new coinage aystem 
is fully operative. Unless this price line is held at least that long, we will be 
without coins until the new type is in adequate supply. 

It is natural that this committee will hear arguments favoring retention of at 
least some silver in coins. These arguments have little economic validity. 
Keference is made to "sound" currency. Our convenience coins are sound if they 
are convenient. The soundneaa and value of the dollar have nothing to do witn 
whether we make our small change out of silver, copper, nickel, or plastic. 

Intrinsic value has nothing to do with the problem. In the first place, nothing 
has intrinsic value. Value in the result of supply and demand. Reduce the 
demand for, or increase the supply of, gold, silver, or peanuts and their value 
will decline. Actually the leas so-called intrinsic value a coin has, the better. 
It costs society less to make, and it is less likely to be used other than as a coin 
The market price of the metal in a coin is irrelevant; four quarters were a dollar 
-when silver has cost the Treasury 50 cents, 71 cents, or 92 cents. We certainly 
-do not want full-bodied coins, as they are the most troublesome, as is in fact 
illustrated now by the silver dollar which has disappeared, and the fractional 
-coins which are tnreatened by the same fate. 

As to the arguments for retaining some silver, other than appeals for intrinsic 
value, the only ones appear to be tradition and prestige. Under existing cir- 
^lunstances, I see no persuasion in either. The tradition of using silver as a coin 
in the United States started when silver was used as standard money and was 
fostered by discoveries of silver many years ago that made it a fairly economical 
material. Certainly the tradition of using copper must be at least as respectable, 
dating also from the Mint Act of 1792. As for prestige, I wonder in whose eyes 



Digitized byGoOgle 



112 COINAGE ACT OF 1966 

the United States of Amerioa gains prestige by using e. half dollar that is 40 percent 
silver. I see more prestige stemming from the advanced technology that has 
created the sandwich coin and that releases silver for more urgent uses. 

May I conclude by referring briefly to some well-known facts about silver. 
First, silver mining is a minor industry indeed, producing only S45 million worth — 
at historically high prices — in the United States annually in recent years. Mexico 
and Peru both produce more. Annual output of asparagus, cabbage, and celery 
each exceed domestic output of silver. The silver- producing industry has un- 
doubtedly received more favorable attention from Congress, from 1702 to IdS4, 
Ser dollar of output and per employee than any other industry. Second, only 
lur mines in the United States derive their principal income from silver. Most 
silver is obtained in conjunction with or as a byproduct of other ores. And 
against consumption of 326 million ounces in the United States in 1964, production 
was 38 million ouncer^, about 11 percent. Third, it follows that high prices of 
silver benefit mainly foreign producers at the expense of American consumers of 
photographic supplies, tableware, jewelry, and dental material and as taxpayers 
paying for the coinage system and for electronic devices. Fourth, it also follows 
that the price of silver has little effect on output. In spite of the market price 
rising to $1.29, American output was 37 million ounces in 1960 and either 35 or 
36 million in each subsequent year. Since 1934 the price has risen SO percent, 
but annual production is still the same because it is largely tied to output of 
copper, lead, and zinc. Fifth, and last, silver is just another commodity. It has 
no inherent, intrinsic claim to be coined any more than does copper or nickel or 
anything else unless it is the most economical commodity for that use. In today's 
world, it is more true than ever that silver is too valuable in other uses to be wasted 
in coins, where other materials are now clearly more economical. 

The Chairman. Now, you say the rest of the gentlemen will file 
tiheir statenients? 

Mr. Stevens. Mr, Chairman, I think I erred a bit in that. Ail of 
the individuals here, with one exception, represent the Silver Users 
Association, and I cannot speak for Mr, Morris, who does not sit here 
as a representative of the Silver Users, 

The Chairman. Yes, sir. 

Mr, Morris, you have a statement too? 

Mr. Morris. Yes. 

STATEMENT OF JOSEPH T. HOSRIS, HANAGINQ DIRECTOR, 
NATIONAI ASSOCIATION OF PHOTOGRAPHIC UANTTFACTURERS, 
INC. 

Mr. Morris, Mr. Chairman, I would like to make a statement, 
excerpting from both a summaiy and written statement, 

I would also like to ask in the interest of conserving this committee's 
time that this brochure entitled "Photography and the Economy" be 
included in the record. It has been distributed to the members of the 
committee. 

The Chairman, Yea; I have looked at it. It contains interesting 
information, we will insert it in the appendix. Without objection, 
it is so ordered. 

Now, Mr. Morris, you may present your statement, sir, 

Mr. Morris. Thank you, Mr. Chairman, members of the com- 
mittee — my name is Joseph T. Morris. I am managing director 
of the National Association of Photographic Manufacturers, Inc., 
New York, N,Y., a voluntarv association composed of approximately 
80 U.S. companies engaged in the manufacture of photographic film 
and papers, cameras, projectors, and other equipment and photo- 
graphic chemicals. Its members account for over 90 percent of these 
products manufactured in the United States, dollar and volume 



■dbyGOOgIC 



COINAOE ACT OF 1965 113 

The U.S. photographic manufacturing industry is the lai^est in- 
dustrial user of silver in the world. We, therefore, greatly appreciate 
ttiis opportunity to express our views on the proposed legislation, 
H.R. 8746, presently being considered by this distinguished committee. 

The photographic industry is entirely dependent upon systems for 
image reproduction that utilize silver-based salts. There are no 
satisfactory alternates or substitutes for silver in the photographic 
process and, despite extensive research, there are no technological 
changes to nonsilver systems anticipated. 

There has been extensive research aimed at the development of 
substitutes for silver-based salts. This research has been accelerated 
within the past few years in part as a direct result of the substantial 
increase in the cost of silver which has occurred since 1961. Silver 
represents a considerable portion of the cost of sensitized photographic 
products. Yet, despite an increase in silver prices of over 40 percent 
in the past 4 years, no acceptable substitute system has been devised 
and none is foreseeable. 

To date any material discovered is subject to severe limitations and 
would at best be suitable for extremely limited applications. 

As the photographic industry has grown, its needs for silver has 
increased from 30.8 million ounces in 1959 to 40.3 million ounces in 
1964. It IS expected that this demand will continue to increase as 
the industry continues to expand within the economy. 

Because of its extensive use of sUver, the photographic industry 
has developed an awareness of tlie need for silver recovery, both as a 
conservation measure and as a measure of prudent business economy. 
Those companies in the industry engaged in the manufacture of 
photographic films and papers recover the maximum amount of 
silver possible from waste and scrap materials. Silver is also re- 
coverable from the solutions used in the development process for 
photographic films and papers. During processing, a varymg amount 
of silver is "washed" from the film or paper and remains in the solu- 
tion. The extraction of this silver from photographic chemicals is 
practiced by many companies in the industry. Since this recovery 
requires an investment in capital equipment, labor, and overiiead, 
the economy of silver recovery in the process operation is dependent 
upon the volume of film processed and many other factors. 

The members of the association and of the photographic industry 
have a direct and continuing interest in insuring that the supply of 
silver available for this use is maintained. They, therefore, nave a 
further direct interest in any proposed legislation that attempts to 
deal with the present critical deficit situation existing between free 
world silver production and consumption. 

The proposed legislation under consideration by this committe& 
provides for the elimination of silver in U.S. dimes and quarters. 
We enthusiastically support this portion of the proposed bill. 

The members of the association are unalterably opposed to that 
portion of the proposed legislation that would provide for the con- 
tinued use of silver in U.S. half dollars, even on a reduced silver- 
content basis. 

In 1964 the free world deficit between silver consumption and 
production excluding alll coinage demand was 70.4 million ounces. 
Any continued use of silver in U.S. subsidiary coinage can only increase 
this deficit and reduce the total amount of silver available for private 



Digitized byGoOgle 



114 COINAGE ACT OF 1»Q5 

industry where its use is vital to the continued growth of the econ- 

Fresideut JobnsoDj in his message to the Congress of June 3, 1066, 
accompanying the proposed legislation, states the following: 

In terms of the present pattern of coin usage, adoption of the new coinage 
will permit a saving of some 00 percent of tlie silver we are now putting into 
coins annually. 

This would indicate a contemplated continuing demand for over 30 
million ounces of silver to be used in half dollars based on the 30(V 
miUion-ounce estimate for present consumption elsewhere stated 
in his message. The continued use of 30 million ounces of silvtf 
in coinage represents an almost 50-percent increase in the 1964 io;- 
dustrial arts freeworld deficit of consumption over production. 
Otherwise stated, this continued unnecessary demand for silver iB 
half dollars represents approximately 75 percent of the silver used 
by the entire U.S. photographic industry last year, based on the 
consumption reported in the Treasury study. 

We appreciate this opportunity to appear before this distinguished 
committee and present our view^ on a legislative proposal which has 
such far-range maphcationa for our industry and for our Nation as 
a whole. Thank you. 

The Chairman. Thank you, sir. 

(The complete statement of Mr. Morris follows:) 



My name is Joseph T. Morris. I am managing director of the National Aeeooia- 
tion of Photographic Manufacturers, Inc., New Yorlc, N.Y., a voluotary aaaocli^ 
tion composed oi approximately SO U.S. companies engaged in the manufacture 
of photograpliic film and papers, cameras, projectors, and other equipment and 
photographic chemicals. Its members account for over 90 percent cnF theee 
products manufactured in the United States, dollarwise and volumewise. 

The U.S. photographic manufacturing industry is the largest industrial uaer 
of silver in the world. We, therefore, greatly appreciate Ods opportunity to 
eTcpress our views on the proposed legislation, H.R. 874S, presently being con- 
sidered by this distinguished committee. 



In 1964 the U.S. photographic manufacturing Industry's usage of stiver was 

estimated at 40.3 million ounces.' 

The photographic industry is entirely dmiendent upon systems for Image 
reproduction that utilize silver-based salts. There are no satisfactory alternates 
or substitutes for silver in the photographic process and, despite ertensive research, 
there are no technological changes anticipated to nonsilver systems. 

The members of the association and of the photographic industry have a direct 
and continuing interest in insuring that the supply of silver available for this UM 
is maintained. They, therefore, have a further direct interest in any proposed 
legislation that attempts to deal with the present critical deficit situation existing 
between free world silver production and consumption. 

The proposed legislation under consideration by this committee provides for 
the elimination of silver in U.S. dimes and quarters. We enthusiastically support 
this portion of the proposed bill. 

The mcmberfi of the association :ire unalterably opposed to that portion of the 
proposed legislation that would provide for the continued use of silver in U.S. 
half dollars, even on a reduced silver- content basis. 

In 1964 the free world deficit between silver consumption and production, 
excluding all coinage demand was 70.4 million ounces.' Any continued use W 
silver in U.S. subsidiary coinage can only increase this deficit and reduce the total 



■dbyGOOgIC 



COINAGB ACT OF 1965 115 

amount of silver available for private iaduetry where its use ia vital to the con' 
tinued growth of the economy. 

Preslaent Johnson, iahtemesaagetotheCongresaof JuneS, 1965, accompanyinK 
the proposed legialatioc, states the following: In terms of the present pattern (rf 
coin usage, adoption of the new coinage will permit a saving of some 90 percent of 
the silver we are now putting into coins annually." This would indicate a con- 
templated continuing demand for over 30 million ounces of silver to be used in half 
dollars based on the 3D0-milhon-ounce estimate for present consumption elsewhera 
stated in bis message. The continued use of 30 million ounces of silver in coinage 
represents an almost 50-percent increase in the 1964 industrial-arts free world 
deficit of consumption over production. Otherwise stated, this continued un- 
necessay demand for silver in half dollars represents approximately 75 percent 
of the silver used by the entire U.S. photographic industry last year, based on the 
consumption reported in the Treasury study. 

Photography is a basic industry in the Nation's economy. 
Photography dependent wpon eHver avaQab&ily 

The entire photographic process depends upon the unique ability of a silver salt 
to record an image when exposed to light. Photographic film and paper reproduce 
an image because they have been coated with a lightr^ensitive silver salt. No 
other material has been discovered that can produce the quality of image and con- 
tinuous tones that make a photograph come alive. 

There has been extensive research aimed at the development of substitutes for 
sOver-based salts. This research has been accelerated within the past few years in 
part as a direct result of the substantial increase in the cost of silver which ha& 
occurred since 1961. Silver represents a considerable portion of the cost of sen- 
sitized photographic products. Yet, despite an increase in silver prices of over 40 
percent in the past 4 years, no acceptable substitute system has been devised and 
none is foreseeable. 

To date any material discovered is subject to severe limitations and would at 
beet be suitable for extremely limited applications. 

As the photographic industry has grown, its need for silver has increased from 
30.8 million ounces in 1969 to 40.3 million ounces in 1964.' It is expected that this 
demand will continue to increase as the industry continues to expand within 
the economy. 

Because of its extensive use of silver, the photographic industry has developed 
an awareness of the need for silver recovery, both as a oonservation measure and 
as a measure of prudent business economy. Those companies in the industry 
engaged in the manufacture of photographic films and papers recover the maximum 
amouDt of silver possible from waste and scrap materials. Silver is also recover- 
able from the solutions used in the development process for photographic films 
and papers. During processing, a varying amount of silver is "washed" from 
the mm or paper and remiuns in the solution. The extraction of this silver from 
photographic solutions is practiced by many companies in the industry. Since 
this recovery requires an investment in capital equipment, labor, and overhead, 
the economy of silver recovery in the process operation is dependent upon the 
volume of film processed and many other factors. 

Our industry is concerned over the existing deficit between free-world industrial 
consumption and free-world silver production. Because silver is indispensable 
to the photographic process, we are vitally interested in the conservation of exist- 
ing silver stocks to forestall the time when the lack of available silver at any 
prioe could cause a serious eurtailcoent in the manufacture of our industry a 
products. 

If silver sup^es are curtailed, vital uses of film h 
for example, it is indispensaUe in aerial reconnaissaL._, 
greatly increased costs to the Government and taxpayer. 

Since the Government is the largest purchaser of sensitized photographic 
material, the burden would be sutetantial. Medical, dental, and scientific 
research would continue to require film. Banks and other commercial and in- 
dustrial users where photography is necessary for recordkeeping, product analysis, 
and research would have a continuing need. Newspapers, magazines, and other 
periodicals where graptiic arts represents the lifeblood would l>e supplied, but all 
would face mounting prices and reduced supply. Many amateur photographers 
faced with increased costs would cut back their photographic expenditures or 
possibly be forced to turn to other interests. 

'Tablof. Treaaor; Stafl Stud; of Silver Eiad Coinage. U.S. Treasury Department. 



db,Google 



116 COINAGE ACT OF 1965 

Tht effect of the proposed legislation 

The proposed legialution under consideration by thia committee is 8 recognition 
in part of the continuing need of private industry tor silver underscored by the 
Btsteraent of the President in his message to the Cfongress on June 3, 1965, accom- 
pftnying the proposed biil in which he stated, "The one part of the demand for 
Biiver that can oe reduced ia Governmental demand for use in coinage." 

The elimination of silver in dimes and quarters as proposed, represents a 
realistic partial solution to the excessive demand placed upon Treasury stocks of 
silver by the continued use of silver in our subsidiary coinage and furthermore, a 
recognition that sutisidiary coinage need not have "intrinsic value" to maintain 
purcnasing power, 

Silver has become too valuable to the industrial needs of our economy to be 
continued in any subsidiary coinage. Our members and our industry, therefore, 
are opposed to that portion of the proposed bill which would provide for the 
ret«ntion of ft reduced amount of silver m U.S. half dollars. The continued use 
of silver in half dollars will impose an unnecessary and unwarranted burden upon 
Treasury stocks detracting from their availability to aid in tilling the industrial 
dcRcit and assisting in the orderly transition to nonsilvcr subsidiary coinage. 
Inevitabljf, these stocks will become depleted oeceasitating a second change in the 
composition of the U.S. half dollars. The Battelle Memorial Institute Btud7 
indicates that this might occur in the 1970's. 

Assistant Secretary of the Treasury Wallace in testimony before a subcommittee 
of the Committee on Appropriations, U.S. House of Representatives on May 24, 
IWiS, indicated in discussing the subsidiary coin ahortaKe that "the shortage of 
half dollars continues to be very severe." The testimony which folUowed indicates 
that the Treasury attributes this shortage to the fact that the Kennedy half 
dollar has become a collector's item. The minting of thia coin with a reduced 
silver content— with an ultimate realization that a further change to nonsilver 
composition is inevitable, can have only one result, to further decrease the circu- 
lation of this coin. 

President Johnson, in his message to the Congress of June 3, 1965, accompanying 
the proposed legislation, states the following; "In terms of the present pattran 
of coin usage, adoption of the new coinage will permit a saving of some 90 percent 
of the silver we are now putting into coins annually." This would indicate a con- 
templated continuing demand for over 30 million ounces of silver to be used In 
halt dollars based on the 300-million-ounce estimate tor present consumption 
elsewhere stated in his message. The continued use of 30 million ounces of silver 
in coinage represents an almost 50'percent increase in the 1964 industrial luis 
free-world deficit of consumption over production. Otherwise stated, this con- 
tinued unnecessary demand for silver in half dollars represents approximately 
76 percent of the silver used by the entire U.S. photographic industry last year 
based on the consumption reported in the Treasury study. 
Photography in the economy 

The photographic industry employs approximately 300,000 persons in the 
United States. There are over 200,000 retail outlets which sell over S2V5 billion 
of photographic products at consumer purchase value. In 1963, 530 photo- 
graphic manufacturing establishments had shipments of over Sl.S billion at 
manufacturers prices. In 1964 exports of photographic goods amounted to S180 
million against imports of $110 million, a significant contribution to the U,3. 
balance-of-payments situation. 

Approsimately two-thirds of the sales by the U.S. photographic manufacturing 
industry are to Government, industry, aisd commercial users. To this large 
segment of the economy, the continued use of photography is vital. In national 
defense where it is used for aerial reconnaissance and X-ray examination of our 
weapons systems, to the health of our citizens where half a billion medical and 
dental X-rays last year contributed significantly to the health of our population, to 
the printing and publishing industries where photography pictoriaily tells a story 
and, in addition, is finding increasing usage as a modem production technique. 

To education where 340,000 still and movie projectors are in iise in the U.S. 
pubhc schools, and to science and industry wiiere it performs a wide variety of 
tanks ranging from data storage to use in oil e^tploratjon. 

Photography also provides recreation for some 52 million American pictun 
takers as well as through motion pictures. 



■dbyGOOgIC 



COINAGE ACT OF 1B65 117 

COKCLTJBION 

We appreciate this opportunity to appear before this distinguished committee 
and present our viewe on a legislative proposal which has such far-range implica- 
tions for our induatry and for our Nation sm a whole. 

We reapeetfuUy urge the committee to report the proposed legislation so as to 
provide for the complete elimination of 8[lver in our Nation's subsidiary coinage 
and simultaneously to insure to the maximum extent possible the continued avait- 
ability of silver to meet the growing needs of the conomy. 

(The statements of Mr. Francis H. Wemple, and Mr. Geoi^e R. 
Fninkovich follow:) 

Stateuent of Francis H. Wbhpld, Treasurer of Handt & Haruan 

I am Francis H. Wemple, treasurer of Handy & Harman, a New York corpo- 
ration founded 98 years ago in 1867. Our executive offices are at 850 Third 
Avenue, New York, N. Y., I'.nd we have plunts in Fairfield, Conn.; Mount Vernon, 
N.Y.; Providence, R.I.; Chicago, 111.; El Monte, Calif.; Norristown, Pa.; and 
Toronto, Ontario, Canada. In addition, we have sales offices in other major cities 
both in the United States and Canada, and an important volume of our producte 
is sold through distributors who have hundreds of branches all over the country, 

Amoo); other activities, we are one of the world's largest processors and refiners 
of silver for industry. We are manufacturers, not bullion dealers in the sense of 
merely buying and selling silver in the form of commercial bars. We produce a 
wide ranze of silver products made from alloys and compositioos which are used 
in virtually all lines of industry throughout the United States and Canada. We 
also buy scrap materials containing silver for our own use or for return to our 
■customers. 

Handy & Harman endorses those provisions of H.R. 8746 which deal with the 
minting of quarters and dimes without silver. We strongly oppose section 1(a)(1) 
falling for a ht^f dollar containing silver and section 7 establishing a mandatory 
Treasury purchase price of $1.25 an ounce for newly mioed domestic silver. 

We oppose the proposed silver half dollar on the grounds that in our opinion 
there is a shortage of silver for industrial purposes alone which should not be 
aggravated by the retention of any silver in our subsidiary coinage system. The 
existence of this shortage and the reasons for it are clearly stated in the President's 
message of June 3, and are in fact given as the primary reasons for recommending 
the ehmination of silver from the quarter and the dime. In my opinion the same 
considerations with respect to the elimination of silver from the quarter and the 
dime apply equtdly to the half dollar. 

We oppose the establishment of a mandatory Treasury buying price for newly 
mined domestic silver because we believe that it is thoroughly unjustified and is a 
complete reversal of the Government's silver policy clearly established in Publio 
Law 8S-3G passed just 2 years ago. 

The continued availability of silver at reasonable prices is vital to the industry 
which my company and others like us serve. It is a common minunderstanding 
to think of jewelry and silverware as the largest users of silver. In fact President 
Johnson in his June 3 message listed these categories first in discussing private 
demand for silver. Actually these uses account for only about 20 percent of total 
industrial demand in the United States. The largest single industrial use is 
photography, and this involves not just snapshots but also X-ray film, industrial 
photography, as well as defense photography. In the cunsumer products group 
silver is used in all household appliances, in automobiles, in radios, in television 
sets, and in telephones to name just a few. The mirror industry is also a very 
large user. Heavy industry relies on silver for motors and generators, aircraft, 
atomic reactor control rods, agricultural machinery, switches and controls, 
electronic data processing equipment, and a host of other products. Silver is 
used in dentistry, as silver amalgam for fillings, and for medical compounds. It 
is used in X-ray tubes and equipment and in surgical and medical appliances. In 
the defense industry it is essentia] for submarine and torpedo batteries, marine 
plumbing, rockets and missiles, supersonic aircraft, and radar. In most of these 
areas no substitute for silver exists. It is essential to support our economy as we 
know it. The President himself states that coinage is the one part of demand for 
silver that can be reduced. I go further and maintain that coinage is the one 
part of demand for silver that can and should be eliminated. 

Everyone is familiar with the fact that demand for silver, particularly for 
coinage in the United States, has grown very rapidly during the past few years. 



Digitized byGoOgle 



118 CXJINAQE ACT OP 1965 

Attached to this statement are two charts, one Bhowing the widening gap betweeoi 
demand and new production and the other showing the rising price trend for 
diver over the past several years. I am aJeo attaching a copy of Handy & Har- 
man's Review of the Silver Market for 1964 which describes in detail hiBtarieal- 
developments in the silver market. AH of these t>ackgroiind facts were brought 
out in the President's coinage message. (The review referred to above may be 
found in the appendix.) 

In considering the merits of a silver half doUar we must estimate futm* demimd 
and supplies of silver. To do this I am making some basic asaumptiMiB. These ' 

1. That production in the free world will increase over the neJtt 5 years by 
a cumulative total of approximately 35 percent. I arrive at this figure by studying 
the most optimistic estimate of the American Mining Congress. It may prove 
to be unrealistic. It is based on the assumption that higher prices will bring 
about substantially higher production. This la not necessarily true. Production 
in the United States in 1964 was just about the same as it was in I960, in spite of 
a price increase of about 40 percent. Sunshine Mine, for example, reported' 
production in 1964 of 2,700,000 ounces compared to an average production for 
the past 5 years of over 3 million ounces. 

2. That industrial consumption in the free world will increase by about 26 
percent over the next 5 years. This is slightly less than the increase over the past 
5 years and may be understated. 

3. That coinage demand will decrease sharply due to the proposed new coinage 
for the United States and less usage outside the United States. For the United: 
Stat^ I am using a figure of 30 million ounces based on the assumption in President 
Johnson's message that the proposed change would reduce the current annual: 
usage of 300 million ounces by 90 percent. I am assuming further that all other 
countries combined will not be using more than another 30 million ounces, even- 
though they used over 60 million ounces last year. 

Using these assumptions we can project by 1970 world industrial demand at 
about 360 million ounces and coinage demand at about 60 milhon ounces. New 
production would be about 290 million ounces, leaving a worldwide deficit of some- 
ISO million ounces. Secondary sources cannot even optimistically be expected' 
to supply more than 50 million ounces, so this would mean that b years from now 
there would be an annual deficit of some 80 million ounces. 

Let's examine the Treasury stock situation by 1970. According to the Presi- 
dent's message the new coins will not go into circulation until sometime in 1966. 
Therefore we may assume that mid-1966 may be the time. Treasury stocks now" 
amount to about 1 billion ounces. At the present rate of use they will be down- 
to about 580 miHioti ounces by the middle of next year. After deducting the 
proposed stockpile of 135 million ounces, there would be less than 450 miUicm 
ounces left, which at the present rate of redemptions as well as projected use for 
half dollars would be gone before 1970. In order to get silver for the new half 
dollar the Treasury would then have to rely on silver obtain^ from getting our 
present coin back out of the hands of the public, or it would have to go to tha 
marketplace to buy it. 

There is a lot of silver outstanding in the form of existing coins, but, as I under- 
stand the administration's proposal, these coins will have to continue circulating, 
alongside the new coins for some time. Furthermore, how fast they can be with- 
drawn in the future is unpredictable. If the Treasury tried to buy 30 million 
ounces a year in a market where supplies were already short, unquestionably 
substantially higher prices would result with consequent serious damage to many, 
many industries. 

We conclude that the proposed silver half doUar will only intensify the existing, 
silver shortage. It will not stay in circulation because it will be even more of a 
curiosity and collectors' piece that the present half dollar which disappeared aa 
fast as it has been minted. It will assuredly have to be changed again in tlm 
future, and this can only cause further disruptions and inconvenience. We 
conclude further that the same silver shortage which dictates the removal of 
silver from our subsidiary coins, including the half dollar, makes completely 
illogical the establishment of a Treasury buying price for newly mined domeatio 
silver at $1.25 an ounce. 



■dbyGoogIc 



COINAQE ACT OF 1966 



119 




1 

1 


,^ ™,-,.-„„„,BJ. ™ j ,^ 


l"^ . 


t . 


/ 


±r ■ . 


/i-i 


rTTXTT~r'n--rTTTTTTl. 



Du,iiz=db,Google 



COINAGE ACT OF 1965 



My name is George R. Frankovich. I am the executive director of the Manu- 
facturing Jewelers A SilversinitiiB of America, Inc., the principal trade association 
of the manufacturing jewelry and silverware industry in this country. This 
association has about 500 manufacturers of jewelry, silverware, and allied prod- 
ucts in ils membership, including suppliers to manufacturing plants. 

Silver ia an important metal to our meraberehip. Half of our finished goods 
manufacturers use silver. Several dozen members are totally dependent ou silver 
aa a raw material. Their productiS include men'a and women's jewelry, religious 
articles, school and college rings, identiii cation bracelets, and tableware. Most 
of these manufacturers are sm^l, with little capability to diversify their produc- 
tion, their markets, or their raw material ref|uirement. 

These silver-using manufacturers are just emerging from the chaotic silver 

g-ice increases of several years ago that made shambles of their pricing structure, 
articularly hard hit were those whose product prices were frozen for long periods; 
for example, those selling on long-term contracts and through catalogs. These 
past few years have demonstrated the necessity of obtaining some assurance of' 
stabi.iiy in the price of their raw material. They are prepared to assume the 
normal risks of a free commodity market, but they do not consider justified the 
competition from Government for the use ot silver in coins or the continued 
adverse inliuenee by Government on supply and price. 

In jewelry alone, there are about 1,200 persons whose livelihood depends on 
silver. Silverware accounts for about 13,000 additional jobs. Historically, rs 
well fts prieewise, silver products occupy a unique niche in the market. Most 
alver jeweliy selb more because it is silver than because it is jewelry. If silver 
were to become uneconomic to obtain, a gap would appear in the jewelry and 
tableware markets and much of this gap would never be filled by products of 
other mi'.teriiils. While some persons may be unsympathetic to the uses or 
silver in products of this type, the thousands of jobs silver makes possible In 
our industry are vitally important to those who earn their living with this metal. 
Vit d to our economy, too, are the businesses and communities whose welfare 
is closely linked to silver. 

Obviously, we agree with the simple logic that silver be eliminated in dimes 
and quarters because of the silver shortage and increasing coinage requirements. 
But to make half dollars of 40 percent silver content under these circumsbinces 
simply does not make economic or monetary sense. Such action darkens even 
further the serious silver supply outlook. 

Projections of stockpile requirement, coinage for the rest of 1965, and con- 
tinued redemption of silver certificates at the present rate would shrink our- 
silver stocks to about 400 million ounces by the end of this year. 

Increased silver production falls short of the increasing industrial demand. 
So even without silver in hiilf dollars, a continuing free-world deficit of 75 million 
ounces would sop up a 400-million-ounce reserve in afcwut .'i years. 

That certainly is a dark outlook. But coinage of half dollars of 40-percent 
silver would shorten the life of even that small reserve fay 1 or 2 years, depending 
on whether Secretary Fowler's low estimate is used or whether we assume the 
more realistic 1964 production figures for half dollars. 

An additional year or two ot silver price stability makes a big difference to the 
consumer and to the manufacturer of silver products. More important, however, 
ia the seemingly permanent competition from the mint for scarce silver stocks, 
which is inevitable if the bill in its present form is enacted. 

The arguments for silver in the half dollar are tortuous at best. Our "prestige" ' 
money is the American dollar and it shall continue to be so long as we maintain 
its prestige. As long as people accept 2 half dollars, or 4 quarters, or 10 dimes for 
this dollar, wc have good coins, regardless of the material from which they are 
made. It the Treasury doubts that 4 quarters or 10 dimes of a nonsilver material 
will continue to be change for a dollar, H.R. 8746 may fail to ease our coinage 
problem. If it believes, however, as do we, that the nonsilver quarter and dime 
will keep their acceptable positions as subsidiary coins, then it can only follow 
that so would a nonmlver half dollar. 

We urge that this committee amend the present bill to provide half dollars of 
non-silver-bearing material. 

The Chairman. We will now give the members an opportunity to- 
ask questions. Mr. Miilter? 



■dbyGOOgIC 



COINAGE ACT OF 1969 123 

coXlectors and people who are not collectors in the true sense will 
ha-'ve a tendency to hold ooto coins that have as much as 90 percent 
ffllyer in them, and you will find retired from circulation every silver 
coin, I just wondered if that would not be true. 

-Admiral Ramsey, would you hke to comment on that? 
-Admiral Ramsey. Mr. Stephens, that has been one of the bones of 
contention, if I may put it that way, between the silver-using industry 
and the silver-producing industry, as to which action will cause the 
coins to disappear the fastest. 

Well, we do not think what you have in mind will happen for this 
reason. 

There is a speculative interest in silver coins existing today in 
anticipation of a price rise in silver which would make the sUver 
Coins more valuable for their metal content than the face value. 

We feel that this speculative interest has been kept up by un- 
certainty and the propnecies that the price of silver would rise. 

We feel that if silver is eliminated from coins altogether, and this 
speculative interest is eliminated, that people will not be inclined to 
hoard silver coins when they might spend them, and they might use 
them for more useful purposes than holding them in speculation, 
"Waiting for the price to rise. 

Now, we do reel that there will be some increase m collecting or 
hoarding or whatever you want to call it. There is bound to be. 
There is to be a change in our coinage system, and some people will 
say "Well, these coins are not going to be minted any more, perhaps 
we had better empty our pockets every night and put them in a box." 
This is to be expected. 

But the people who are holding, as one of the members I think 
yesterday said, he had knowledge of someone who is holding IK tons 
ot silver coins in anticipation ofa price rise, he would no longer con- 
tinue to hold these coins if he did not think he was going to make a 
profit. 

Therefore we think that the elimination of silver will tend to bring 
coins back into circidation, because the speculative interest is gone. 

Mr. Stephens. Would that speculative interest be part of the 
reason that the Kennedy half dollars have not been in general 
circulation? 

Admiral Ramsey. Well, air, the Kennedy half dollar is in effect a 
commemorative coin, and I do not think you can include it in the 
speculative area. The Kennedy half dollar is a commemorative 
Coin, in effect, and it is being kept by people for that reason and not 
for a speculative interest in the hopes that they will get more money 
for the 50-cent piece. 

Mr, Stephens. That is all that I would like to ask. Thank you for 
the information. 
The Chairman'. Mr. Gonzalez? 

Mr. Gonzalez. Mr. Chairman, I would like to address the same 
questions I asked the Treasury officials yesterday to any or all of 
these gentlemen here this mormng, and that is how do you feel about 
the revival of the transaction tax and the end-use certificate? 

Now, the transaction tax we repealed in 1963. Although I did 
net know as much then as I do now, and I do not claim to know too 
much now, I did have doubts then. And it seems to me that the 
congressional intention being what it was when the transaction tax 



Digitized byGoOgle 



122 COINAGE ACT OF 1965 

Mr. Johnson. Thank you, Mr. Chairman. 

Apparently what we are really discussing here this morning is the 
question of whether we will ehminate the 50-cent piece from the 
legislation and put it in the same category as other coins. 

I am interested in the statement this morning by Mr. Strauss, and 
I want to direct this to any member of the panel, in which he says 
"we believe the lesson of history is clear that currency systems based 
exclusively on fiat money are in the long run doomed to drastic 
devaluation," 

Do you think that it will be a dangerous thing for the coinage of 
this country and to our monetary system if we also destroy the silver 
content in our SO-cent piece and just have all coins just token coins? 
Do you believe that statement? That is a pretty strong statement 
by Mr, Strauss — ^warning of a monetary disaster if we resort to 
nothing but token coins. 

Would you care to answer it, Mr. Stevens? 

Admiral Ramsey. I think Dr. Welfling would be the one to answer 
that question. 

Mr. Wblflino. Excuse me, I thought you were addressing a ques- 
tion to Mr. Strauss. 

Mr. Johnson. No; I was quoting Mr. Strauss and addressing my 
question to your puiel. 

Mr. Wblfling. I am sorry. 

No; I would disagree completely. 

As I said in my statement, it could not matter less what token coins 
are made out of. In fact, the name "token coin" explains the aitu»- 
tion. They are tokens. As such my position would be they ^tould 
be made as economically as possible. 

What the token coins are made of has nothing whatever to do with 
the so-called soundness of the dollar or the level of the price level. 

Mr. Johnson. Thank you. 

That is all, Mr. Chairman. 

The Chairman. Mr. Brock? 

Mr. Brock. Will the gentleman yield? 

Just following that thought furthers Doctor, would you then take 
the position that the dollar itself should have no reserves behind it? 

Mr. Wblfling. As a quick answer, I could not quite take that 
position; no. I would explain my answer this way: The vt^e of the 
dollar, meaning the height of the price level, is determined largely 
by the volume of dollars. How many of those dollars the pm>hc 
wants to carry around in fractional form is purely a matter of coo- 
venience, once the total quantity of dollars has been fixed by monetary 
policy. 

Mr. Bhock. I agree completely insofar as the coinage is concerned. 
I was just wondering about your economic philosophy in general 
insofar as the gold backing is concerned. 

Mr. Wblfling. I would nave to say how the supply of dollars is 
limited is less important than the fact that it is limited, whether it 
is limited by gold reserves or some other method. 

The Chairman. Mr. Stephens? 

Mr. Stbphbns. I would like to ask anybody on the panel that 
might feel he would like to volunteer an opinion on thk. It seems 
to me when we take the silver out of all the coins, as you have pro- 
posed, including the major portion out of the 50-cent piece, too, that 



Digitized byGoOgle 



COINAGE ACT OF 19fl5 123 

collectors and people who are not collectors in the true sense will 
have a tendency to hold onto coins that have as much as 90 percent 
silver in them, and you will find retired from circulation every silver 
coin. I just wondered if that wouJd not be true. 

Admiral Ramsey, would you like to comment on that? 

Admu-al Ramsey. Mr. Stephens, that has been one of the bones of 
contention, if I may put it that way, between the silver-using industry 
and the silver-producing industry, as to which action will cause the 
coins to disappear the fastest. 

Well, we do not think what you have in mind will happen for this 
reason. 

There is a speculative interest in silver coins existing today in 
anticipation of a price rise in silver which would make the silver 
coins more valuable for their metal content than the face value. 

We feel that this speculative interest has been kept up by un- 
certainty and the prophecies that the price of sUver would rise. 

We feel that if silver is eliminated from coins altogether, and this 
speculative interest is eliminated, that people will not be inclined to 
hoard sUver coins when they might spend them, and they might use 
them for more useful purposes than holding them in speculation, 
waiting for the price to rise. 

Now, we do feel that there will be some increase in collecting or 
hoarding or whatever you want to call it. There b bound to be. 
There is to be a change in our coinage system, and some people will 
say "Well, these coins are not going to be minted any more, perhaps 
we had better empty our pockets every night and put them in a box." 
This is to be expected. 

But the people who are holding, as one of the members I think 
yesterday said, he had knowledge of someone who is holding 1% tons 
of silver coins in anticipation of a price rise, he would no longer con- 
tinue to hold these coins if he did not think he was going to make a 
profit. 

Therefore we think that the elimination of silver will tend to bring 
coins back into circulation, because the speculative interest is gone. 

Mr. Stephens. Would that speculative interest be part of the 
reason that the Kennedy half dollars have not been in general 
circulation? 

Admiral Ramsey. Well, sir, the Kennedy half dollar is in effect a 
commemorative coin, and I do not think you can include it in the 
speculative area. The Kennedy half doUar is a commemorative 
coin, in effect, and it is being kept by people for that reason and not 
for a speculative interest in the hopes that they will get more money 
for the 50-cent piece. 

Mr. Stephens. That is all that I would like to ask. Thank you for 
the information. 

The Chairman. Mr. Gonzalez? 

Mr. Gonzalez. Mr. Chairman, I would like to address the same 
questions I asked the Treasury officials yesterday to any or all of 
tnese gentlemen here this morning, and that is how do you feel about 
the revival of the transaction tax and the end-use certificate? 

Now, the transaction tax we repealed in 1963. Although I did 
not know as much then as I do now, and I do not claim to know too 
much now, I did have doubts then. And it seems to me that the 
congressional intention being what it was when the transaction tax 

48-93S— ss ft 



Digitized byGoOglC 



124 COINAGE ACT OF 196S 

was instituted and having served its purpose well during that period 
when it was important, it would seem now it would be more in order 
during this transition that will occur when and if we go into the 
new coint^e. 

Do you favor the restoration or revival of these two legislative 
measures as a concomitant matter of policy to be adopted by the 
Congress if this new coinage law is so passed? 

Xu*. Wemple. Mr. Gonzalez, my name is Wemple, and I am 
treasurer of Handy & Harman — maybe I can ta,ke a crack at that 
question. 

First, the transaction tax. This tax originally was conceived 30 
years ago when our entire tax structure was much different than it is 
today and was designed to tax and penalize speculation in silver on 
a rather severe basis. However, it never brou§;ht in any revenue of 
any large amount, and my recollection is that it may have initially, 
but it certainly did not over the great life of the tax. 

It largely proved to be a restrictive affair which prevented the 
silver markets in the United States from developing to the extent 
that they might otherwise have developed. 

We would ne opposed to any revival of the transaction tax^ — ^and 
perhaps I should emphasize that the whole question of the need for it 
m our opinion would not arise if silver were completely eliminated from 
the U.S. coinage, because the U.S. Govenmient would thereby soon 
not have any need for such control. 

Now, as for the end-use certiffcate, I would say on that, speaking 
from the point of view of Handy & Harman, that if in the judgment 
of the Treasury Department an end-use certificate type of approach 
to control the use of existing silver supplies were considered necessary, 
we certainly would abide by them. 

Mr. Gonzalez. I am very interested in hearing that, because in 
your booklet you point out very emphatically and dramatically that 
since lend-lease the United States has turned out to be an exporter 
of silver. 

Mr. Wemple. That is right, yes — last year they were a large 
exporter of silver, 

Mr. Gonzalez. I believe that — I have another question which 
might be pertinent in your case. 

Do you have any knowledge of any kind of industrial speculation 
through inventoryaccumulation? 

Mr. Wemple. We estimated at the end of 1964 that somewhere in 
the order of 70 million ounces on a woridwide basis were outstanding, 
either in the form of speculative holdings or in excess inventories 
accumulated as a hedge against a future shortage of supply, or a future 
sharp price increase. 

I would guess at this point that little if any of these holdings have 
been liquidated up to now. My guess at this point would be that that 
substantially represents the amount at this time. 

Mr. Gonzalez. So perhaps some revival of the transaction tax — 
maybe not as severe as the one we repealed — but some modified 
form would be very much in point of order to be discussed by the 
Congress. 

Now, after all, the thing that I am really worried about is the 
transition period, which I think that if we do not take measures in 
anticipation of speculation, of runs through excessive redemption of 



Digitized byGoOgle 



COINAGE ACT OF 1963 125 

the outstftnding silver certificates, and related problems that could 
arise, that then this can very well turn out to end in chaos instead of 
bemg a help. 

We won't solve the silver problem; we won't solve the coinage 
problem, 

I think this is the only real worry that I personally feel as a member 
of this committee. 

Therefore, these two measures, which I thought had proved to be 
pretty effective, at least dining the period of tune that they served 
their main functicm, as anticipated by Congress when it adopted 
them — that perhaps now would be the time to consider this seriously. 

If there is industrial accumulation here with inventories that could 
create a problem, then we should seriously consider restoring the end- 
use certificate, because at least it would be a measure of controlling 
the domestic problem. 

I don't know what we can do about the international speculation. 
But I think there is quite a bit we can do about the domestic specula- 
tion. 

Mr. Wemplb. I think on that point, the reintroduction of the end- 
use certificate, which as I said before we certain^ would abide by — 
we have to recognize that the silver markets of the world have inter- 
play with each other, and it is very difficult to isolate one from 
another. If we had an end-use certificate system, such as we had 
under the 1946 act, then it would end up the domestic industry which 
was eligible would use Treasury stocks, much as they did in 1960 and 
1961, and foreign industry, which was not eligible, or foreign buyers 
who are not eligible would simply divert the other supplies which 
normally would be coming into this market. It is what we saw 
happen, Mr. Gonzalez, back in 1960 and 1961— that the flow of 
silver, the traditional flow of silver to this market was diverted to 
foreign markets. And I think we would see much the same thing 
happen again. 

Mr. Gonzalez. Thank you. I have been advised that my time 
has expired. 

The Chairuan. Mr. Stanton? 

Mr. Stanton. I have no questions, Mr. Chairman. 

The Chairman. Mr. Weltner? 

Mr. Weltner. No questions. 

The Chairman, Mr. Hanna? 

Mr, Hanna. Mr, Chairman, there is just one point I want to make — 
an observation first. 

I do not conceive of the impact of silver in the coins being the same 
in our society as it was in the Roman Empire. For one thing, they 
bad no concept of equity or use that was developed in this country. 
We have a whole generation of people who probably never have 
owned an automobile, hut they don't care because they are using one 
all their life. 

I just want to get at the one point, and that is what effect on the 
price or the support price would the use of silver in the htjf dollar 
nave, if any? 

Mr. Welfling, perhaps you should answer this. You have indicated 
there is 123 million ounces used in the United States a year for indus- 
trial purposes, that 203 million ounces have been used for coinage. 
Now we are goii^ to knock off the 203 million oimc«s usage if we do 



Digitized byGoOglC 



126 COLVAQE ACT OF 1965 

not put any silver in any coins. Now, what is that going to do to the 
price of silver, or the support of the price of silver? 

Mr. Welplinq. I think the first question is how much silver would 
be used in the 50-cent piece. 

Mr, Hanna, That is not my question. My question is, What is 
going to happen to the price of silver? That is my question. 

Mr. Welflinq. In the near future? 

Mr. Hanna. Yes. Assume that we are not going to use any silver 
in any coinage whatsoever next year. Now, what is going to be the 
price of silver? 

Mr. Welflinq. The pressure on the price is upward, and the only 
thing that holds it down is the Treasury stop, which is available 
through redemption of silver certificates. So as long as that stock 
lasts, the price cannot rise ahove SI. 29. 

Mr. Hanna. Is your answer that it is not going to have any effect 
on the price of silver — because I don't understand 

Mr. Welflinq. Yes. 

Mr. Hanna. Is the lack of the use of silver in coinage would to 
affect the price of silver? 

Mr. Welfling, No; not for the foreseeable future. 

Mr. Hanna. Now I will ask the same question of Mr. Strauss. 

Mr. Strauss. If no silver at all is used in comage, I would agree 
with Dr. Welfling that the immediate efEect would be that the price 
would remain at $1.29. 1 think the longnm effect is that it might 
remain at $1,29 somewhat longer than it would if some silver were 
being used in coin^e. 

From the standpomt of the effect on price in a commodity that is 
free of any restraint, and at the moment the only restraint on silver, 
as Dr. Welfling properljr pointed out, was the redemption of the silver 
certificates — once that is gone, it is total demand versus total supply — 
whatever the nature of the demand, whatever the nature of the supply. 

So if you are restricting the total demand by completely eliminating 
coinage, of course it does have a dampening effect. But that is not 
to say it will push the price of silver down at this time because, as 
has been brought out in the statistics, even without any coinage use 
at the present time there is a deficit in the world supply of silver, 

I would like to say that we are talking now really in kmgrun price 
movements. 

The immediate effect of the President's recommendation and the 
knowledge that this committee was debating this bill was to unsettle 
the speculators. And I do not quite agree with what Mr. Wemple 
said in response to Coi^ressman Gonzalez' question. The fact is 
that some of the speculative stocks that were accumulated last year 
are being drawn on now, not in the United States, but outside the 
United States, The price of silver in London, which had been at a 
premium over our price to the extent of the cost of freight — in other 
words, the British price was controlled by our $1.29 price, plus what it 
costs to get silver to England. On Friday the price m England 
dropped to our price here minus the cost of getting silver to the 
United States. In other words, as the British looked at it — well, 
they could sell it at $1.29 in the United States, hut it costs them a 
cent and a half to get it to the United States. So the British price 
dropped to $1,278, 

The reason for that is that the people who had bought silver in 
London primarily as a hedge against devaluation of sterling, inci- 



DigitizcdbyGoOgle 



COINAGB ACT OP 1985 127 

dentally, rather than as a speculation on silver per se, figures with the 
high bank rate there — they have to pay 6 or 7 percent on their money— 
they figured tiiat the measures before this committee were going to 
insure that the price of silver in the near future was not going to 
rise— therefore wny continue to carry silver and pay 6 percent interest 
per year. They are dumping their stocks. That is what is tempo- 
rarily depressing the market. 

But I think this is going to be a sort of a 9-day wonder. I do not 
think the price weakness will persist over there. I think the com- 
mittee should be aware of the fact that it has occurred. 

Mr. Hanna. Thank you. 

Thank you, Mr. Chairman. 

The Chairman. Mr, Mize? 

Mr. Mize. Thank you, Mr. Chairman, 

Mr. Strauss and Mr. Hardy, we import both copper and nickel, 
and now we are going to start using copper and nickel in our coins. 
Do you anticipate any upward pressure on the price of nickel and 
copper? 

Mr. Strauss. Mr. Mize, I am going to take exception to your 
statement. We do import most of our nickel. But our domestic 
copper mine production is about 1.2 million tons a year as against a 
totEiI domestic requirement of about 1.5 million tons. So we do not 
import most of our copper. Most of our copper is mined in this 
country. 

No, I do not believe that converting to the use of copper and nickel 
for coinage is going to put any pressure on the price of either of those 
commodities, for the reason that the mint has made it clear and the 
stockpile authorities have made it clear that the mint's requirements 
will be met for the time being, at any rate, by drawing down surplus 
copper and nickel already owned by the Government. So I do not 
believe this will affect the market price of either metal. 

Mr. Mize. Thank you. 

Thank you, Mr. Chairman. 

The Chairman, Mr, Grabowski? 

Mr. Grabowski. Admiral Ramsey, on page 7 of your statement you 
state that you feel that a ceihng should be spelled out by the Secre- 
tary of the Treasury in item 6 of our bifi stating that not only should 
the Treasury be authorized but directed to sell silver at a fixed price of 
$1.29. I assume this is important to the silver users. Why is that so? 

Admiral Ramsey. Yes, sir, we feel that it would be important. It 
is unclear at the moment — just exactly what is intended by these 
buying and seUing provisions. The selling provision in the present 
law protects the coinage. The Treasury has to sell sUver to keep the 
market price at $1.29 because of coinage. The selling provision was 
not for the benefit of the silver-using industry. 

We have to bear in mind that the $1.29 price for silver today is a 
result of the redemption of silver certificates, which is another matter 
entirely. 

Now, in case the Treasury has silver and is not redeeming silver 
certificates, for whatever reason, in that situation the Treasury would 
have to sell silver to keep the price at $1,29 as long as it has to protect 
the coinage. Consequently, this provision, whidi has been inserted 
in this bill, to provide a floor of $1.25 we feel should be compensated 
for by a ceiling spelled out just as this is spelled out for the floor. 
And that is my point. 



Digitized byGoOgle 



128 COINAQE ACT OF 19e£ 

But I think it is very important to remember that the Treasury does 
not set the market price m the terms of "fixing it" as has been so 
commonly stated. The price is determined by the redemption rate, 
and not by any deliberate action on the part of the TVeasmy. And 
the redemption is done through the obligation of the U.S. Government 
to redeem silver certificates in silver. 

Mr. Grabowski. Thank you. 

The Chairman. Mr. White? 

Mr, White. Thank you, Mr. Chainnan. 

First of all I would like to ask Dr. Welfling a question. 

In his statement he very definitely indicated that there is no need 
for intrinsic value in subsidiary coinage. 

Do you believe there is a need for 25-percent gold backing of our 
present Federal Reserve notes? 

Mr. Welflinq. I think that is only one way of 

Mr. White. I asked the question — do you believe there is a need 
for the backing of 25 percent m gold behind our Federal Reserve notes? 

Mr. Welfling. I take it you would prefer a yes or no answer. 

Mr, White. Yes, sir; I would. 

Mr. Welexinq. No. 

Mr, White. You do not feel there is. 

Mr. Welfling. No, air. 

Mr. White. Mr. Martin, when he testified before our committee, 
felt this was necessary. The President of the United States has indi- 
cated it was necessary. You disagree with both Mr. Martin and the 
President of the United States. 

Mr. Welfling. If you want a yes or no answer that I disagree, yes. 

Mr. White. I will ask you another question, Doctor. That ques- 
tion is with respect to the circulation of the new coinage along withi 
the proposed coinage. 

Do you believe that the present 90-percent silver coins can stay in 
circidation with the cupronickel bonded layered coin? 

Mr. Welfling. Did you say the present 50-cent piece? 

Mr. White, The present 90 percent silver coinage, 

Mr. Welfling. I doubt it — but not because they are difiFerent; 
solely because the present 50-cent piece, it is so close to its redemption 
value. 

Mr. White. That is the difference between $1.38 and $1.29. 

Mr. Welfling. That ia right. 

Mr. White. About 9 cents difference in monetary value. 

Mr. Welfling. Right. 

Mr, White. Isn't it a fact the intrinsic vtdue has something to do 
with it? You are basing your opinion on intrinsic value; are ^ou not? 

Mr. Welfling. That is precisely my objection to corns with 
intrinsic value. 

Mr. White. I ask the question again. Will the two coins stay in 
circulation side by side? 

Mr. Welfling, That depends upon the extent of the market price. 

Mr. White. You heard testimony here today. Doctor, that we are 
going to continue to maintain the price of silver at $1.29 by the sale 
of silver stocks as long aa we have silver available from our stocks at 
West Point. 

Mr. Welfling. Right. 



■dbyGOOgIC 



COINAaB ACT OF 1965 129 

Mr. White. Therefore, the price is going to continue at $1.29 as 
long as the Treasury will redeem silver certilcates. Now, under that 
condition will the two coins stay in circulation side by side? 

Mr. Welfling. Not so long as that volume of silver that is in the 
50-cent piece threatens to go above that market price in the near 
future. 

Mr. White. Does it not threaten to go above it at the time that 
we no longer have the stocks in silver at West Point. 

Mr. Welfling. Yes. The next block will be $1.38. 

Mr. White. Then what would you aaticipate to be the fate of our 
present 90-p6rcent silver coin^e? 

Mr. Welfling. It is a gamble 

Mr. White. I am asking you to prognosticate a little. 

Mr. Welfling. That was about what I was to do, sir. I think it 
is a gamble whether the Treasury can hold that price. I think the 
odds are in favor that it will be able to. But I also think it should 
have every break. 

Mr. White. I agree with you that we are going to have to have 
coinage, and this is my primary objective; to continue a coinage that 
will be acceptable to the American public and do the business it is 

In (Jie event that the price of silver exceeds the monetary value that 
we now have in our subsidiary coinage, then you would agree that 
that coinage would very definitely be m jeopardy, as has been stated 
here several times. 

Mr. Welfling. Yes. 

Mr. White. All right. Then you also agree, that at the end of the 
time period when we no longer have the silver for sale, that that coin- 
age will probably disappear, the 90-percent coinage, either by with- 
drawing by banks in the Federal Reserve System or people melting 
it down and putting it into some other form. 

Mr. Welfling. If the price exceeds the $1.38 that would happen. 

Mr. White. Do you think at the time we get to the ultimate dis- 
posal of our stocks the price will exceed $1.38? 

Mr. Welfling. That, of course, is prognosticating, as you said. 
If I had a bet, I would bet on the Treasury to win this. But it is not 
a sure bet. 

Mr. White. I don't quite imderstand what vou mean by win. 

Mr. Welfling. I think the Treasury will be able to maintain the 
market price of silver until it has an adequate supply of the new 
coinage. 

Mr. White. I wonder about the available stock of 2 billion ounces 
that now exist in our subsidiary coinage — if we longer have stocks of 
silver, this coinage will disappear, will it not? 

Mr. Welfling. Yes, I understand your question. I did not say 
it would disappear. I said it would if the price reached $1.38. And 
I think 

Mr. White. I think we had better get back to a simple answer, 
yes or no. 

Do you beheve the price will reach $1.38 after the Treasury stocks 
are depleted? 

Mr. Welfling. After they are depleted, yes, if they are depleted. 

Mr. White. At their present rate of consumption they are bound 
to be depleted, are they not, sir? 



■dbyGOOgIC 



130 COINAGE ACT OP 1965 

Mr. Welfling. That is why I say it is a gamble. At the present 
rate they should last 2 years. But then you are betting on the 
present rate. 

Mr. White. How lon^ has Great Britain been attempting to recall 
their subsidiary sUver com^e? 

Mr. Welfling. I didn't know they were attempting to recall it, 

Mr. White. They were attempting for some period of time. 

Mr. Welfling. They went to another coin in 1946. 

Mr. White. Even before that they reduced the silver content. 

Mr. Welfling. Yes. 

Mr. White. For 40 years. And they have only been able to get 80 
percent of it in that 40 years. So we are talking about a recovery of 
silver — it would be very difficult in our present subsidiary coinage, 
A^ain we are talking about the possibility of protecting our subsidiary 
comage. 

Well, I have some other questions I would like to ask you but I 
have been informed that my time has expired. 

I thank the chairman very much. 

The Chairman. Mr. Widnall? 

Mr. Widnall. Thank you, Mr. Chairman. 

Dr. Welfling, on page 5 of your statement you say: 



How much of the silver that we have today, that we are using today, 
is actually tied to production of copper, lead, and zinc — what per- 
centage? 

Mr. Welfling. I am sure Mr. Strauss can give you a better answer 
My recollection is that it is either 20 or 30 percent. 

Mr. Strauss. About two-thirds of the production at the present 
time is tied to the production of base metals. About one-third is from 
mines that are valuable chiefly for their silver, 

Mr. Widnall. How much of the increase in production of silver is 
attributed to copper, lead, and zinc, and how much to actual silver 
mining? 

Mr. Strauss. Well, in the United States production has not in- 
creased particularly. This has been due primarily to the fact that 
the copper, lead, and zinc industry, as it has expanded, is treating 
more and more ores that do not carry any silver at all. 

As far as the stra^ht silver mines are concerned, as I said before 
they have not had economic incentives, because while their price is 
up 80 percent, the prices of commodities and the inflationary effect 
on the cost of doing business has been considerably more than 80 per- 
cent. So actually the economic position of the silver-mining industry 
today is not as good as it was in 1935 when all this started. 

Mr. Widnall. What known sources of silver are not being worked 
today because of price, that could be worked — any material number? 

Mr. Hardy. Undoubtedly there is much silver that is not being 
brought from the ground today because of economic conditions. I 
would like to call your attention to the fact that 100 years ago the 
|>rice of silver was $1.29 and a deposit that had 12 or 15 ounces of 
silver to the ton in those days was a relative bonanza, because the 
coat of mining was only about $4 or $5 a ton. 



■dbyGOOgIC 



COINAGE ACT OP 1965 131 

Today when you have costs of mining five and six times that and 
still a price of $1,29 you can see that a deposit of 12 to 15 ounces per 
ton is not going to be operated. 

There are many of those on the North American Continent, which 
is the primary home of silver, and the general locus lies between the 
summit of the Rocky Mountains and the summit of the coast range, 
from the Yukon territory down through British Colimihia, the United 
States, into Mexico, through Central America, and on into South 
America, where of course the Andes is the governing feature. 

Mr. WiDNALL. If the price of silver operated freely do you think 
it would be— it could be materially— the production could be ma- 
terially increased without a Government subsidy? 

Mr. Hahdy. If the thing were exactly on a free market, where it 
was only the forces of consumption that were in the market, as to 
what would set the price of it, in accordance with what was produced, 
I am sure that the silver would come from the ground. 

To say there is no more silver to be found and produced is completely 
wrong. There is plenty of it. As in the cases I quoted, uranium and 
copper — one might even look back at tungsten during the Korean war. 
It will come forth in answer to a call of price. 

Mr. WiDNALL. Well, the point I am getting at is if you had a free 
market in silver and the price was absolutely free, would that produc- 
tion come without the request for Government incentives to produce? 

Mr. Hahdy. Oh, certainly; very much so. 

Mr. Strauss. May I add something to that? 

Congressman Widnall, I am not sure that you are aware of the fact 
that our committee has estimated a substantial increase in production 
that is in the making right now and that does not call for any kind of 
Government subsidv or assistance. We are not looking for subsidy, 

Mr. WiDNALL, That is all; thank you. 

The Chaihman. Yes, Now we have all asked questions, I beheve, 
and it is up to the wishes of the committee as to further proceedings. 
The only time we could have additional hearings would be Friday or 
Monday. Mr. Todd? 

Mr. Todd. No questions. 

The Chairman. Mr. Gettys? 

Mr. Gettys. Mr. Chairman, if the remaining members of the 
committee have no questions, I will foi^o my questions. 

The Chairman. Let us consider then whetner or not we should 

Eass on this bill and the amendments between now and 12 o'clock or 
ave another session on Friday, 

Mr. Multer called to my attention a very important point. 

Any member desiring to ask questions may do so in writing and 
we wdl ask you gentlemen, if it is directed to any one of you, to 
supply the answer when you examine your transcript of the testimony. 

Wifl that be satisfactory, gentlemen? 

That will be fine. 

And the record will be printed and available before the bill comes 
up on the floor of the House. 

Mr. Brock. Mr. Chairman, I understand there is an entirely 
new draft of the bill to be submitted in executive session. In addi- 
tion there are going to be amendments offered. I intend to offer 
at least one and probably two. I am quite sure that Mr. White 
will have some to offer. 



Digitized byGoOgle 



132 COINAGE ACT OF 1965 

It seems to me that we are taking a pretty heavy burden to pass 
on l^islation of this importance in this short a period of time. 

The Chairman. If we don't get through by 12, we will just go over, 

Mr. Brock. It is perfectly all right with me. I don't think we 
need to rush with something like this. We ought to take time if 
necessary. 

Mr. White. Mr. Chainnan 

The Chairman. Mr. Annunzio? 

Mr. Annunzio. Mr. Chairman, I ask permission that these state- 
ments from the International Jewelry Workers' Union be included 
and made part of the record. 

The Chairman. Without objection, so ordered. 

(The material referred to follows:) 

Chicago, III., May 28, 1965. 
Hon. Frank Anntjnzio, 
Home of Representatives, 
House Office Building, Washington, D.C. 

L ' - - 

Of o , , . „ „ 

of Bilver from the minting of subsidiary coinage and redemption or retirement 
of silver certifioates at eonveraion rate of $1.29 per ounce. Tliia ia of vital concern 
to many of our members employed in Chicago if the price of what is regarded as 
a luxury item is driven too nigh. Loss of sales must result — followed by loss of 
employment to our members. 

Your sympathetic interest in our problem wiU be deeply appreciated. 

WiLLiAU F. Lennon, 

President, Local 4- 

International Jewelry WoEKERa' Union 

New York, N.Y. 
Statement 

The International Jewelry Workers' Union, AFL-CIO, which has thousands of 
members throughout the United States, ur^es that Congress take immediate 
measures to halt the use of silver in U.S. subsidiary coinage (dimes, quarters, and 
half dollars) as there is not enough silver being produced to satisfy either the needs 
for coinage, or the demands of industry. It is essential that supplies of this 
precious metal be conserved for use in industry where it has no substitute. 

The U.S. Mint Is expected to use 312 million ounces of silver this year to mmt 
dimes, quaters, and half dollars. This ia 40 percent greater than the entire free 
world production estimated for 1965, and more than 2% times the amount needed 
by American industry. The U.S. Treasury's stocks are being depleted at an 
alarming rate to meet this deficit in supply. 

Unless action is initiated immediately, to stop this senseless drain on Aroerica's 
silver resources, the U.S. Treasury's supplies of silver will vanish in less than 3 

J ears. Every day, the situation is further aggravated. The International 
ewelry Workers' Union is vitally concerned with this matter, for the Jewelry and 
silverware industry is the third largest consumer of silver in the country and, if 
Treasury supplies of silver are permitted to disappear, the jobs of many hun- 
dreds — perhaps even thousands — of our members will be in serious jeopardy. 

The price of silver in our industry is exceedingly important, since it accounts 
for as much as 75 percent of manufacturing costs in some of our major product 
categories. We, therefore, strongly oppose any action that might result in an 
increase in the price of silver. The retention of any amount of silver in coinage, 
or the failure of the U.S. Government to continue its present legal obligation to 
redeem silver certificates, would result in increased prices. 

Since 1952, we have seen the price of silver bullion increase by 62 percent. 
Unit sales of silverware have declined in almost direct proportion, with correspond- 
ing loss of jobs. 

Serious unemployment would result from any additional increase in the price of 
silver. There would be hardships caused to our members and their families, and 
the blow would be especially heavy in those communities in which the jewelry 
and silverware industries represent a major economic factor. 



Digitized byGoOgle 



COINAGE ACT OF 1905 133 

Because of the imperative nature of the situation, we urge that: 

(1) IiegiBlatian be enacted immediately, providing for the elimination of silver 
in the manufacture of subsidiary coins; and 

(2) The U.S. Treasury continue to make it« silver available to domestic industry, 
through redemption or retirement of silver certificates at the current conversion 
rate of $1.29 per ounce. 

Eabbt Spodick, 
Generoi president and geTieral teerelary-trea«UTer. 

The Chairman. Mr. White? 

Mr. White. Mr. Chairman, I believe you are aware that the Sub- 
committee on Mines and Mining of the Interior Committee, is holding 
some hearings with respect to silver production and consumption. 1 
hope these hearings — which are to be concluded today — will be made 
available to the members before we take action on this bill. 

The Chaibuan. They will be made available. It is customary and 
traditional. 

Mr. White. I would like to make the request that they be made 
available to us before we take final action. 

The Chaikman. It is not traditional to have the printed hearings 
before the committee votes. That has never been known to my 
knowledge. But now it is understood that we will have the hearin|n9 
printed and available to the Members of the House before the bill 
comes to the floor of the House. 

Mr. White. Mr. Chairman, I would again like to point out that 
the Treasury Department has taken over 2 years to consider this 
I^slation. Their report is 4 months late. It would seem to me 
that to try and push this through in 50 minutes would be a little 
inappropriate at this time. 

The Chairman, Well, suppose we go into executive session, if it is 
satisfactory with the members, and then we will decide what we shall 
do. 

Mr. Brock. Before we do, Mr. Chairman, I would like to ask 
another question. 

The Chairman. You mean of the witnesses? 

Mr. Bhock. Yes, sir. 

The Chairman. Certainly. You may proceed, sir. 

Mr. Brock. Gentlemen, some of you have expressed rather strong 
concern over the availability of silver in the future. 

What would be your reaction to the possibihty of requiring in this 
bill that all new coins, the reduced value coins be printed with the 
date of 1965, and all silver content coins have a date of 1964 so that if 
sometime in the future we are faced with a national emergen<y and 
we needed to get these coins back into the hands of the Treasury, 
to get the silver content, we would have a method of finding out — we 
would have a method of encouraging people to turn the coins in. 

Is this a feasible approach? 

Admiral Ramsey. I think that is a tough question to answer. 
But I would say this: It is astimated variously that there are from 
1.2 to 1.4 billion ounces of silver in outstanding subsidiary coins at 
the present time, which we feel in a national emei^ency could be called 
in and used for whatever purposes it might be needed. 

Now, that is the only way I can answer your question. 

I do not quite follow what you are trying to do otherwise. 

Mr. Brock. I am tjyin^ to differentiate just on the matter of dates 
so it would be easily identifiable. 



■dbyGOOgIC 



134 COESTAGE ACT OP 1968 

Admiral Ramsey. I don't think it is going to make much difference 
whether it is 1964 or 1965. If we need silver coins and we need silver 
and we are going to call tliem in, if the Government is going to national- 
ize coins, I don't think it would make much difference what the date ia. 

Mr. Brock. Except some people are not as aware of these coina as 
you and I migjit be and might not know the difference. 

Admiral Ramsey. I see what you mean. In other words you are 
talking about the 50-cent reduced content coin. 

Mr. Brock. That is true. I am also talking about the cupronickel 
coin. We have been told they are so good you can hardly tell the 
difference. 

Admiral Ramsey, I don't think I can get into that one, Mr. 
Brock. The best thing I could say is I think we could differentiate 
the coins if you had to call them in. I think the Government would 
have no trouble in getting in the silver coins witli the high content 
silver. It might be an interesting situation, but I think they can 
do it. 

The Chairman. Shall we have an executive session now? 

Without objection, so ordered. 

(The followmg statements and correspondence were submitted for 
inclusion in the record:) 



Mr. Chairman, my name is Craig Hoamer, Representative from the 32d District' 
California. I appear before you to point out wliat I believe to be three serious 
defects in H.R. 8746. 

Despite statements in tlie President's message to Congress on Jmie 3, 1965, 
relative to the coinage proposal and the statements to your committee by Henry 
H. Fowler, Secretary of the Treasury, it is ray considered opinion that GreshaTO*B 
law has not been repealed. I believe it is inevitable that the new coins of nominal 
intrinsic value cannot for long circulate alongside existing silver coins without 
driving the latter into hoarding and out of circulation. The record of many 
governments who have attempted to outlaw melting down coins, exporting them, 
and imposing other restrictions regarding them has consistently been character-- 
ized by failure. 

To obviate the operation of Gresham's law, I suggest that the legislation include 
discretionary authority for the Secretary of the lYeasury to substitute for a frac- 
tion of the metals that the bill authorizes for use in the new coins another metal 
of specified isotopic content. Tins will enable the Secretary of the Treasury to 
establish a metallic value for the substitute metal equivalent to that of the silver 
in existing coins and thereby put the old coina and the new coins on parity. In 
order to accomplish this, of course, the Secretary of the Treasury must have author- 
ity to purchase quantities of the substitute metal when it is offered at the mint. 

It is apparent that the physical process of minting new coins will not keep up 
with the demand despite the pious hopes expressed by some witne^es to your 
committee. This alone or taken in conjunction with the operation of Gresham's 
law threatens to create a massive coin shortage in this country, disturbing the 
public convenience and necessity in its fractional dollar transactions. Therefore, 
the bill should contain discretionary authority for the Secretary of the Treasury 
to print and issue fractional paper currency which can to an extent alleviate the 
prophesied inconvenience. 

It is my own estimate that the cost of producing the new coins will not exceed 
20-percent of their face value on the average. This is a very generous estimate and 
the likely fact is that the cost of production will bo considerably less. Taking the 
20 percent figure, however, for the purposes of illustration, it is pointed out that at 
the present time there are approximately 12,394 milUoa coins in present circulation 
having a face value of $2,230,100,000. At the 20-percent sciKniorage figure, 
rMjlacement of this coinage in circulation should accrue a profit of about $1,780,- 
Offl),000 to the 'Treasury. Additionally, at the present rate of annual replacement 
of coins and additions to the supply, over $350 million a year of face value must be 



Digitized byGoOgle 



COINAaE ACT OP 1968 135 

coined and issued. The TreaBury's 80-peroent profit on these should amount to 
some £280 miltion annually. Furthermore, ehould the Treasury be able to re- 
capture ail existing subsidiary coinage, itB mlver content, if sold, could represent 
another $2 billion, or so, profit to the Treasury. 

It appears to me that these profits should not be squandered by sublimation into 
a mass of Treasury etatistice. Rather they should be applied against the national 
debt monthly aa they accrue. It ia my strong recommendation that provision to 
such effect be included in H.R. 8746. 

I hope that the committee takes favorable action upon these recommendations. 
If it does not do so, I intend to offer amendments to the bill implementing tliem 
when it reaches the House floor. 



Mr. Chairman, distinguished members of the committee, I am Thomas B. 
Hungerford, executive director of the National Automatic Merchandising Asso- 
ciation, with headquarters in Chicago, 111. 

We are the national trade association of the merchandise and service vending 
industry. Our more than 1,400 member firms include all 3 segments of our 
business: Companies which own and operate vending machines, firms which 
manufacture the machines, and companies which supply vendible products and 
services to the operators of machines. 

The purpose oi my testimony is to give wholehearted support to the President's 
message proposing the new coins and, specifically, to Senate bill 2080 which has 
beea introduced also as House bill 8746. 

In supporting this legislation, I spealc in behalf of our own members, as well aa 
several aUied associations which represent other coin-operated types of businesses. 
These include coin-op laundries, music naachincs, and soft drink bottles. 

The vending industry considers the President's proposal for new coinage a 
most imaginative and practical solution to the problem of dwindling silver reserves. 
All Americans have a stake in the various aspects of the silver shortage. Our 
industry has, from the beginning, gone on record for a solution which will put the 
public interest above other considerations. For the sake of brevity, I wUl refer 
only to the specific involvement of coin-operated equipment services. 

Ever since World War II, vending services have become increasingly impor- 
tant to the American consumer. The American public now puts 30 billion coins 
into merchandising vending maciiines alone,- every year. Our machines will sell 
more than $3.5 billion worth of goods m 1965. By 1970 this important part of 
our retailing economy is expected to rise above $5.5 billion in sales per year. 

What this means to the average citizen, however, can be better illustrated in 
another way: More tlian 1,500,000 Americana now obtain at least 1 meal every 
day from vending machines where they work. Our customers include the employ- 
ees in thousands of factories, hospitals, and offices. Colleges and other institu- 
tions depend on vending service for meals, and especially for snacks and coffee 
breaks. For example, in 32 different plants of the Radio Corp of America naore 
than 60,000 employees are served every day through vending machines, I can 
give you an example still closer to home. Even employees at the White House, 
here m Washington, use a vending installation for snack and refresliment service. 

Vending is important not only to millions of customers but also to hmidreds 
of product manufacturers. For example, every fourth nickel and dime candy 
bar now comes from a vending machine. So do 20 percent of allaway-from-home 
soft drink sales and more than 3 billion cups of coffee per year. 

Since I began speaking to you — about 3 minutes ago — the American pubho 
has put 174,000 coins into our machines. On an annual basis this amounts to 
over 30 billion coins. 

It can easily be seen that unless these coins work properly, irritation and 
widespread complaints would result. 

Coins are the lifeblood of our business. And the heart of each vending machine 
is the coin mechanism which decides whether the coin is genuine and whether 
the machine should therefore dispense the product or service. 

It might be interesting to note that until the first of these sophisticated mech- 
anisms was invented in the 1930's, the vending industry was literally "slugged" 
out of business. Only with the invention of the so-called "eddy current slug 
rejector did we gain the ability to tell good coins from bad coins. 



Digitized byGoOgle 



136 COINAGE ACT OF 1965 

These com mechaniBms first check the coin for size and thickness. But the 
key test checka the metallic content of the coin. It so happens that our testing 
mechaaisma were deeigned for the present sUver coins. 

If I ma^, I would like to demonstrate just how this works. 

Only coins with similar density and uectrical resistivity to our present silver 
coins will pass this test. Ail other coins, and counterfeits, are rejected. 

If the new coins to be adopted by the Consress have a different metallic re- 
action, they will be rejected just like "slugs.* Public confusion, and even in- 
dignation, would surely result. Conceivably, consumers would, so to speak, 
blame our Government for minting "bad" coins. 

More than half of the 12 miUion coin-operated units of all types use the metalUo- 
content test which I have just described. It would take at least 3 years to design 
and produce new meohaniams in order to equip all of these uoita, if "noncom- 
patible" coins are adopted. And it would coat our industry more than SlOO 
million to change over. This does not count hundreds of millions of dollars in 
loss of sales during the changeover. 

Obviously this would be a serious problem to our industry, as well as to the 

The new dimes, quarters, and half dollars proposed by the President in the 
legislation now before you will work reliably in our existing equipment without 
any change. The important thing is that the public will be able to uae the pro- 
posed coins in our machines side by side with the present silver coins without any 
trouble. 

The coins proposed by the President will be an ideal solution for our millions of 
customers, and also for the more than 6,000 companies which own and operate 
merohandiae vending machines. This is aiso true for the other coin-operated 
businesses of which I spoke. 

It should be understood that a satisfactory half dollar is crucial to the musio 
machine industry and to the coin-operated laundry businesses especially. But this 
coin, also has increasing importance for merchandise vending, because cigarette 
prices are approaching the 50-oent mark and many new types of merchtuidise 
which we now sell will require the half-dollar coin in the future. 

Our industry strongly backs the President's proposal for the new coins and 
urges the Congress to vote its approval. 

We are grateful to the committee for this opportunity to offer testimony. 



The future of luncheon facilities and refreshment breaks for millions of factory 
employees and college students is up for a vote by the U.S. Congress in the nert 
few weeks, when it decides what to put in place of the present silver content of our 
dimes, quarters, and half dollars. 

Serious disruption of vital services and considerable economic dislocation will 
result unless the Congress provides for new coins which will work satisfactorily in 
food and beverage machines which serve thousands of factories, offices, colleges, 
hospitals, service stations, and many other locations. 

Included in the congreseional decision will be the fate of 12,200 million cups of 
coffee, milk, and soft drinks and of 4,500 mOlion candy bars. These are just a 
fraction of the numerous goods which poured forth last year as Americans plunked 
more than 30 billion coins into merchandise vending machines of all types. 

With more than 83 million coins used in merchandiae venders alone every 24 
hours, a wrong decision could bring irritation and angry words from the millions 
of American consumers who buy everything from clean laundry to hamburgers, 
kleenex, postage stamps, telephone calls, ice, dance music, and photostats at the 
drop of a coin. 

The metallic content of our coins directlj 
anisms which test whether a coin ia acceptei 
operated machines. 

Since the mechanisms check the metallic properties of t 
magnetic field, only coins which react like present silver nr 

All other coins, and slugs, are rejected. According to " „ _, 

oians, the fate of S3. 5 billion in annual sales of vended products depends on 
whether Congress votes the right kind of aubstitute coins. 

Coins with leas ailver and coins b^d on a modern clad process bonding two 
different metals into a three-layer sandwich would be the ideal solution, because 
they work like present coins, will be accepted interchangeably until present silver 
coins go out of circulation in a few years. 



Digitized byGoOgle 



COINAGE ACT OF 1966 137 

Clad metal is the modem process which is widely used in automobiles, refriger- 
ators, and many other iudustrial and consumer goods. It is easy and economical 
to mint and, therefore, guarantees as ample coin supply for the growing U.S. 
economy. 

Since these new coins could be minted with a smaller amount of silver, and even 
without any silver content at all, they provide the ideal answer to the growing 
shortage in the Government's silver reserve. 

With more Americans relying on coin-operated services every year, coins which 
work in present equipment are crucial to the vending industry. 

Growing at an average of almost 10 percent every year since the 1950'8 the 
American vending industry will sell more than $3.5 billion in goods this year. 

One out of four nickel and dime candy bars sold, one out of five soft drinks 
consumed away from home, and nearly 3 billion cups of cotlee were bought by the 
American consumer from vending machines last year. 

Coins are also the open sesame for 1,200,000 telephones, 228,000 laundry, dryer 
and dry-cleaning machines, 470,000 music machines (plus 1,410,000 separate wall 
boxes), 650,000 amusement machines and kiddle ridea, 250,000 wall coin changers 
and 33,000 postage stamp machines, of which 8,000 are operated by the U.S. 
Government. 

By far the greatest advance of vended services has come in factories, colleges, 
and hospitals. More than 1,500,000 American workers and students rely on 
vended food service for at least one meal each day. 

Martin O'Shaughnessy, administrator of food services for Radio Corp. o( 
America, Camden, N.J., says RCA depends heavily on vended services for its 
employees. 

''In several of our major manufacturing plants vending services are the OTily 
medium to provide food to our employees. Even in all of our other plants, 
where conventional food service is used, vending represents about 50 percent of 
our employees' daOy food purchases." 

He adds that 32 RCA plants utilize vending machines, serving some 60,000 
of the company's 80,000 employees. 

Whether the Congress adopts coins which will work in present coin equipment 
is also of crucial importance to the more than 6,000 firms which own and service 
vending machines as a full-time business. 

More than 4,000 of these companies are small independent businesses with 
six or fewer employees. Only a tuindful of large companies employ thousands 
of servicemen on a national msis. 

To the smaUer firms, especially, an adverse decision by the Congress would 
mean extinction, because even if they could finance the high expense of changing 
their coin mechanisms, they would not be able to survive the loss of sales imtil 
new coin mechanisms become available. (Production time has been estimated at 
3 years, if a complete ch«igeover should become necessary.) 

Thus, while the plink of coins into vending machines goes on at the rate of 
more than 58,000 every minute, the industry holds its breath, hoping that 535 
Senators and Congressmen will vote for happy consumers and a^inst out of 
order signs. 



■dbyGOOgIC 



138 COINAGE ACT OF 1965 

Facts and Fiodrks 

about the uerchahdi8e vendiho indubtbt 

Value of goods sold through machines in 1964 {estimated) $3, 500, 000, 000 

Number of machines on location 4, 500, 000 

Vending machines with coin mechanisms using the "eddy cur- 
rent" principle 3,300,000 

Number of coins inserted in vending machines: 

Hourly .._ 3,483,183 

DaUy 83,596,383 

Annually 30,512,680,000 

Number of Americans who obtain at least 1 meal daily from 

vending machines (estimated) 1, 500, ODD 

Vending employment: 

Number of vending operating companies (1964) 6, 200 

Number employed directly 80,000 

Suppliers' employees furnishing products to the vending 

mdustry _ 300,000 

Total vending industry annual payroll ' $600,000,000 

ABOUT OTHER COIN-OFGRATED BUSIN ESSES 

Number of coin telephones in use _ __ 1,200,000 

Number of wall-type coin changers (used in coin-op laundries, 

with phone booths, etc.) 250,000 

Number of music machines on location (1963) 470,000 

Gross sales through music machines (1963) -.. $419, 000,000 

Number of coin-op laundry stores 35, 000 

Includes: 

770,000 washing machines, 250,000 dryers (annual sales) . . . $500, 000, 000 
60,000 drycleamng units, annual sales (in 8,000 of the 35,000 

stores) $200,000,000 

'Over. 

Note.— All ^mes are for IftM unU^ Indicated othervrbe. 

Retail sales though merchandise vending machines in 1964 totaled $3,494 
million. At the present rate of growth, vending machine sales in 1970 will he 
$5,250 million. 

Nurnb^ of coin-operated machines tieing "eddy-eurrent" coin meekaniam* 





19M 


1970' 




600.000 
2S0.0C0 
UG,fiOO 
R600 

60.000 
eacoo 

25.000 

>tooo 

2,400 


tas? 






Coin cliangers (wall type) 


310. nno 










IS 
















6,»4a,4<» 


8,110,800 





>i9e6. 

Thb American Bankers Association, 

New York, N.Y., June 7, 1965. 
Hon. Wright Patman, 
Cha,irman, Banking and Currency Committee, 
House of Representatives, Washington, D.C. 

Dear Mr. Chairman : The American Bankers Association supports the changes 
in our coinage system as recommended to the Congress by President Johnson in 
bis message of June 3, 1965, and urges enactment ^ H.R. 8746, a bill to provide 



Digitized byGoOgle 



COINAGE ACT OF 1865 139 

for the coinage of the United States, which is now under consideration by the 
House Banking and Currency Committee. I expressed the association's support 
in a statement released to the press on June 3, 1965, a copy of which is attached. 

The shortage of coins in circulation has been acute at times during tlie past 
few years and has caused serious problems to banliing institutions in meeting the 
business needs of their customers. During the April IS6S meeting of the executive 
council of the association the situation at that time was discussed by the Federal 
agency relations. Federal legislative, and economic policy committees of the 
association. Following this meeting the administrative committee of ABA 
further re\iewed the matter and adopted a resolution on April 19, 1965, recom- 
mending the eUmination of silver from U.S. subsidiary coins, etc. I am attaching 
a copy of this resolution, also. 

We will be glad if you will include our views in the record of your hearings oa 
H.R. 8746. 

Very truly yours, 

Reno Odun, President. 



Washington, D.C, June 3. — Reno Odlin, president of the American Bankers 
Association, today expressed the ABA's support of changes in our coinage system 
as recommended to the Congress by Presiaent Johnson. 

Mr, Odlin, who is chairman, the Puget Sound Nations.! Bank, Tacoma, Wash., 
also commended the Treasury Department for its detailed study which formed 
the basis for the President's proposals, and gave assurance that the ABA would 
do its utmost to assure a smooth transition to the new system. 

The text of Mr. Odhn's statement follows: 

"The American Bankers Association is in full accord with the recommendations 
made by President Johnson with respect to changes in our coinage system. The 
association's administrative committee reviewed this problem on April 19, 1965, 
and agreed that continued use of silver in subsidiary coins had reached critical 
proportions and recommended that some action be taken to change our subsidiary 
coinage while the Treasury atUl possesses substantial amounts of silver that can 
be supplied to the market through redemption of silver certificates. 

"The ABA is very much aware of the impact which these coinage proposals 
may have on the American public. We subscribe to the President's beli^ that 
there should be no untoward concern about the change to composite coins, and 
we will also urge all of our 14,000 member banks to make clear to their depositors 
that the purchasing power of the coins has not been diminished in any way and 
that they should be assiniilated into business and personal use as quickly as 
possible. By the same token, we will urge that any tendency toward hoarding 
of existing silver coins be discouraged. 

"The ABA is convinced that the President's proposals will provide a long-range 
and fundamental solution to both the existing coin shortage and the demands 
for silver which makes it impractical to continue for the long-term future large- 
scale production of silver coins. Elimination of silver from dimes and quarters 
with the substitution of composite coins will provide an acceptable and convenient 
coinage that has been proven suitable for automatic coin machine operations. 

"While the association would have preferred the complete elinunation of silver 
from half dollars also, we can readily accept the administration's assurances 
that half dollars of 40 percent silver content will not produce a substantial drain 
on existing silver stocks. The previous decision not to mint additional silver 
dollars at this time is also sunported by this association, although we are pleased 
to note that the authority to do so is being continued so as to make them available 
for use in the future if conditions so warrant. 

"The additional recommendations for legislation made by the President 
should prevent or reduce hoarding of existing silver coins during the transition il 
period to the new system. Presidential authority to prohibit melting and expor- 
tation of subsidiary coins is absolutely necessary m this regard. Otherwise 
there undoubtedly would be substantia amounts of silver coins taken out of 
circulation and held in anticipation of a future rise in the market price of silver 
at which time the coins could be sold or melted for their silver content. Similarly, 
the authority for the Treasury to purchase domestically mined silver at not less 
than $1.25 per, ounce is necessary to protect silver producers from a sharp drop in 
the price of silver. 



■dbyGOOgIC 



140 COINAGE ACT OF 1065 

"The ABA wishes to commend the Treasury Department for its excellent and 
detailed study of a highly Comdex problem. During the past year we have been 
pleased to cooperate with the Department iu eliminating coin shortages and we 
again offer our services in helping to aSHure a smooth transition to the new coin 
system." 

T SUBSiniABY COINS 



Although the efforts of the Treasury Department and the American BanlieTB 
Association to eliminate the shortage of coin have met with some success, shortages 
etiU persist in many areas. Moreover, the rise in the market price of silver to 
its monetary value of $1.29 per ounce has led to hoarding of coins and silver 
bullion. This, together with the increasing industrial use of silver, has resulted 
in a 40-percent reduction, from more than 1.5 billion ounces to about 1 billion 
ounces, in the Treasury's silver stock during the past 2 years. 

The American Bankers Association, while recognizing the traditional role of 
silver in U.S. coinage, is convinced tha^t a long-range and fundamental solution 
to the coin shortage must recognize the fact that the sharp and continuing rise 
in industrial demands for silver will increasingly limit its usefulness for subsidiary 
coina^. Accordingly, we urge the following steps: 

1. We urge the CongreaB to enact legislation designed to eliminate at the 
earliest practicable date silver from U.S. subsidiary coins (dimes, quarters, and 
half dollars), recognizingj of course, that substitute materials would have to be 
suitable for automatic com machine operations. 

2. We urge the Treasury not to mint additional silver dollars at this time, but 
that the authority to do so be continued, so as to be available for use in the future 
if conditions so warrant. 

3. Consideration should also be given to temporary discontinuation of the 
minting of 50-cent pieces, very few of which are moving into actual circulation. 
This would permit the Treasury to divert all possible facilities to the production 
of quarters, dimes, and nickels in order to build up stocks to prevent acute 
shortages if hoarding occurs during the transition to a new system. 

4. In order to prevent or reduce hoarding demand for silver coins during the 
transition period to the new as^tem, we urj^ administrative actions, or, if neces- 
sary, passage of legislation to prohibit meltmg or exportation of subsidiary silver 

5. In addition, we restate our recommendations of April 20, 1904, that the 
year of coinage on subsidiary coins not be changed each year, but that it remain 
the same, for all coins of each new des^; and that private commercial facilities 
be used as much as possible to augment the output of the mint until additional 
Government facilities are in operation. 

Resolution approved by the Administrative Committee of the American 
Bankers Association, April 19, 1965. 



Chaubeb op Coumgbcii os thu United States, 

Wathington, D.C., June 8, 1966. 
Hon. Wright Patuan, 

Chairman, Bonee Bankmg and Currency CommUUt, 
V.S. House of Bepreientatuiea, 
WaehingUm, D.C. 

Dbab Mb. Chairuan: The Chamber of Commerce of the United States 
endorses those provisions of S. 2080 and H.R. 8743 which authoriee reduotion 
of the silver content of coinage and urges their prompt enactment. 

It is well recognized that current industrial and monetary demands for silver 
have created a shortage of supply of national significance. For this reason we 
support reduction of the silver content of coinage to the extent necessary to 
resolve the current supply problem, while maintaining a metallic coinage system. 

While reasonable men might differ as to the specifics of the proposed coin 
composition, there can be no dissent as to the urgent need for revision in the 
lk;ht of the present shortage of silver. The present proposal meets the exigencies 
of the current situation with the least disruptive effect upon our system of coinage 
and our economy. 

Sincerely yours, 

Thbboh J. Rich. 



■dbyGOOgIC 



COINAGB ACT OF 1985 141 

Thb New England Council, 

BotUm, Mass., June 8, 1965. 
Hon. Wbiqht Patman, 
Chairman, Banking and Currency Committee, 
House of Representatives, 
Washington, D.C. 

Deab Conokessman Patman; On behalf of the New England Council, I 
would like to present our views on H.R. 8748, the proposed Coinage Act of 1965, 

The New England Council is a private, nonprofit organization with offices in 
Boston, Mass. It is composed of 2,200 members from business, labor, education, 
and government, and is dedicated to the development of a sound and dynamic 
r^on through the full utilization of all of the region's human, natural, and 
material reeouroea. With New England's economic development as a focus, the 
orgBDization seeks to identify the region's broad public interest and promotes 
appropriate programs of action to implement its findings. 

New England ia baaically; a silver-using region. Its jewelrj^, silverware, 
photography, and electronic industries all depend on the availability of silver 
at reasonable prices. It is, therefore, vitally interested in any legislation which 
would change the use of silver in coinage. 

There is wide agreement that a serious silver shortage is developing. Current 
projections have established that in coming years there may well not be sufficient 
silver to meet both the growing needs for silver in industry and the rapidly 
increasing need for more and more coins as population grows and business activity 
increases. The administration has carefully studied the problem and proposed 
specific legislation, H.R. S74S, to help solve it. 

While we support the objectives of this measure, we have reservations as to 
its adequacy. We believe that serious consideration should be given to completely 
eliminating silver from autuidiary coinage. The compelling reasons for eliminat- 
ing silver from use in the dime and quarter are equally vtdid for the half dollar 
and we urge complete removal of silver in all suraidiary coinage. Such a step 
would in no way change the value of subsidiary coinage aa currency. It should 
be emphasized that there is no substitute for silver in industry, but there are 
perfectly adequate substitutes for silver in coinage. It is important to plai '~~ 

hange only and not cri ' " ' ' ' " ' 

ank you for your cons 
Respectfully yours, 



Bbll Telephone Labobatorieb, Inc., 

Murray HiU, N.J., June 8, 1965. 
Hon. Wmght Patman, 

Chairman, Committee on Banking and Currency, 
House of Repreaentativet, Washington, D.C. 

Dear Mr. Chairman: This letter presents the views of the Bell Telephone 
System in regard to H.R. 8746, a bill to authorize changes in the composition of 
the 10-, 25-, and 50-cent U.S. subsidiary coinage. 

The Bell Telephone Laboratories, Inc., is the research and development arm of 
the Bell Telephone System, being a subsidiary of the American Telephone & Tele- 
graph Go. and the Western Electric Co. Technical information developed by the 
laboratories is made available to the Bell Operating Cos. through the American 
Telephone 4 Telep-aph Co. 

Early in 1964, m my capaeity as head, public telephone department of the 
Bell Telephone Laboratories, I was requested to study the functional properties 
of coins in their application in coin-operated mechanisms and to identify those 

Properties which are essential for continued operation of the public telephones, 
'his request by the engineering department of the American Telephone & Tele- 
graph Co. resmted because of the use of 5-, 10-, and 25-cent coins in public and 
senupublic telephones of the Bell System operating companies. 

"To identify the essential properties of the suteidiary coinage used in public 
and semipubltc telephones it waa necessary to determine the operating charac- 
teristics relating to the coinage for the over 1,100,000 coin telephones presently 
installed. Obviously, any incompatibility in coinage would have an extremely 
serious effect on our ability to provide public telephone service. In this respect 
it is of interest to note that on the average approximately 10 million coin-operated 



Digitized byGoOgle 



142 COINAGE ACT OF 1985 

telephone calls are made each day from Bell System telephoneg and a propor- 
tionate number from coin telephones owned and operated by the independent 
(non-Bell) telephone companies. I understand that these independent coin 
telephones require the same properties for coinage as the present Bell System tele- 
phones. To permit future improvements in coin telephone service, it was neces- 
sary to investigate the operating characteristics of present coinage in new and 
proposed coin mechanisms which could be associated with the public telephones. 
The operating characteristics of the present coin telephones and of proposed coin 
mechanisms show that the size, weight, and electrical properties are crucial and 
and that the latter two properties are intimately tied to the composition. Tests 
using sample coinlike disks in the coin equipment show that any significant 
departure from the dimensions, weight, or electrical properties of the present 
silver base coinage would produce malfunction of the equipnient and rejection of 
the coinage. Theoretical studies which permit a broader understanding of these 
properties than is practicable with physical tests also support further thia 
conclusion. 

In the covirse of the study program at the Bell Telephone Laboratories we have 
identified clad metal combinations which do possess similar properties as present 
silver subsidiary coinage and which can serve as the basis for new compatible 
coinage. We have also tested many metal combinations which do not meet the 
requirements for compatible coinage. I am pleased to state that the 75 percent of 
copper and 25 percent of nickel clad on a core of pure copper authorized for the 
10- and 26-cent coins in H.R. 8746 has been tested by the laboratories and meets 
all of the weight and electrical requirements for compatibility. Coins made from 
this metal to the dimensions of present 10- and 25-cent coins will permit continued 
service at public telephones. I can also state that the 50-cent silver alloy clad 
on a silver-copper alloy core also satisfies the technical requirements for 
compatibility. 

I appreciate the opportunity of placing the views of the Bell Telephone Systetn 
before the committee, and I will be available for further information at any time. 
Respectfully, 

W. Pfbkd, 
Head, Public Telephone Department. 



Alleqheni Cigabbttb Sehvicb Co., 

Piitiburgh, Pa., April SI, 1905. 
Congressman Willtau S. Moorbdad, 
U.S. Post Office, 
Federal Building, Pillshurgh, Pa. 

DxAR Congressuan: Our company is engaged in the automatic merchandising 
business. As such, we are vitally interested in the forthcoming bill to be recom- 
mended by the Treasury Department, proposing a change in the silver content 
of our U.S. coin. 

While we are not taking sides as to the continued use of silver or the elimination 
of silver, we are very much concerned with making sure that the coins that are 
adopted will not be inconsistent with the ability of our vending machines to accept 
good coins and reject counterfeits or slugs. Our national association, the National 
Automatic Merchandising Association, has spent many months in studying this . 
problem. We belie\e they have covered in detail, aO the facets this problem 
contains. They have made recommendations to the Treasury Department of 
three alternate plans, any one of which would enable us to continue operating our . 
present euipment without costly changeover or a great deal of annoyance to the 
American consumers. A copy of these recommendations is being enclosed here- 
with for your study. 

Our company and its subsidiaries employ approximately 40 people who would 
be directly affected by the adoption of a coin inconsistent with the ability of our 
equipment to accept them. Far more important, I believe, to you as a representa- 
tive of the people of Pennsylvania, is the serious effect it would have on the t^T- 
chasing public who use our equipment in the more than 2,000 locations we service. 
The enclosed recommendations of our industry's position points out that there 
are more than 83 million transactions made by vending machines such as ours 
every day. 

You can well understand, therefore, that any coin which cannot be used by our 
present mechanisms, would cost our industry thousands of dollars in order to 
make our machines accept such coin. I am sure you can also appreciate thft 
confusion uid the irritation and annoyance that your constituents will be fiub- 



DigitizcdbyGoOglC 



COINAGE ACT OP 1965 143 

jected to at coffee breaks, at lunch time, and even while traveling if they attempt 
to use the vending machinee to make purchases and find the new legal coins will 
not operate the machines from which they wish to obtain their meal or refresh- 
ments. 

Your support in making sure that an acceptable coin is decided upon will be 
appreciated. 

Sincerely yours, 

Habrt Rosen. 

Thb Vending Industry's Position on Coinage 

The merchaodise and service vending industry urges a solution to the shortage 
of silver for coinage which will cause the least comusion and inconvenience to 
the American public by assuring the continued operation of millions of existing 
coin mechanisms. 

Such mechanisms are used in more than 3,300,000 vending machines, 250,000 
coin changers, and 470,000 music machines (plus their 1,410,000 attachments) 
throurfiout the country. The operation of some 1,200,000 coin telephones is 
also affected. 

Acordingly, the National Automatic Merchandising Association advocates 
one or another of the following alternates in place of the present 90-percent 
silver alloy currently used in dimes, quarters, and half dollars; 

1. A reduction in the silver content of the present silver-copper alloy coin to 
any combination of silver and copper which will work satisfactorily in present 
coin mechanisms. 

2. A clad (laminated) coin made from outer layers of silver-copper alloy on a 
copper alloy core. 

3. A clad (laminated) coin made of cupronickel outer layers on a pure copper 

The first two solutions require the retention of a reduced silver content. The 
third requires no silver. 

The vending industry is neither for nor against the retention of silver in the 
coinage. It supports any solution which provides for coins that will function 
satisfactorily in existing coin equipm.ent, thus assuring the American public of 
trouble-free operation with both present and new coins. 

Any coin made from an alloy of high electrical resistivity and density, such as 
cupronickel alloy, will require the replacement of existing coin mechanisms. 
The adoption of a high-resistivity alloy would also cause severe counterfeiting 
and slug problems, even after all coin mechanisms are replaced. 

The vending industry stands in firm opposition to such a solution. 

Public inconvenience resulting from ^'noncompatible" coins would arouse 
widespread resentment. Such coins would cause the disruption of operations in 
thousands of plants, offices, and institutions where employees rely on vending 
machines around the clock for food and refreshment services. 

With more than 83 million vending machine transactions every day (and com- 
parable use of coin telephones and other coin-operated devices), it is imperative 
that both existing and new coins work satisfactrorily in present coin-operated 
equipment. 

The vending industry supports all practical measures which will insure an 
adequate coin supply for U.S. commerce and which will prevent the disappearance 
of coins from circulation, 

Smithtown, N.Y., April SO, 1966. 
Hon. 0. G. Pike, 
House of Ufpresentatives, WashingUm, D.C. 

Dear Sib: I am in the automatic merchandise vending machine business and 
I am vitally concerned with a bill proposing & change in the silver content of our 

Our national association, National Automatic Merchandising Association, 
reports that 30 million vending transactions take place hourly in this country. 
Pay telephones and parking meters were not considered in arriving at this figure. 
More than i% million vending machines are in use today, equipped with coin 
mechanisms to test the validity of the coins being used. A change in the metallic 
composition of the coin could render these testing unite and vending machines 
useless. 



■dbyGOOgIC 



144 COINAGE ACT OF 1966 

Many of these machines are uaed throughout the country to vend food for 
perBOnuel employed by the automotive, electrical, and steel industry. It ia 
therefore, a serious problem if the present coin is changed to such an exteut that 
it would not operate in our equipment. By change, I am not only referring to 
the size but more important, the metallic content which determines the acceptance 
of the coin in the machine used. 

It is true that new mechanlBms could be manufactured but the cost per machine 
and the sales lost if and when the mechanism was made available, would be 
more than I could afford. 

I support any solution which provides for coins that will function satisfactorily 
in existing coin equipment. 

Thank you very much for your consideration. 
Yours very truly, 

Edward N. Rosbelot. 

Macee VuNDiNa Co., 

Washington, D.C., June 7, 1965. 
Dr. Paul Nelson, ■ 

CUrk and Staff Director, 
Banking and Currency Commitieef 
U.S. House of Represenlativee, Washington, D.C. 

Dear Dr. Nelson: I would appreciate you inclusion of my enclosed statement 
in the record of the hearings before the House Banking and Currency Committee 
on H.R. 8746. 

Yours very truly, 

Aaron Golduan, President. 
Enclosure. 

Statement op Aaron Goldman, President, Mackb Vending Co. 

Mr. Chairman and members of the committ«e; I am Aaron Goldman, president 
of the Macke Vending Co, one of the largest vending companies in the Nation. 
I am submitting this statement to you on behalf of my company and the vending 
industry in wholehearted support of H.R. 8746, the President's proposed legisla- 
tion for a new U.S. coinage. 

We beheve that any change in the coinage must be one which will cause the 
least confusion and inconvenience to the American public by assuring the con- 
tinued operation of the millions of existing coin-operated vending machines. 
Therefore, any new coins must be compatible with existing coins in use in all 
existing coin mechanisms. 

Most vending machines are equipped with a sophisticated coin testing device 
designed to handle a large volume and variety of coins, to give the customer 
cliange automatically and to reject foreign or damaged coins and slugs. This 
device tests coins for their electrical resistivity and density among other properties. 
If a coin fails this test, it is diverted back to the customer. If it passes, it then 
sets the machine in action. The clad coins proposed by the administration have 
precisely the same properties of resistivity and density as do the present silver 
coins and will, therefore, work without any cost or inconvenience in present coin 
mechanisms. 

The vending industry constitutes a significant factor in the Nation's economy. 
Last year over 30 billion coins were inserted in vending machines by Americans 
to purchase $3.5 billion worth of retail goods. These figures do not include the 
number of consumer transactions involving such coin-operated devices as coul 
telephones and coin-operated laundries. 

Automatic merchandising has become an around-the-clock convenience in the 
modern age. The fastest growing application of vending in recent years has been 
in lunch and refresimient services for employees in factories, offices, hospitals, 
military bases, and for students and faculty in colleges and universities. An esti- 
mated 1.5 million Americans now obtain at least one meal a day from vending 
machines where they work and millions more rely on vended snacks and coffee 
breaks. 

Any changes in the metal content of U.S. coins which would affect vending 
machines would, therefore, have a vital impact on the public as well as on-food 
and refreshment services in most of America's business and institutional establish- 
ments. 



■dbyGOOgIC 



COINAGE ACT OF 1966 145 

The merchandise vending industry in the United States is composed of more 
than 6,000 small bugineesea that own and service most of the vending machines 
in operation. Operating on a thin proAt margin many of the amall vending com- 
panies could not sustain a period of shutdown, molf uuctions, and public dissatis- 
faction resultii^ from a changeover to noncompatible coinage and would thus be 
forced into bankruptcy. 

More than 80,000 persons are directly employed by vending-machine operators 
and manufacturers, a total payroll estimated at over £600 million annually. These 
figures do not include the more than 300,000 additional persons whose employ- 
ment derives from supplying the products and aervioes required by vending com- 
panies. Any disruption of vending-machine operations could lead to dislocation 
and unemployment of a significant percentage of these wage earners. 

The coinage recommended by the Treaideot will provide the United States with 
a coinage which will carry out fully and without mterruption and disruption its 
function as a technical merchandising instrument. This is absolutely necessary 
for the public interest. I, therefore, strongly urge your approval of H.R. 8746 
and its speedy enactment into taw. 



Statbubnt bt Sertouation Corp. in Spppobt op H.R. 8746 

Servomation Corp. is a national vending and food service company engaged 
in providing refreshment and food service through coin-operated automatic- 
vending machines in industrial plants, schools, hospitals, and other institutions. 
Through its more than 100 subsidiaries and 7,000 employees it operates in 30 
States from coast to coast throughout the country and aa a publicly held corpora- 
tion listed on the New York Stock E:cchange it represents approximately 4,500 
shareholders. 

Needless to say, Servomation, its employees, stockholders, and customers all 
have a vital interest in a rapid solution of the current coinage problem which 
will not be disruptive of its operations together with those of the vending industry 
generally. 

We are well aware of the many interests which had to be considered by the 
administration in formulating any proposal for change in the Nation's coinage. 
We believe that it has achieved a sound and workable solution to this difiicult 
problem and that its proposal embodied into H.R. 8746 should be speedily enacted 
into law. 

The major feature of the bill which is the provision of a coinage which will be 
compatible with the ensting coinage in all of the millions of machines presently 
in use and providing serve throughout the country, is of such paramount impor- 
tance that it should not he allowed to be obscured by peripheral considerations 
not relevant to the basic problem and the basic issue. It should be stressed that 
the achievement of compatibility does far more than avoid the wastage of many 
millions of dollars in modifying present machines and the tremendous losses and 
inconveniences to the public from this process, important though these are. The 
fact is that a conversion of the coin mechanisms in the machines would not 
ameliorate the situation since the existing coins will of course continue to be used 
and the public would suSer as greatly from the rejection of such existing coins as 
it would from a failure of the machines to accept the new coins. Indeed this 
would serve to accentuate the shortage problem. Under the proposal contained 
in H.R. 8746, however, all of these problems will be successfully resolved. 

Not only will passage of the legislation proposed bring a great and positive 
benefit; speed in such action is also urgently important, for such speedy action 
will end the uncertainties which inevitably hamper the needed expansion of 
facilities and services and will also reverse the tendency to hoarding which has 
operated to aggravate the coin shortage. Servomation Corp. therefore, in concert 
with the vending industry as a whole, strongly urges the Committee on Banking 
and Currency to act favorably and quickly on H.R. 8746. 

Respectfully submitted. 

Joseph E. McDowell, President. 



■dbyGOOgIC 



COINAGE ACT OF 1965 



Statement on President's Coinaqe Proposal 

On behalf of our more than 8,000 employees, I respectfully submit this state- 
ment endorsing the President's proposal for new coinage. 

We are in complete support of the U.S. Treasury bill on coinage. The proposed 
coins will work reliably in our present vending machines and will be welcomed 
by our customers in 31 States who increasingly depend on coin-operated equip- 
ment for goods and services 24 hours a day. 

The passage of this legislation is vital to our company, its employees, and its 
customers. As one of the largest companies in our industry, we provide manual 
food service in more than 500 industrial and institutional locations throughout 
America. We also provide specialized food and vending services for hospitals, 
schools, and the military. 

The passage of this bill provides an ideal solution to the crucial coinage problem 
facing our country. It assures an adequate and modern coin supply for our econ- 
omy through the years ahead and works no hardship on the millions of men and 
women who comin-ise our industry. 

May I respectfully urge swift passage of this important legislation. 

Alex Krauer. 

QiTAKBR St.\tb Cooa-Cola Bottling Co., 

PiUthvrgh, Pa., April 6, 1966. 
Hon. Williau S. Moorhead, 
Houte of Repreaenialivea, 
Wa»hijtglon, B.C. 

Dear Mr. Moorhead: Around April 15, the U.S. Treasury will recommend 
that Congress pass a law to change the silver content of our dimes, quarters, and 
half dollars. A change is necessary because our supply of silver is almost ex- 
hausted, but if Oongresa votes for new coins, which will not work in our present 
vending equipment, our operation will be in serious trouble. 

We serve several thousand vending machines throughout industry and regu- 
lar retaU outlets dispensing soft drinks, food, candy, cigarettes, and milk, in- 
volving the services of many employees. We join the merchandise and vending 
industry urging a solution to ttie shortage of silver for coinage, which will cause 
the least confusion and inconvenience to the American public by assuring the 
continued operation of millions of existing coin mecIianiBms. 

Accordingly, we advocate one or anotner of the following alternates in place 
of the present 90 percent silver alloy currently used in dimes, quarters, and half 
dollars: 

1. A reduction in the silver content of the present silver-copper alloy coin 
to any combination of silver and copper which will work satisfactorily in present 
coin mechamsme. 

2. A clad (laminated) coin made from outer layers of silver-copper alloy on a 
copper alloy core. 

3. A clad (laminated) coin made of cupronickel outer layers on a pure copper 

The first two solutions require the retention of a reduced silver content. The 
third requires no silver. 

We are neither for nor against the retention of silver in the coinage. We 
support any solution which provides for coins that will function satisfactorily 
in existing coin equipment, thus assuring the American public of trouble-free 
op^^tion with both present and new coins. 
Very truly yours, 

Howard W. Clottgh, 

Vice President, Sale*. 



:dbyGOOglC 



COINAGE ACT OF 1965 147 

Radio Cobp. op America, 
Camden, N.J., June 7, 1985. 
Hon. Wright Patman, 

Chairman, House Banking and Currency Committee, 
U.S. Congress, 
Washington, D.C. 

Dear Congressman Patmani May I ui^e your support of H.R. 8746 in your 
current hearings. 

IndUBtjial food services rely heavily on the vending ioduatry to provide daily 
food requirements to many millions of production and administrative employees 
throughout these United States. Any impairment to the smooth functioning of 
this important service, resulting from the use of improper coinage, would seriously 
penalize the food service industry and bring about substantial financial losses to 
the American business community. 

Radio Corp. of America has made wide use of vending machines in its food 
service program and we would like to continue to have the benefits of this service 
in satisfying the food requirements of our employees. 

I should tike to request that my statement be made ptirt of the record of your 
proceedings. 

Yours very truly, 

Martin O'Shauohnesst, 
Administrator, Food Services. 

Gallarneau Bros., 
Amarillo, Tex., June 7, 1965. 
Congressman Wright Patman, 
U.S. House of Repreeenlatives, 
Washington, D.C. 

Dear Congressman Patman: President Johnson has proposed a clad metal 
coin to eliminate the present coin shortage. I heartily endorse this proposal and 
ask that you give it your support. 

We are vending machine operators serving an area with a radius of 150 miiea 
from Amarillo, and employ 16 people. These machines provide a livelihood for 
us and serve the needs of our many thousand customers. The present coins will 
remain in use for a long time, so we must have coins that will work side by side 
with our present-day coins. 

Our position all along has been that any coin that would work in the millions 
of coin-operated machines would be satisfactory with us. Since President 
Johnson has proposed a coin which will work, we ask that you give it your support. 
Very truly yours, 

J. B. Gallarneah. 

Key City Vendino Co., 

AbHene, Tex., June 7, 196B. 
Hon, Wright Patman, 
Chairman, Banking and Currency Committee, 
House of Representatives, Washington, D.C. 

Dear Mr. Patman: We wish to advise that the new U.S. Treasury bill on 
coinage meets with our approval and wish to urge your support of this most 
important solution to the problem of silver shortage for coins. 

It is our understanding that this new coin will operate our vending machines 
as efficiently as the present coins. Since some 80 million coins are used each 
day in various types of vending equipment, you can easily recognize the urgency 
of supporting this proposed bill. 

In our operation alone, there are about 10,000 daily purchases made with coins. 
This requires the service of 10 employees. We shall be very grateful if you will 

Yours truly, 

Marvin Lewis, Owner. 



■dbyGOOgIC 



148 COINAGE ACT OF 1965 

American Bottlers or Cakbonated Bbvekaobs, 
The National Association ot the Soft Drins Industry, 

Waskington, B.C., June 7, 1966. 
Hon. Wkight Patman, 

Chairman, Committee on Banking and Currency, 
U.S. House of Representatives Building, Washington, D.C. 

Mt DBAS CoNaREBBMAN Patman: The American Bottlers ot Carbonated 
Beverages, the nutianal association of the soft drink industry, with a membership 
compoBed of 2,461 bottlers of soft drinks doing business in every State of the 
Union, ia pleased to indicate to you the support of this industry for your bill H.R. 
8746 to provide fot the coinage of the United States. It is our considered judg- 
ment that the approach to coinage taken in this proposed legislation represents a 
realistic and workable solution to one problem caused by our country's diminishiiif; 
silver supplies. 

We are particulariy gratified to note that the new coins which will be minted 
if H.R. 8746 becomes law in its present form, will be compatible with the coin 
mechanisms which are a part of the automatic vending machines through which 8o 
much of our product is dispensed. Tliis ia eapecially important to our members 
who have an interest in the over 883,000 bottle-vending machines on location at 
this time. These machineB each sell an estimated 132 drinks per week for a total 
of 5,594,888,000 drinks per year. 

It is not at all difficult to predict the chaotic effect on this vital sales segment of 
our industry if coins to be adopted did not work in these machines. As noted 
earlier, it appears that the coinage proposed in II. R. 8746 will be compatible with 
present equipment and, accordingly, the soft drink industry would like to take 
this opportunity to add its endorsement to that bill. 

It will be greatly appreciated if our views on this legislation could be made a 
part of the record of the hearings of your committee on this subject. Thank you 
in aavance for your consideration in this matter. 
Very truly yours. 

Thou AS F. Baksr, 
Executive Vice President. 

Southern Vbndebs, Inc., 
San Aviomo, Tex,., June 8, 1965. 
Hon. Wbiqht Fatman, 
U.S. House of Representatives, 
Wa»hington, D.C. 

Mt Dear Mr. Patman: We are 1 of over 6,000 operators of automatic 
vending equipment who are vitally concerned with the coinage problem existing 
today. Coin-operated services are a vital part of the modern economy. Since 
the present coins will be in circulation tor a long time, it becomes important that 
both types work in the millions of vending machines on which the American public 
has come to rely. 

The Treasury proposal calls for clad metal coins, that will work perfectly in 
existing vending machines, interchangeably with present silver coins. No other 
new coin will work properly in our machines thus causing untold public confusion 
and irritation. 

We sincerely ask that you support the President's recommendations and vote 
in favor for the U.S. Treasury bill on coinage. 

Respectfully yours, 

H. W. Hablin, Jb,, Vice Presideni. 



t the Coldubiitu fob 

Mr. Chairman and members of the committee, my name ia Richard K. Bancroft. 
I appear on behalf of the Columbium for Coinage Association. My purpose in 
appearing before the committee ia to urge that columbium be considered aa the 
material to be substituted in place of ailver in the U.S. coinage system. I have 
been employed by the Union Carbide Co. for the last 19 years, first as a sales 
engineer and more recently as manager of product planning for the Stellite 
Division of the Union Carbide Corp. with offices in Kokomo, Ind. 



Digitized byGoOgIC 



COINAGE ACT OF 1965 149 

My company, together with four others, has formed the Colurabium for Coinage 
Asaociatioa on whose behalf I am here today. The members of the OBsociation 
are as follows: 

General Electric Co. 

Kawecki Chemical Co. 

Molybdenum Corp. of America. 

Union Carbide Corp. 

Wah Chang Corp. 
The President's message on coinage has made it abundantly clear that "We 
have no choice but to eliminate silver for the most part from our aubaidiary 
coinage." The question is what is the best substitute material for use in place 
of silver. The members of the Columbium for Coinage ABBOoiation do not oppose 
the proposed clad coins in place of the 10-, 25-, and 50-cent silver pieces historically 
used in the U.S. coinage. Nevertheless, we believe that the adoption of the 
composite coin is likely to prove only an interim solution for the problems which 
are inherent in the coinage situation. 

We believe experience with the new coins made of low cost base metal will 
show that the present rejection mechanisms used in vending machines in the 
United States will prove to be inadequate protection against "slugging." Cer- 
tainly, the adoption of the composite coin will be a daily reminder to the public 
at large that a low cost cupronickel covering bonded to a copper base metal core 
will actuate the release mechanism of present-day vending machines. Indeed, 
we believe that in time the vending machine industry will become the principal 
victim of the proposed composite or sandwich type coin and will be obliged to 
devote substantial resources to finding a more sophisticated mechanism which 
will be more nearly proof against "slugging." Not only must there be more 
sophisticated mechanisms but these mechanisms must be designed around a 
metal such as columbium which has intrinsic value and unique characteristics 
which distinguish it from base metals such as copper and nickel which may be 
profitably used for slugging. 

Now let me proceed to outline some of the affirmative merits of columbium as a 
metal for adoption in the subsidiary coinage of the United States. Attached to 
the statement which has been placed before each member of the committee is a 
copy of a more detailed document entitjed "A Proposal for Columbium Coinage." 
This proposal has attached to it a commemorative medal made from columbium. 
I Invite the members of the committee to remove this medal from its plastic 
jacket and to examine it in detail as I continue with my brief statement. 

1. HISTOBT 



2. PtTBLIC ACCEPTABILITZ 

You will see that columbium is comparable to silver in weight, having approxi- 
mately the same density, has a good "feel" and has a "ring" more like silver than 
nickel or any other base metal proposed for the coinage. It also has an attractive 
luster which becomes brighter with usage. 

a. WeAKABILltT AND COBBOSIOK BESIBTANCE 

Columbium is harder and tougher than either silver or nickel. Columbium 
thus has a high degree of wearability and resistance to corrosion. Only one other 
known metal, tantalum, is so highly resistant to corrosion. 

4. RESISTANCE TO COUNTERTBITlNa 

Columbium has a far higher melting point than silver (4,400° F. as against 
1,760° F. for silver) and moreover requires specialized processing {vacuum melt- 
ing). These characteristics, together with the intrinsic vaJue of the metal, tdl 
contribute toward making columbium both difRcult and unprofitable to counter- 
feit or to convert into slugs for vending machines. 

8. WOBKABILITT AND ADAPTABILITY TO MINT PBOCESSING 

Columbium is highly ductile, almost equally so with silver, and can be worked 
cold. Experimental columbium coins have already been struck by the Phila- 



DigitizcdbyGoOgle 



150 COENAGB ACT OF 1865 

delphia Mint thus establishing that coins from columbium can be produced using 
the standard pressea of the Government mints. Moreover, reproduction of 
detail, balance, and other characteriBtica are excellent. 



Proven reserves of columbium ore are over 6 million tons, making it one of the 
most plentiful of metals. The largest deposits are in Brazil, Canada, and Africa 
with a substantial ore body at Powderhorn, Colo. 

7. AVAILABILITY AND COST 

Within a period of 18 to 24 months following the adoption of columbium for 
coinage, production of this metal could be scaled up to meet any annua] coinage 
demand in the range of 10 to 20 million pounds. Although today's commercial 
price for columbium is high for coinage purposes, because erf limited industrial 
demand, it is certain that the price to the Government would be substantially 
reduced once there was an assured long-term market. For this reason, we thinlt 
that the price of columbium should conservatively be estimated for present 
purposes as in the range of $10 to $15 per pound or less, which would be approxi- 
mately one-half the present price of silver. 

In this connection I call attention to the example of the descending price of 
titanium which in 1950 was priced at $20 per pound and by 1962 had dropped to 
less than S3 per pound, all this as a result of the normal response of price to 
increased production. The same result can logically be expected to occur with 
columbium. 

POSITION or THE COLUMBtlTM FOR COINAGE ASSOCIATION 

As indicated earlier, the association which I represent is not opposing the 
specific proposals which the President has made. However, we believe that these 
proposals, if adopted, will prove inadequate to a long-term solution of the problem 
and will lead to a tremendous increase in "slugging of vending machines (of the 
present type). The adoption of sandwich coins will give notoriety to the fact 
that copper disks combined with any of several base metals of suitable weight 
can be joined together with ordinary household glues or even double-sided adhesive 
tape to provide a slug which will easily pass the vending machine devices now in 
use. Thus, we believe that the adoption of the sandwich-type coin will in a period 
of years render obsolete today's rejection mechanisms. Ultimately the vending 
machine industry, regardless of cost and inconvenience, will be obliged to develop 
more sophisticated rejection mechanisms than are presently in use. Because of 
its special characteristics, we believe columbium would malce an ideal choice of 
metal for research on a more sophisticated rejection mechanism. The metal- 
lurgical and technical resources of the members of our association are available 
to assist engineers of the vending machine manufacturers in developing a rejector 
unit geared to the reception of columbium and of no other metal. 

In conclusion my specific recommendations to the committee are as follows: 

1. That the committee make specific provisions in the proposed legislation 
tor an intensive study of the "slugging" problem; 

2. That this study include consideration of the special advantages of 
columbium for use in more sophisticated vending machines which will be 
slug proof and thus serve the long-term interests of the vending machine 
industry; 

3. That this study include consideration of the progressive introduction 
of columbium into the coinage beginning with 50-cent pieces, which would 
have the least adverse impact on existing vending machine use and yet 
would offer the greatest potential per unit protection against slugging losses 
when a new mechanism is developed. There is more than enough colum- 
bium in the Government's existing stockpile (14 million pounds) to assure 
an adequate initial supply for the new 50-cent pieces; and 

4. That a representative of the columbium industry be included in the 
membersliip of the proposed Joint Commission of the Coinage. 



■dbyGOOgIC 



COINAGE ACT OF 1966 151 



Intboddction 



The purpose of this proposal is to acquaint the Treasury, the Congress, and 
other interested groups with the characteristics and advantages of columbium 
which make it a superior candidate material for U.S. coinage, and to promote 
its adoption as a substitute for silver coinage. 

A number of firms active in the mining, processing, and marketing of columbium 
have formed a group known as the Columbium for Coinage Association. This 
presentation has been prepared and is submitted by the association, whose 
memtrers are; 

General Electric Co. 

Kawecki Chemical Co. 

Molylidenum Corp. of America. 

Union Carbide Corp. 

Wah Chang Corp. 



Columbium has the characteristics required of a good coin material and in 
addition unique attributes which, if it were adopted as a substitute for silver, 
would retain the dignity and prestige of U.S. coinage. 

Known world reserves of columoium exceed 6 million tons which is equal to 
known reserves of sulfide nickel ores. Columbium is abundant in this hemi- 
sphere and supplies iu Canada and United States are amply for any emergency. 

Present production capacity is between 1 million and 2 million pounds annually. 
With suitable long-term assurance of high volume demand, production could be 
brought to a level of 10 to 20 million pounds annually in a period of about 2 years. 

In the quantity required for coinage, we estimate the price of columbium to the 
Government would be less than half the present price of silver. The use of 
columbium tor coinage would so far exceed any current or envisioned applications 
of the metal that raw materials and stability of price could be readily assured the 
Government. 

Publicity on "sandwich coins" has invited slugging of vending machine rejector 
devices now in use. What is now needed is a slug proof rejector device. It ia 
believed such a device eould be designed, built around the properties of columbium. 
We have confidence the combined technical skills of the columbium industry and 
the vending industry could solve the problem. 

Eatahliahment of a healthy columbium industry would be beneficial to the 
defense and space effort, nuclear power development, and would strengthen the 
economies of Canada, Brazil, and many other smaller free world countries such as 
Congo, Uganda, Kenya, Nigeria. 

There are several reliable U.S. companies who are interested and capable of 
supplying columbium for U.S. coinage. This assures the Ciovemment of alternate 
and sustained aource of metal. 

Nickel and copper which have been prominently suggested for all U.S. subsidary 
coins are base metals widely used and essential to many basic U.S. industries. 
Although there are ample world reserves of these metals, availability may depend 
largely upon one or a very few firms and, in time of national emergency, broad 
demand precludes availability for coinage. We have already had experience with 
"white" pennies and silver mckels. 

COLUMBIUM FOH COINAGE 



Pvhlie acceptance 

Columbium is silver-gray with an attractive luster, is comparable to silver in 
weight, has a good feel, and ring more like silver than nickel or any other known 
base metal used for coinage. 
Wearability and corrosion resiMtance 

Columbium is harder and tougher than cither silver or nickel and may be 
expected to have greater wear resistance and retain imprinted detail longer than 

either. Of all known metals and alloys, it is second only to tantalum i "'"~ 

resistance, and luster should be enhanced by usage. 



■dbyGOOgIC 



152 COLNAGE ACT OF 1965 

Resistance to counlerfeiling 

Colutnbiurn has the inherent ability to resist counterfeiting. Its high melting 
point (4,400° F.), specialized processing (vacuum melting) and intrinsic value aQ 
contribute to make counterfeiting both difficult and unprofitable. 
Workability and adaptability lo mint processing 

Columbium ia very ductile and can be worked cold. Experimental columbium 
coins have already been struck by the Philadelphia Mint, usin^ their standard 
presses. Reproduction of detail, balance, and other characteristics are excellent. 
Su^iency of supply 

Columbium ore reserves are over 6 million tons. This makes it one of the most 
plentiful of metals. Largest deposits are in Brazil, Canada, and Africa, with a 
substantial ore body in United States. Canadian columbium deposits alone 
would be enougb to meet estimated coinage need of S,000 tons annually for over 
100 years, and at Powderhom, Colo., reserves would sustain the same usage rate 
for over 30 years. 
Availability and cost 

Within a period of 18 to 24 months it is estimated columbium production could 
be scaled up to meet any annual coinage demand in the range of 10 to 20 million 
pounds. 

Additional facilities needed for sustained high production would relate to 
mining and milling, extraction, reduction, and annealing. Ample melting and 
rolling capacity already exists. 

At the outset, it is recommended Uiat columbium strip or blanks be supplied 
the mint. Ultimately, there is no serious technical barrier to the mint assuming 
further "upstream" processing. Columbium docs not require the extensive mills 
associated with steel or other hot rolled metal fabrication. Operations are clean. 
Because the metal is worked cold, much of the present mint ec;uipment could no 
doubt be utilized. 

Use of columbium in place of present silver coinage would create a columbium 
industiy. This would be healtJiy for U.S. economy by establishing facilities 
furthering technology, and providing a sound base from which to expand all 
commercial refractory metals. Many industries as well as the apace and military 
agencies would benefit. 

However, the columbium producers would have to be assured of reimbursement 
for the additional capital investment necessary to produce the volume of colum- 
bium required tor coinage. In this regard, it is suggested that long-term (10-ycar) 
contracts with suitable amortization would be appropriate. 

Today's commercial price for columbium strip ranges between $30 to $40 per 

Biund. Lack of industrial demand for the metal and its alloys keeps the price 
gh. However, with a long-term assured market in the volume necessary for 
comage, the price to the Government would conservatively be in the range of 
$10 to SI5 per pound or less. Since columbium is about 80 percent of the weight 
of silver, this would mean an equivalent volume cost of about one-half the present 
price of silver. 

Even the most optimistic industry forecasters agree that any single commercial 
use for columbium would never equal its usage for coinage if adopted and required 
in a volume of 10 to 20 million pounds per year. It is probable, even assuming 
columbium were someday used in eas turbine engines and other high-temperature, 
space, nuclear, and corrosion appucations, the total volume required would not 
equal coinage requiremeots. 

This then would give the Government a high degree of control over the supply 
and price of columbium raw materials and, thus, the stability of coinage. 

Other important considerations which favor columbium include the following: 

Columbium offers a substitute for silver which will maintain the integrity and 
dignity of U.S. coinage. 

The adoption of columbium for coinage would provide a final solution to the 
present problem and its abundance assures a stable coinage for a century or more. 

Establishment of a healthy columbium industry would be especially helpful to 
the economies of Canada, Brazil, and many of the smaller countries of Africa and 
the free world. To Brazil, it would mean another major export to the United 
States and thus contribute aut>atantia1 aEsifitance to the political and ecoDomio 
stability of the country. To Canada, it would mean further development of 
columbium properties. To many smaller nations like Nigeria, the Congo, Kenya, 
and Uganda, it would help build financial independence. 



■dbyGOOgIC 



COINAGE ACT OF 1965 153 

THX MKTAI. COLiniBIIIll 

Colurobium, Bometlmee cftllod niobium, is an elemental metal. Along with 
tungsten, tantalum, and molvbdenum, it is known aa one of the refractorr or 
reactive metala — refractory, Secause of its raeltin); point (4,473* P.) and nigh 
strength at elevated temperatures, and reactive, because of ita affinity for atmos- 
pheric gaBCH at temperatures above 500° F. 
Sittory 

Although discovered well t 



rare earths. 

Juat before and during the Korean war, under the impetus of demand, intenaivtt 
exploration revealed laj'ge deposits throughout the world and columbium is now 
known to be most plentiful. B; far the greatest use of columbium is aa an 
alloying addition to nigh-temperature alloys, chiefly aa ferrocolumbium. 
Occurrence and world retervu 

Columbium occun aa columbit« In alluvial deposits frequently associated with 
tin and in the mineral pyrochlore. Largest columbite sources are found in 
AMca and Malaysia with smaller deposits scattered throughout the world. 

However, pyroohlore is by far the greatest source of columbium. Canadian 
deposits in the Oka district contain more than 1,260,000 tons of Cb/)i (about 
875,000 tons of contained metal). Largest known reserve is the Araxa deposit 
in Mioas Gerais Province, Brazil, where over 6,300,000 tons of Cb/), (4.4 million 
tons of columbium metal) are proven. Other important reserves are in Africa. 
A recently discovered pyrochlore body in the Congo is reported as vast, but yet 
not fully evaluated. 

In United States, there is an estimated potential resource of almost 150,000 
tons of columbium metal — an ample supply for emergency use. Small columbium 
placer operations have been carried out in Idaho and a substantial pyrochlore 
deposit estimated to contain eome 70,000 tons of columbium is located near 
Powderbom, Colo. 

Proven world reserves of columbium exceed 6 million tons, which is roughly 
equivalent to Icnown reserves of sulfide nickel. Geologists say future discoveries 
will probably prove columbium to be as plentiful as copper. 

Figure 1 shows major pyrochlore deposits in the free world as follows: 

1. Molybdenum Corp. of America, Minas Gerais, Brazil. 

2. St. Lawrence Columbium and Metals Corp., Oka district, Quebec. 

3. Columbium Mining Products, Ltd., Oka district, Quebec. 

4. Quebec Columbium, Ltd., Oka district, Quebec. 

5. BeaucMO Mines, Ltd., North Bay, Ontario. 

6. N. V. Billiton Maatschappij, Tanganyika. 

7. E. I. du Pont, Powderhom, Colo. 



■dbyGoOgIC 



154 



COINAGE ACT OF 1965 




FiGuBB 1. Major pyrochlore deposits of the free world. 



PKODHCTIVB CAPACITY 

Following ia a discusaion of current columbium mining and proceasing activity: 
Mining 

The largest columbium mining operation has been ia the Oka district of Quebec 
where St. Lawrence Columbium & Metals Corp. is producing at the rate of 700 
tons of contained metal per year. 

Amalgamated Tin Smelters and a number of smaller companies arc producing 
a substantial volume of columbium concentrates in Africa and small mine and 
mill operations exist in Norway and Portugal. 

Mining and mill facilities at the Araxa deposit in Brazil, of which Molybdenum 
Corp. of America is principal owner, are now capable of producing 3 million pounds 
of columbium metal per year. There is an estimated 10 billion pounds of recover- 
able columbium in this deposit alone. 

Available information indicates yearly free world mine and mill production at 
about 3 millioa pounds of ecguiv^ent columbium metal. There are now over 
14 million pounds of columbium in the U.S. stockpile. 
ProcesBing 

There are five major U.S. companies active in the processing and marketing of 
columbium products, as follows: 
E. I. du Pont. 

Fansteel Metallurgical Corp. 
Kawecki Chemical Co. 
Union Carbide Corp. 
Wah Chang Corp. 



■dbyGOOgIC 



COINAGE ACT OF 1965 156 

Other firmB having processing capability and active In the Getd to a lesser 
degree include: 

TJniversal-Cyelops Steel Corp. 

General Electric Co. 

Keniuunctal, Inc. 

Mallinckrodt Chemical Works. 

Stauffer Chemical Co. 

Sylvflnia Electric Products, Inc. 

Temeacal Metallurgical Co. 

Westinghouse Electric Corp. 
A. Extraetion-Teduetion 

There are two methods used commercially for producing columbium metal 
from mill concentrates. One is by chlorination and Hubaequent sodium reduction. 
The other is by hydrofluorination and conversion to the oxide followed by carbon 
reduction to pure metal. 

Some firms using the lirst method have developed proprietary means of con- 
tinuous extraction-reduction to pure metal. 

Present extraction capacity of the five major columbium producers is about 
2,740,000 pounds of contained columbium per year. Total U.S. extraction 
capacity IB estimatpd at 4 million pounds annually. Existing reduction capacity 
Is in excess of 2 million pounds. 

B. Contolidation — Ingiri production 

Three methods are used to convert the metal powders to bar or ingot for working 
to mill products: Sintering, vacuum-arc melting, and electron-beam melting. 

Sintering is a powder metallurgy process in which the metal powder is pregsed 
cold into a bar which is Hubsequently reHistancp heated for a long period in a high 
vacuum. The resultant product has good density and may be worked directly. 
Tliis process is little used with columbium due to its relatively high cost and 
limited ^ze bar which can be obtained. 

In vacuum-arc melting, the metal powder is consolidated into electrode bars 
by cold pressing. The electrodes are then melted to ingot under high vaj^uum. 
Ingots weighing several hundred pounds can be produced. 

iiectron-beam melting is relatively new but is now most widely used for 
obtaining columbium ingot. With this process, electrons from a high-tempera- 
ture element are focused in a magnetic field to produce a cone of intense heat into 
which pure metal powder or bar is fed. The metal drips into water-cooled copper 
molds. Ingots weighinB several hundred pounds are produced. The entire 
process is carried out in very high vacuum. 

Existing capacity of electron-beam melting Ls over 2,500,000 pounds of colum- 
bium ingot per year. Consumable vacuum-arc melting capacity is easily 10 to 
20 million pounds. Adequate melting facilities are presently available for any 
conceivable demand. 

C. MiU proeewmn — Forging, roUing, annealing 

Columbium begins to react with gases of the atmosphere (O-N-H) at a tem- 
perature of about 500° C. The result is embrittlement. Therefore, all forging, 
rolling, and drawing operations are done at room temperature. This is no 

Eroblem because columbium is very ductile and is capable of 99 percent reduction 
efore annealing is necessary. 

Normal processing includes conditioning of ingot followed by cold forging and 
rolling on conventional mill equipment. Most strip and sheet are produced on 
. Sendzimir mills. 

Annealing is done in high-vacuum furnaces. Temperature required is 2,200- 
2,250" F. 

Ample forging and sheet rolling equipment is available to supply any require- 
ment of columbium sheet per year. Present capacity of high-temperature, high- 
vacuum annealing facilities is estimated at 1 to 1.5 million pounds of finished 
product per year. 



■dbyGoogIc 



COINAOE ACT OF 19S6 



Mining and milling; ptr ftv 

Canada 1,400,000 

Braril 3,000,000 

Other free world 3,000,000 

U.S. atockplle ' — 14,000,000 

Total - 21,400,000 

Extraction of concentrates 4,000,000 

Reduction of oside - 2,000,000 

Consolidation and melting _ _ *20,000, 000 

ForgiDgand rolling , ...'20,000,000 

Annealing - 1,250,000 

■ AviUabls at ootaet. U.B. eolDmUDm dtpotdtt tra B**llal)la u ntarm Im amtrgMio; on. 

■ Orinon. 

Propertiea of Mlumbium 

A. Phytieal propertiet 

Density 0.31 pound/cubic inohea 

(SO percent of silver). 

Melting temperature.. 4,474' F. 

RecrTStallisatlon temperature 2,200° F. 

Modulus of elasticity 15X10* p.s.i. 

Electrical resisUvity 12.5 n ' ' 

B. Meehanictd propaiiM 



Non.— Hudnaa, Boctwdl B-40. 
AppUcatitmi 

The greatest u. 

addition to iron- and nickel'base alloys. Annual consumption in the Unite 
States is about 1,000 tons. Probably less than 50,000 pounds a year of pure 
columbium or columblum-baae alloys is consumed as mill product. Principal 
applications are as tubing for molten salt experimental nuclear reactors and tar 
nuclear fuel cladding. Also, columbium alloys are used as structural elements of 
experimental aircraft, miesilee, and aerospace craft. 

THE VBNDINa IHDD9TBT PBOBUBH 

It is now a matter of public knowledge that copper disks combined with any 
of several other base metals of suitable weight (sandwich" type coins) can be 
joined together with household glue or even adhesive tape to provide a slug which 
will easily pass the most sophisticated devices now in use. 

The prospect is a growing slug problem which will make today's rejector units 
obsolete. It seems clear that the vending industry must change rejector devices 



._„ „ . , , f both 

the Government and the vending industry. The latter also must be assured a 
slug-proof rejector mechanism. It is believed a device can be designed to accept 
only columbium coins which would provide the safeguard needed. 

The metallurgical and technical skill within the companies who are members of 
the Columbium for Coinage Association is available to assist the engineers of 
vending machine manufacturers in developing a. rejector unit to handle columbium. 



The coinage and vending problem requires a permanent somtion — not an exped- 
ient. Columbium offers a plausible answer, and the columbium industry working 



Vending machine merchandising is surely destined to grow. Any coin or 
rdector device problem which exists today wfll only be compounded in the future. 
" ..... . . ■\ ^j^i^ — jjpj ^jj exped- 

im industry working 

Digitized byGoOgle 



COINAGE ACT OF 196S 157 

wHh the Treasury &nd the vendiM industry can work out a tranaition program 
which would minimize the effect of introducing new coinage, and the impact of 
changing vending equipment. 

(Whereupon, at 11:10 a,m,, the committee proceeded into executive 



■dbyGOOgIC 



db,Google 



APPENDIX 



Thz Wmra Houbb, June S, 1985. 
SnititABi: fi P&oa&AH fob a Niw and Modxbniisd U^. Coinaqb 

Thb Bummary of the President's coinage program, the Treasury staff etudy of 
silver coinage, ai^d the atudy of alloys suitable for use as U.S. coinage are made 
available as background to the President's coinage prORram. 

One underlying determination had to be made as the basic and fundamental 
decision aSectins the U.S. coinage. This was: Will there be enough silver 
available to justify continued large-scale use of silver in U.S. coins? 

The Treasury staff study of silver and coinage came to the unequivocal con- 
clusion that there is not. (See point 1 of the Digest of the study, and pts. Ill 
and V of the study, and the table at the end of tUs summai?.) 

There tna» no choice whether the United States should turn away from ii» 
traditional htyh Hlver content coinage at Ai» time. It had to do eo became to 
attempt to retain it in the face of a growing imbalance between silver supply 
and demand could only result in a severe and chronic natiorud coin shortage in 
the not distant future. 

There was a choice in only one mailer: what tubsMute should be used for the 
existing 90 percent silver coinage! 
The Silver and Coinage Study provides a set of criteria for a modem coinage 
(see pt. II of the digest and of the study). The new coins the President is rec- 
ommending to Congress meet these criteria: 

They will provide uninterrupted service as a medium of exchange. They can 
be made without further major changes for a long period ahead. They are made 
of materials for which there is assured access. They can be minted without 
undue diffieiUty and at moderate cost. They can be used — ocroM lAe counter and 
in aU of the IB miUion coin-operated denicet in use in the United Slates-^side 
by side with the existing silver coins. These factors were determining in the 
selection of the new dime and a new quarter despite the fact thai Ihey have a di»- 
linclively digerent appearance from their traditional suver coutderparts. 
The silver supply-and-oemand situation is summarized in a table at the back of 
this document. It should be noted that: 

In 1964, free world consumption of silver exceeded new production by a. 
massive 335 million troy ounces — -11,557 tons (see the last figure in the table). 
Even if no silver had been used anywhere in the free world for coinage, there 
would have been a silver deficit, on the average, from 1957 through 1961 
and growing deficits in 1962, 1963, and 1964 (compare the first and the sixth 
columns of the table). 

Coinage demand for silver lias been growing fastest, and U.S. use of silver 

in coinage accounts for nearly all of tMa increase (see ttie second, third, and 

fourth columns). 

The entire use of silver by the United States in coins, and in part the use of silver 

in the arts and industry in this country, are supplied from the Treasury's silver 

stock, acquired mainly in the 1930'b. This Stock now Stands at approximately 

1 billion ounces. 

Thus, unless the United States acts now to ease its dependence upon silver in the 
coinage, the Treasury's large Stock of silver would be gone in 2 to 3 years. 

Consequeniiy, a n«tD, largely nonsHver siAsidiary coinage is proposed now, 

while the U.S. silver stodc is large enough to insure an orderly transition to the 

new coinage, without danger of a coin shortage, and withoxU major upset* to the 

silver market. 

Of the six coins in use in the United States, the new coinage prooram leaves 

three unchanged. These are the penny, the nickel, and the «lver dollar. 

ISO 



■dbyGoogIc 



160 COINAOE ACT OF IQBJI 

With respect to the silver dollar: 

(1) The nieer dollar remairu unchanged a» the coin it ha» been since 18S7, a coin 
weighing ili% grains overall, 00 percent of iU weight silver. 

(2) There are no plans at present for new production of the silver dollar. 

7^ new dime ana the new quarter. — They will be the same size and have the 
same design as the present dime and quarter. But they are composite coins. 
They are faced with cupronickel, the alloy of 75 percent copper and 25 percent 
nickel now used in the 5-cent piece. The cupronickel facing la bonded to a core 
<rf pure copper. The copper core gives these coins their distinctive feature: a 
copper edge. 

This type of coin was selected because it alone, among practical alternatives, 
can be used without interruption of service in all coin-operated devices in use In 
the United States, including the 6 million coin machines that have sensors set to 
reject anything other than the present 90-percent silver coinage. 

This is a public convenience factor that was ^ven great weight in making 
selections for the new coinage, in view of the (ollowmg: In 1964 the public bought 
some $3>4 billion worth of ^oods and services, in more than 30 biUion transactions, 
through merchandise- vending machines. The 1965 fibres will be bigger, because 
this method of merchandising is expanding rapidly in the United States. The 
public has come to depiend upon automatic mercnandising for the provision of food 
and other email consumer items, at all times and in a growing number of places. 

The new halt dollar.— This too will be a composite coin. But it will be almost 
indistinguishable from the present half dollar. It will be the silver standard bearer 
of the new coinage, faced with an alloy of 80-percent silver and 20-percent copper, 
bonded to a core of approximately 21-percent silver and 79-percent copper, 
giving an overall 40-percent silver content. It will continue to be minted with 
the image of the late President Kennedy. 

The coinage program includes a* a central feature Ae continued circulation of 
existing silver coinage. 

Betention of the existing silver coinage in use for an indefinite period ahead mean* 
that: 

Both the old and the new coins must be accepted by the 6 million coin-operated 
devices in operation in the United States that use sensors set to reject coins other 
than the present silver money. They do this by rejecting any coin, or slug, that 
does not nave the electrit^ properties of a coin with a 90-percent ^ver content. 
To be compatible in technical use, therefore, the new coins had to duplicate the 
electrical properties of the present silver coins. The proposed composite coins 
were engineered to do this. They do so precisely and consistently. 

If an Incompatible new coinage had been chosen, the sensors in coin machines 
could have been chanced to accommodate them, at a cost estimated at approxi- 
mately SlOO million. This cost did not enter into decisions as to the new ccnnage, 
since every industry must from time to time spend to keep in step with changes 
around it. The foUowing factors were influential: 

1. Changing the rejector devices in vending machines would impose upon 
the public service delays of 1 to 3 years. 

2. Changing the rejector devices to accommodate a new coinage with 
electrical properties different from those of the existing silver coinage creates, 
rather than solves, a problem. This is so because setting rejectors to accept 
coins of variant electrical properties in effect desensitizes them, exposing 
them to eKtensive slugging. This would raise the cost of goods sold throu^ 
coin operated vendors, as the losses through fraudulent use would be passed 
along to users in the form of higher prices for the goods and services sold 
through the machines. 

The composite coins avoid all these problems. 

Continued circulation of silver coifis also means that the silver coinage must be 
protected from hoarding and destruction. This requires that the silver in them 
must not be permitted to become more valuable — as silver — than the face value 
of the coin. 

This will be prevenled by continued action by the Treaiury to hold the price 

of silver at not more than $1.B9 and a fraction cents a troy ounce. At this price 

it is uneconomic to melt existing U.S. silver coins for their silver content. 

The silver coinage will be protected in this way by the tact that the Treasury 

stands ready to supply silver from its stock at the $1.29-plus price. It is 

expected that the transition can be made to the new coinage, the existing coinage 

can be protected, and the Treasury will stiU have a large supply of silver stock in 

hand at the end of 3 years. 



■dbyGoogIc 



COINAOE ACT OP 1966 161 

Introduction of the new coinage into circulation will start next year, if legisla- 
tion authorising it receives prompt congresaional approval. 

Meanwhile, the mint will continue making the existing silver coinage. 

The new coins will have the same purchasing power as present silver coins. 
They will be legal tender, exchangeable at full face value for all the financial 
instruments of tne United States. 

Use of the new coinage will permit an ultimate saving, in terms of the present 
pattern of coin usage, of 90 percent or more of the silver we now put into coins. 

EsUmaled free irorld tileer eoiMufflpfton aTtd produethn, t949-84 
[MUlloni ol Oat troy onnccal 







UK-ColiUfe demmd 


Total con- 


~fflr 






BDdtlW 

arte 


United 

Statu 


rr 


Total 






IS 

SIS 


203 


i 


S 

K 

'i 


i 

419 

sea 































SflTCT Stddy," pi. m, table I, 
Dce eqnala 480 Era 
m, beaae, l,aoo,abc 



■dbyGOOgIC 



db,Google 



TREASURY STAFF STUDY OF SILVER 

AND COINAGE 

UNITED STATES TREASURY DEPARTMENT 
1965 



Table of Contents 

Foreword 

Digest of the Treasury Staff etudy of silver and coinage 

I. Introduction 

II. Diacusaion of the criteria by which any future coin program should be 
judged 

A. Permanence of the program 

B. Raw material requirementa 

C. Public acceptability 

1. Need for the change 

2. Characteriatics of the new coins 

3. Degree of inconvenience 

4. Absence of extreme hardship 

D. Mining characteristics and coinage costs 

E. Compatibility with present coinage 

III. Silver market trends 

World production and conaumption 

Free World ailver production and consumption outside the United 

States - _ 

Conaumption . 

Production ^ 

U.S. production and conaumption 

Conaumption 

Production 

Analysis of changee in Treasury stocks of ulver and projected rate of 

depletion 

The influence of price OQ silver production and consumpKon 

The influence of ailver price upon production 

World silver production 

U.S. silver production 

The influence of ailver price upon conaumption 

Prospective levels of silver price in a free market 

Conclusion 

IV. Metallurgioal and technical characteriatios of alternative coinage 

alloys 

Aluminum 

Columbium- 

Cupronickel 

Oopper-sinc 

Nickel (pure) 

Nickel (Inco)- - 

Nickd sUver 

Hastic. _ .- 

Stainless steel.. _ 



■dbyGoOgIC 



164 COINAGE ACT OF 1905 

IV! Metallurgical and teobnical chArncteri sties of altemstiTe coioAge 

alloys — Continued P«» 

saver, 500 fine, 500 copper ,,, 53 

Silver alloy, United Kii^om 54 

Silver clad coins _ $S 

Other dad coins .'. 67 

Titanium _ 58 

Zirconium 58 

Summary. (See Summary and conclusions, front of book.) 

V. Problems with a changeover to reduced-content silver coinage 59 

Special problems with silver alloys. 59 

Mint coinage estimates 60 

Treasury recovery and replacement of eiisting coinage 60 

Recovery and replacement with 400 fineness coinage 69 

A different approach _ 70 

Conclusions *73 

Appendix: Notes on retention of a silver 60-cent piece 73 

VI. Further consideration of the base-metal alloys 76 

Relative merits of the remaining alloys 78 

Medium of exchange function and pennanenoe of solution 77 

Assured access to raw materials 77 

Public aoceptftbility 77 

Physical characteristics 78 

Operation in vending machines 78 

Absence of hardship 79 

Ease and certainty of production 79 

Minimisation of cost of coinage 80 

Balance-of-paymente cost 81 

Summary: The relative merite of the base alloys 82 

Changeover problems with the base alloys 82 

Possible need to replace existing coinage 83 

Possible interim expansion of &-cent production 84 

Dimensions of the changeover problem 85 

Vending machines and the changeover 87 

Transitional coins _ 87 

Mating, boarding, and export controls 88 

VII, Conclusions and recommendations.- 90 



■dbyGoOgIC 



COINAGE ACT OF 190S 



FOREWORD 



This study has served as a hasic document aseiating in the develop- 
ment of policies to insure the adequacy of the United States coinage. 

It is the result of research and analysis that has extended over the 
past 2 years. The objective was to consider all aspects and possi- 
bilities of the silver and c<nnage problems. 

The study is made public as an informational service. In using 
it, account should be taken of the fact that since it was undertaken 
qnesticms as to wear, and procurement, of some materials, then un- 
certain, have been answered. 

One of the central aims of the study was the application of objec- 
tive criteria f<»' the developmmt of a modem coinage system. The 
new coinage recommendations contained in legislative proposals being 
s«it to the . C<Higres8 meet the criteria for a modem United States 
coinage set forth here. 

A critical part of the study was a thorough exploration of the silver 
supply and demand situati<»i. This exploration provided the sub- 
stance for the most basic decision that had to be made with respect 
to our coinage system : had it become unavoidably necessary for the 
United States to turn away fnxn the large-scale use of rilver in its 
coinage! 

The conclusion of the Treasury Staff Study of Silver and Coinage 
that there is not a sufficieiit supply of silver to warrant the retentitm 
by the United States of its traditional silver coinage is supported 1^ 
an independent study, commissioned by the Treasury, of the Battelle 
Memorial Institute, also being made public at this time, and by other 
inquiries into this subject. 

RespcHisibility ior the study was cmicraitrated in the Treasury's 
Office of Finuicial Analysis. However, the study has been a coopers^ 
tive undertaking to which perstnmel in the Bureau of the Mint, Office 
of Domestic Gold and Silver Operations, the Treasurer's Office, and 
the Office of the General Counsel have all ccmtributed. 



ui 

Digitized byGOOgIC 



166 COINAGE ACT OF 1966 

IMgest of the Treasury Staff Study of Silver and Coinage 

[Note.— The study's final conclusions are summarized bere, followed by a brief 
review of each of Its sections] 

/. Summary of Conclusions and Recommendations 

1. The fundamental finding of this study is that the world and the 
U.S. silver supply and production situation and outlook do not war- 
rant continuation of the lar^-scale use of silver in the U.S. coinage. 

2. Cupronickel is the best pernianent material ioc a new subsidiary 
coinage, ignoring the vending machine problem. However, cupro- 
nickel coins would require "factory" adjustment of the coin rejectors 
in some 6 million coin-operated vending macliines, entailing signifi- 
cant costs and public inconvenience, 

3. Since extensive experiments confirm that cupronickel clad on a 
copper core operates successfully in unaltered vending machine re- 
jectors, preferable options are available. Cupronickel-clad coins can 
be used during a transition period, or permanently. An overriding 
requirement with cupronickel-clad coins is the production feasibility 
of the strip and the assurance of an adequate supply for processing in 
the Mint, 

6. Subsidiary silver coinage of reduced content, such as silver- 
copper alloys clad on a low-content silver-copper core, suffers both 
frtMn difficult transitional problems and incomplete assurance that 
the subsidiary coinage would not be imperiled again within a fairly 
short period of time, due to the shortage of silver. If any silver is to 
be retained in the subsidiary coinage system, it should be limited to a 
clad silver 50-cent piece of 400 fineness. There is no suggestion that 
the silver content of the silver dollar be changed. 

7. During the installation of any new coinage system, it will be 
obligatory to hold the market price of silver at its current level of 
$1.29+ in order to protect the existing coinage. Since this will re- 
move the incentive to melt the existing coinage, controls over melting 
would probably not serve any useful purpose. Effective controls on 
the hoarding of coin appear impractical. Controls on the export of 
coin may serve a useful purpose during the transition period. There 
is something to be said for having standby authority to inv<Ae con- 
trols. A prompt transition to base alloy coinage would make the 
actual use of controls unnecessary. 

8. New coins should be placed in circulation through normal clian- 
neU. Every effort should be made as soon as possible to prepare for 
extremely high rates of production of the new coins. 



■dbyGOOgIC 



COINAGE ACT OF 1966 167 

//. Criteria by Which a New Coinage Can Be Judged 

Summary of Criteria 

The criteria are listed in the order in which they are discussed 
rather than in descending importance. However, it is felt that the 
single Tnost essential objective rrmet he the facilitation of the orderly 
flow of financial and Gommereiai transactions. 

A new coinage should meet the following principal criteria : 

1. No interruption of essential medium of exchange function. 

2. Promise of requiring minimum changes for a long period of 
time. 

3. Assured access to raw materials. 

4. Public acceptability in terms of — 

a. Need for the change. 

b. Technical characteristics of the coins. 

c. Degree of inconvenience the new coinage impedes. 

d. Absence of extreme hardship to any group or region. 

5. Minting characteristics and coinage costs : 

a. Assurance of high levels of production. 

b. Minimization of dollar cost. 

c. Minimization of any adverse impact upon balance of pay- 
ments and international financial position. 

6. Compfitibility with present coinage: 

a. Probable need for side-by-side circulation, 

b. Vending machines usage. 

///. SUver Market Trends 

The discussion of silver market trends is divided into two parts. 
First, the dimensions of the growing imbalance in world silver mar- 
kets are established and the implications for Treasury policy are dis- 
cussed briefly. Second, the extent to which production and consump- 
tion of silver would adjust to higher prices is examined in order to 
reach a preliminary judgment as to the feasibility of reduced content 
silver coinage. [To avoid misunderstanding, it should be stressed 
that while this preliTninury essam-ination of silver markets does not 
definitely rule out the possibility of a low-content silver coinage sys- 
tem, that possibility is ruled out hy a later examination {Section V) 
of the ipeHfic di^tculfles of achieving a safe transitionJ] 

1. Recent years have seen the development of an enormous gap be- 
tween Free World production and consumption of silver. The over- 
all deficit, inclusive of coinage demands, was 200 million ounces in 
1963 and almost 340 million ounces in 1964. Even if all coinage de- 
mands, United States and foreign, are subtracted, a deficit remains. 



■dbyGOOgIC 



168 COmAOE ACT OF 1966 

2. T7.S. Treasury stocks of silver declined to 1^18 million ounces 
by the end of 1964 and may be down to 1,000 million ounces or less 
by inid-1965. Legislative action by 1965 on a new coinage system is 
essential while Treasury stocks of silver are still large. 

3. On the basis of past experience, higher silver prices and in- 
creases in base-metal production promise to increase world silver pro- 
duction. The independent influence of higher silver prices cannot 
be estimated with any precision, but there is no reason to doubt that 
substantially higher prices would lead to some expansitm in ^Iver 
output. However, the currait production deficit is so large that it 
cannot be closed from the production side. 

4. During the last 15 years, most of the growth in the industrial 
consumption of silver has occurred in foreign countries; U.S. con- 
sumption has grown more slowly. There were some signs that the 
recent increases in silver prices had checked the overall growth in 
world industrial use of silver, but only temporarily, and in 1964 
there was a sharp advance in silver consumption, here and abroad. 

5. A simple extension of the postwar trend of silver prices suggests 
that $2 an ounce might easily be reached by 1980 or 1986. Analyras 
of supply-and-demand factors does not yield any precise estimate 
of the level that silver prices might reach in a free market. The 
analysis does suggest that there is a very appreciable risk that the 
price could reach $2 an ounce then, or even much sooner. Battelle's 
detailed quantitative projections of the rate of exhaustion of Treas- 
ury stocks lead to an even more pessimistic appraisal since with coin- 
age of 50 percent silver content they can foresee the complete exhaus- 
tion of Treasury silver as early as 1969, 

6. In view of these considerations, it does not appear that reduc- 
tion of silver content to 800, 7O0, or 600 fineness would constitute a 
longrun (20- to 25-year) soluticHi to the coinage problem. On the 
basis of longrun supply-and-demand factors, there ia an unmistakable 
risk thai a rising market price of silver would soon imperil coinage of 
500 finejiess. That risk would be overwhelming even for lower silver 
eonients if future U^. coinage demand could not be met exdusivehf 
from Treasury sHver'holdisigs. 

IV. Metallurgteal and Teehtdeal Charaeteristies of Alternative 
Coinage Alloys 
This section divides the possible coinage alloys into those that are 
acceptable on techracal and metallurgical grounds and those that are 
not acceptable. Findings are summarized in the tables that follow. 



■dbyGOOgIC 



leg 






ic'ii' <iii hi III Hm 

im liii 



■I 

h_ 

mi I 

^ if 



fill. 

Plltl 



III ill , 



liii 



! 



11 if I li pi 

11 ii I! il lii. 



„Googic 



ACT OF 1066 



I 



I 



t 



i 



III 
jii 

llll! 



! 



I 



! 



|H hi itiii 

i ill jii 

il i! 

fiiii iiiiiii 




if if i 

si il 6 

p. il !! 



„Googic 




171 



I 

tfi 

i 



i 



11 



itillli 






llllfii! 



IP. 



hill 

lilili 



III 






ix 

^db,Googic 



I" 



I! 



1 








i 

I 
1 
i 



I 
1 

I 



„Googic 



fill 



1 1' 



ii 



I 

Hi 



ii 



ii 

I 

j_ 

! 



MIL 
JiiiM 

iiil 

i ' 



1 1 



i I 



A 

§ 

1 

I 

ii 



„Googic 



174 



li 

II 
I 



■B 

fi 



■5 

I 



OOINAOE ACT OF 1906 

tfi ^fi tn 
llllliji liJi. 

IlliJi 



pi 



ti 

li 



liil 






„Google 



COINAGE ACT OP 1QS5 175 

V. Problems Wtth a Changeover to Reduced Content Silver 

Coinage 

The present section examines the feasibility of achieving a success- 
ful transition to a new coinage system using low -content silver alloys. 
An appendix considers the possibility of a silver 50-cent piece of 400 
fineness. Major conclusions can be summarized as follows: 

1. The transition to silver coinage of reduced content would be an 
extremely risky undertaking, and Treasury silver stocks would prob- 
ably be depleted within a relatively short period of time. If tliere is 
a partial and limited exception to this overall conclusion, it arises with 
400 fineness where a high proportion of the existing coinage is recov- 
ered at a rapid rate. 

2. Even there the risks would have to be judged intolerably great 
unless there were clear evidence, at the time a decision was reached, 
that the coin shortage had ended and subsidiary coinage was tem- 
porarily redundant,^ No one could be sure in any case that the price 
of silver would not be driven again to the melting point of subsidiary 
coinage; this might not occur within the immediate future. In gen- 
eral, analysis of the special problem of the trangition to reduced con- 
tent silver ooimnge suggests that attention can appropriately be con- 
centrated from this point in the study upon the base alloy alternatives. 

VI. The Relative MerUg of the Base Metal Alloys 

This section first considers the respective merits of the four remain- 
ing alloys: cupronickel, nickel silver, 9S percent nickel (Inco coin), 
and cupronickel clad on a copper core. The nature of the production 
effort required for a smooth transition is described and the possible 
use of controls is examined, and largely rejected. Major conclusions 
are summarized below. 

1. Assuming that vending machine rejectors were to be modified, 
the choice of permanent coinage material lies primarily between cu- 
pronickel and nickel silver. The difference between these homogeneous 
alloys is not great, although in most respects cupronickel is slightly 
superior. The preferejice would be for cupronickel subsidiary coinage 
with the present 5-cent piece unchanged. 

2. The cupronickel {or nickel silver) clad on a copper core has the 
great advantage of avoiding the need for modification of vending 
machines. The Inco coin does not work acceptably, and, even if it 
did, it would be superior to the clads only on the basis of appearance. 
The clad coin is to be preferred since it would lead logically and easily 
to a permanent coinage of cupronickel, or nickel silver, or, as seems 
equally desirable, could be retained as the permanent coinage material. 

■ Tbli li clearlr not tbe caw at the present time. 



■dbyGo5glC 



176 GOmAOB ACT OF 1065 

3. Full replacemfflit'of the existing subsidiary coinage with strai^t 
cupronickel could be achieved in less than 3 years with existing and 
planned Mint capacity, even more rapidly if capacity were expanded 
further. The Mint is conducting an exhaustive investigation of the 
supply situation in the case of cupronickel clad on copper. 

4. Standby authority to impose controls on the melting and export 
of coin might he a useful backstop. A prompt transition to base alloy 
coinage would make the use of controls unnecessary. 



■dbyGOOgIC 



COINAOE ACT OF 1965 177 



TREASURY SILVER AND COINAGE STUDY 
I. Introdaction 

This study examines the silver coinage problem and evaluates ways 
in which that problran can be resolved. It draws upon a range of pre- 
vious Treasury studies and mmnoranda in arriving at its specific rec- 
ommendations for a new coinage Eastern. Some sections of the present 
study, particularly those dealing with the metallurgical and technical 
characteristics of alternative coinage alleys, have also benefited from 
findings of a parallel study for the Treasury by the Battelle Memorial 
Institute. Ot^er sections of the present study incorporate informa- 
tion that has been made available to the Treasury by private groups 
and by other government agencies. The published literature dealing 
with the silvw sitimtion and with suggested chuiges in our coinage 
system has been examined. 



■dbyGOOgIC 



COINAOE ACT OP 1906 



II. Discussion of tlie Criteria by Which Any Future Coin 
Program Should Be Judged 

The selection of a set of criteria by which alternative coinage systems 
are to be judged necessarily involves a prior view as to what a coinage 
system should do and how it should do it. This study takes it to 
be axiomatic that, under modem conditions, the primary and essential 
function of a coinage system is to assist the unimpeded flow of trans- 
actions throughout the economy, by acting &s a medium of exchange. 

There are collateral objectives; for example, the preservation of 
historical tradition, the minimization of costs to the private sector of - 
any transition to a new coinage system, the avoidance of strain upon 
the balance of payments, the maximization of Treasury "profit" 
(seigniorage) on coinage operations. No single plan for a new system 
will be able to achieve fully all of the ends that are desirable in them- 
selves. 

The importance of the coinage system to overall economic and finan- 
cial activity is so great that any compromises should be between the 
attainment of the various subsidiary objectives, and not at the ex- 
pense of the major objective of continuing to provide a reliable me- 
dium of exchange. 

A. Permanence of the Program 

No alteration in our coinage ^stem is likely to guarantee complete 
immunity from the possible future need for modification. An ideal 
program should offer assurance against a shortage of coinage ma- 
terials for a long period into the future. The likelihood of any dis- 
ruption within 5 to 10 years should be regarded as disqualifying. 

B. Raw Material Requirements 

The raw materials needed in a new coinage system should be readily 
available, preferably from domestic production or excess stockpiles. 
Silver and ha^e-metal aUoy systems pose somewhat different problems 
in this respect. With silver coinage of reduced content, the major 
problems are the extent to which a higher silver price would deter 
industrial uses, encourage exploration activity, and stimulate mine 
production ; the degree to which existing Treasury silver stocks at the 
time of the transition would be conserved by lower silver content per 
coin; the effective addition to Treasury silver supplies made possible 
by the capture of higher content coins in circulation at the time of 



■dbyGOOgIC 



COINAGE ACT OF 1905 179 

the transition; and the extant to vrhich the existing silver coinage 
might be lost from circulation at tlie time of the transition; and the 
extent to which the existing silver coinage might be lost from circula- 
tion by being hoarded, melted down, or exported. With hose-metal 
alloyg, the questions are the relatively less complex ones of the avail- 
ability of whatever raw materials are required as an input into coin- 
age manufacture, and the strength of competing demands in relation- 
ship to prospective supplies. 

In the case of silver as well as base-metal alloys, there is the question 
whether a coinage system is acceptable only if its materials can be 
found domestically at reasonable cost, or if imported materials could 
be used. From the standpoint of security, it would probably be suf- 
ficient if there were substantial domestic, or even North American, 
supplies relative to maximum potential coinage demand and other 
vital uses during an emei^ncj period. It is true that for a time during 
World War II silver had to be used in the 5-cent piece because of the 
sliortage of nickel and copper, and the 1-cent piece was made of zinc- 
coated steel. Certainly, it would be unwise for a coinage program to 
involve a major continuing dependence upon a foreign source for raw 
materials if there were strong indicaticni that supplies might be inter- 
rupted because of revolution, expropriation, strikes, etc. 
C. Public Acceptability 

The feasibility of a change in our coinage system rests upon the gen- 
eral agreement of the public that such a change is necessary and de- 
sirable, and upon the reasonableness of the proposed change. It seems 
probable that the main element in public acceptability will be (1) 
demonstrated necessity of the change, (2) characteristics of the new 
coins, (3) degree of inconvenience to which the public is subjected by 
the change, and (4) absence of extreme hardship suffered by any par- 
ticular group or industry as a result of the changa 
i. Need for the change 

In view of the silver situation, present and prospective, the existing 
system of subsidiary coinage cannot possibly be cmtinued for mudi 
longer, 
2. OharacterUtJca of the new coins 

The new coins should be similar in size, weight, ring, and color to 
present coinage. It seems probable that in the new series as in the old 
only the 1-cent piece should be red in color. New coins should have 
wearing qualities not greatly inferior to those of the present coinage, 
and any increase in durability would be a valuable dividend. 

It is assumed from the outset that the existing diameter and thick- 
ness of U.S. coinage will be continued. On the assumption that it is 
desirable to retain some continuity with tlie past, it can also be argued 
that the retention of silver in our subsidiary coinage is desirable. Cer- 

DigitizcdbyGoOgle 



180 COINAGB ACT OF ISftS 

tainly, there is no question that continuation of subsidiaiy coinage of 
the presuit silver «»it«it would offer many advantages. Because that 
is not possible, the main choice comes down to subsidiary coins of lower 
silver content and coinsof no silver content 

3. Degree of inconvenience 

Inconvenience to the public would be minimized if new coins have 
desirable technical characteristics, are readily available in requted 
amounts, and can be used with confidence in present coin-operated 
devices. 

Inconvenience will also be reduced if new coins can be placed into 
circulation tiirough normal channels in the ordinary way, rather 
than by requiring the public to exchange old coins for new. The 
exchange approach would involve complicati<»is such as having 
large numbers of exchange locations; an adequate inventory of new 
coins for exchange purposes at each location; educating the public 
regarding the exchange, etc. New legal prohibitions should be held 
to the irreducible minimum consistent with the protectitm of existing 
coinage and the achievement of a smooth transition to the new system. 

4, Absence of emtreme hardship 

A new coinage program should avoid inflicting a demmiatrably 
serious hardship upon a particular group or industry. The coin- 
miu^hine industry could claim such hardship if new coins did not 
work in its machines. The manufacturers of rejector devices could 
claim a serious hardship if a proposed period of transition to the new 
Etystem were too short to allow an orderly adaptation of existing equip- 
ment, if adaptation is required. A considerable hardship to the public 
at large would arise if the usefulness of coin-operated devices were 
seriously impaired over a long period of time. Silver producers could 
claim that a new coinage system Uiat threatened to lead to a sharp 
fall in the price of newly mined silver would place an undue burden 
upon them. Silver users could claim that a new coinage system 
that promised to lead to a sharp increase in the price of refined alvtx 
would be inequitable. 
D. Minting Characteristics and Coinage Costs 

Relative ease and certainty in the manufacturing process for new 
coins is particularly desin^Ie in view of the current coin Mortage. 
There are anne signs that tlie coin shortage has been alleviated to a 
certain degree. Even so, the need will remain for an assured transi- 
tion to hi^ levels of output for the new coins, particularly since large 
amounts of any new coin are likely to be taken out of circulatim tem- 
porarily 1^ the public However, feasibility from the producti<m 
side would have to be clearly dem<»istrated if new materials ar new 
processee were to be used. 



■dbyGOOgIC 



COINAGE ACT OF 1B86 IgJ 

He minimization of the numufacturing cost of a ^ven system of 
coins of acceptable quality is desirable as a simple matter of ^ci^K^. 
There is general agreement that within die limitaticms with which 
the; have had to w<H'k, Mint operations have been condocted very 
^ciently. A slightly broader aspect of the cost queeti<Ki is whether 
or not the Treasury should seek to achieve the lowest pos^ble total 
coinage cost, inclusive of materials used. Unless it can be shown tiiat 
higher cost does for aame reason make coins more acceptable, there 
would seem to be reastxi to favor low-cost coinage. 

The possibility must be examined that the potoitial scope for coun- 
terfeiting would thenhy be encouraged, although this does not appear 
likely to be of consequence in the case of any alloy that would be ac- 
ceptable (HI other grounds. Aside frcnn seeking the minimum level 
of materials and manufacturing costs ctmasteot with coinage of ac- 
ceptable quality, there is a case under present circumstfmces for hold- 
ing the foreign exchange cost of coinage to reastmable proportions. It 
will also be essential to insure that the tran^tjon to a new syston of 
subsidiary coinage does not have harmful ^de effects on the interna- 
tional position of the dollar. 
E. Compatibility with Present Coinage 

The production requiremmts for a new coinage system can be eased 
if there is side-by-side circulaticm of new and old coins during the 
period of transition. The only exceptiim would arise if it were be- 
lieved that an oitire set of new coins could be produced and the sub- 
stitution of new for old coins made in one step. This does not appear 
to be an available altamative at the present time. Because of the coin 
Mortage, it is necessary to keep Mint facUities fully employed on the 
production of coins of the present type. Therefore, it is particularly 
dearable that a new coinage system provide for a high degree of side- 
l^-^de circulation of new and old coins. 

In additicm to minimizing production problems and protecting the 
existing coinage, it would be desirable that new and old coins be c<xn- 
patible in the sense of working in existing coin machine rejectors. If 
this is not possible, problems will be eased to the extoit that the re- 
quired modification of rejectors can be made withia a reasonably 
diort period of time at an expense that is not prohibitive. 



■dbyGOOgIC 



182 



COINAGE ACT OP 1965 



III. Silver Market Trends 



The presoit section discusses recent trends in silver mai^ets and 
the implications of these trends for a new coinage system. The dis- 
cussion falls into two major divisicms. First, recent developments 
in silver consumption and production are examined at world, foreign, 
and U-S. levels. This concludes with a review of what has happened 
to Treasury silver stocks and what is likely to happen to them in the 
near future. Second, with this background established, the discussion 
turns to the special problem of the effects that higher silver prices 
might be expected to exert upon world and U.S. consumpticRi and pro- 
duction of silver. 

World Production and Consumption 

Since World War II, and particularly since 1958, there has be«i a 
widening gap between Free World silver consumption and produc- 
tion. Continuing pressure upon U.S. silver stocks is basically at- . 
tribntable to that gap between Free World production and use of 
silver, although in any given year imbalances have bem met frtnn a 
variety of sources including use of silver stocks, demonetized coin, 
liquidation of private holdings of silver, and, for a time, sizable sales 
by Red China. 

The relatively sluggish expansion of silver production in the face 
of rapidly expanding consumption may be seen in Table 1 which 
estimates Free World silver consumption and production since 1949. 
It will be noticed that Free World silver production has rissn tmly 
moderately since 1958, and has averaged about 205 million ounces an- 
nually over the entire period 1958-64. In that same period, world 
consumption of silver, for coinage and industrial use ta^t together, 
has just about doubled. As a result, the sizable annual deficits of 
65 to 70 millicHi ounces that were the rule from 1949 to 1968 had 
tripled to a massive 205 million ounces by 1963, when silver usage 
grew to twice new silver production, despite an appreciable produc- 
tion increase in 1963. Data for 1964 are still subject to revision but 
th^ suggest an overall deficit of 326 to 350 million ounces, with esti- 
mated total usa^ up to more than two and cme-half times the esti- 
mates of total new production. 

The "indicated deficits" of table 1 are gross measures of the degree 
of disequilibrium that has existed in world silver maricets. Thty 



■dbyGOOgIC 



COINAGE ACT OF 196S lg3 

considerably oTerestimate the excess demand that has actually im- 
pinj^ upon world markets, chiefly because of the inclusion of U.S. 
coinage demand in overall consumption. U-S. coinage demand has 
been met from <^cial stocks, not from new production. From some 
standpoints, it is the balance between production and industrial de- 
mand, alone, that is of interest. Therefore, the indicated deficit in 
Table 1 is also shown exclusive of total coinage demand, and U.S. 
and foreign coinage demands are shown separately so that other meas- 
ures of the deficit can readily be computed. Fordgn coinage demand 
is, by and targe, met in the market. But, in terms of the overall bal- 
ance between world consumption and productitm, inclusion of all de- 
mands is the indicated course to follow, whether met from existing 
stocks or current output. Indeed, it might even be ai^ed that U.S. 
coinage demand should be increased to include the amotmts of old 
silver dollars placed in circulation during recent years. To do so 
would raise 19S3's indicated deficit by more than 50 million ounces. 

Although the indicated deficits cannot be interpreted literally as 
measures of excess demand, these gross statistics do show most clearly 
the drastic alteration that has taken place in world silver consumption 
and production, and the overall dimensions of the Free World pro- 
ducti<«i deficit. It is particularly dgnificant that in each of the last 
6 years the use of silver in industry and the arts has, itself, exceeded 
new production. 

Tabu! 1. — Estimated Free World Silver Consumption and Production, 







[Inmmiowortb»li«;o<i 


DCMl 










trti 


U.BA. 


s 


Total 


ToW 


^ 








a) 




B) 




0) 


(« 


(6) 


CM 


im-ant,,i» 


IBS. I 


9(LS 


W.i 


n.1 


mt 


ITS. 9 


-a.« 


acts 


ign-STanncB 


19a 1 


37. t 




TS.S 


M.S 


191. Q 


-TIB 
































































































252.3 
2S5.B 


mo 


Bi.e 


187.0 
2A4.S 


us. a 


218.8 


-20(1.1 

-S34.S 













Bouree: Cidumru (!) and IJ) an From Huidr and Harman, ^wnwl Rttlem, Cotoion (4) 1> dcrlvsd 
hns tha world totala pobUsbed In tbe jlnnuoj RcfKirti ii/U< [MrMUr a/U« MM and compllsd br tbB Bunaa 
oIUlDca. Production tor the tollowlnc countilw hu baen subtracUd from tb« vodd totals: Cuchaatarakla, 
BHt Ormun;, Hungary, Kumsnla. Poland, U.S.B.K,, CUoa, and North Eorga. Tha world iBOdoetiaa 
Mlnuto hrignlii troni the Bureau ot tCnes, Mineral Iniuttti auntn, Angmt Zl, IMt; and that lot tHM 
li frnn Handy and Harroan, Annual RtrUu, IVM, adluit«d On the baili oltbc 1HS-S3 nlaUoniblp botwean 
tbe Haadr aod Hannan and Bnmo ol Ulnn oi 



■d by Google 



|g4 COINAGE ACT OF 196S 

This Strongly suggests the poesibility that, even if coina^ demuid 
for silver were to dry up entirely, there would still be an appreciable 
gap betwem the world's industrial consumption of silver and prospec- 
tive levels of silver produced at current prices. Since U.S. coinage re- 
quirements have been met from existing stocks of silver, market de- 
mand would not be directly affected if the United States were entirely 
to discontinue the use of silver in coinage. If other countries were also 
to abandon the use of silver for coinage, and if their demands had 
previously been met from current production, there would be scHne re- 
sulting effect upon market demand. But, total ctMisumption require- 
ments would still appear quite likely to continue to exceed current 
jiroduction at the price-cost relationships now existing in the silver 
industry. In 1968, for example, it will be noticed from Table 1 that 
there was an indicated Free World deficit of about 40 millint ounces 
wholly aside from coinage demand, and this deficit appears to have 
widened to 70 million oimces, or so, in 1964 when speculative purchases 
of silver again became important, as they were in 1961. 

The possibility that a sharp reduction in coinage demand would 
still find silver in relatively short supply in world mai^ets does not 
take into account the effect on silver prices of any ultimate di8po6iti(m 
of existing c^cial stocks. World silver stocks in official hsjids out- 
side of the United States are believed to be quite modest in ^ze. 
On the basis of the statistics presented in the Annual Report of the 
Director of the Mint, ihey would appear to total little more than 100 
million ounces. As for this country, at currrait rates of U.S. coinage 
demand and bullion redemptions, the question is scarcely one of how 
to dispose of any residual U.S. official stocks without disrupting the 
market. Existing U.S. official stocks of silver are likely to be no more 
than adequate for the short^nm 3ta:bilization of world silver prices 
which the United States will find essential in making an assured, 
trouble-free transition to a new coinage system. Even if the deci^cm 
is to r^lace silver subsidiary coinage with a base alloy, scHne silver 
might be required after the transition period for stoc^ile or othse 
purposes. 

Unless <Hie envisions some radical departure frcnn the recent pat- 
tern of world industrial consumption and production of silver, de- 
mand for silver appears certain to be strong over the long ran, even 
if silver is veiy largely abandoned as a coinage material. 

Free World Silver Production and Consnmption Ontdde the 
United States 

Until recent years- there had be^i approximate balance between 
silver production and consumption outside of the United States, but, 
in the last few years, overall deficits of some size have begun to ap- 



DigitizcdbyGoOgle 



COINAGE ACT OF 1965 Jgg 

pear. Table 2 eetimatce f<Hvign sUver producticHi and consumption, 

1949-64. 

Conawwption 

The rise in foreign use of silver in industiy and the arts has heai 
very great. It is estimated that Free World foreign industrial use of 
dilver may have amoimt«d to something like 60 million ounces prior 
to World Wwr II. That level had been regained by 1958. A period 
of rapid growth in aHver consumption then led to more than dou- 
bling of the 1953 level by 1961. Industrial demand in Canada, United 
Kingdom, France, West Germany, and Japan rose more or less stead- 
ily fr<»n an average 35.8 million ounces in 1949-52 to an average 96.4 
million ounces in 1959-62. The increase in the industrial use of 
silver has been most striking in West Germany and Japan. There 
was scwae indication of a reduced rate of growth in Ft«e World in- 
dustrial use of silver outside the United States during 1962 and 1963, 
probably due to the effect of the increasing price of silver in those 
years. However, as the price of silver remained at the ceiling im- 
posed by the mcMietaiy value of the U.S. silver dollar during 1964, 
the growth in foreign industrial use of silver was very sizable, some 
20 million oimces on the basis of preliminary data. 

Foreign coinage demand remained relatively stable through 1969, 
averaging about 40 million ounces annually. It then rose appreciably 
in the period from 1960 through 1964, when it averaged some 65 millicn 
ounces annually, with a good part of this increase accounted for by the 
French coinage program. Future coinage demand in the Free World 
outside of the United States is difficult to estimate, but few observers 
see much likelihood of any marked further expan«on fmn present 
levels. Foreign coinage demand might very possibly decline. 
Prodiustion 

Production of silver in the Free World outside the United States 
increased fairly steadily until 1958. It th^i reached a temporary 
plateau, before increasing by about 8 million ounces in 1963. Prelimi- 
nary reports suggest that foreign producticoL in the Free World did 
not rise by a similar amount during 1964. As a result of relatively 
slow overall growth in production and rapidly increasing demand, the 
surplus of new producti<Hi over consumption, which had already begun 
to narrow sharply after 1954, disappeared altogether in 1960. 
Deficits have been substantial since that time. The indicated deficit, 
including coinage demand, has averaged a little less than 30 millitHi 
ounces annually in the last 5 years. The deficits were larger in 196] 
and 1964, partly, it would seem, because of some speculative purchases 
of silver in each of those years. Excluding coinage demand, produc- 
tion of silver in the Free World outside the United States has exceeded 
ctmsumption by an average 32 million ounces during the last 5 years, 
but this surplus fell in 1964 to 13 billion otmces. 



■dbyGoO§le 



186 



n 





coI^ 


AOE ACT 

"533s 


' iges 

* 15 si 


33 




1 


5ssas 


5 is si 


33 




s 


* 1 3 s' s 


3 is ii 


::5 




1 


5si5s 


« i^ ii 


?* 




1 


"ssaS 


« i^ ii 


33 




1 


^SiSs 


i ii ii 


33 




i 


5 3 5 =■ 3 


2 13 ii 


33 




i 


'5Ss' 


S 15 ii 


''i 


f 


1 


53as-: 


3 i5 ii 


"i 


i 


^Saii' 


5 ss ii 


^i 


1 


i 


5aa*5 


5 3s ii 


ii 


i 

A 


i 


5 :■ a a - 


5 33 ii 


33 


11 


ja;-" 


9 Hi ii 


it 






jiVi 


\ li 

i 
1 t 

in 

: 


i 


i 
f 

i 

1 



II 



Du,iiz=db,Googlc 



COINAGE ACT OF 1966 lg7 

VS. Prodnction and Consamption 

Conawmption 

In ctHitrast to the very rapid ^;rowth in foreign silver consumption, 
industrial consumption of silver in the United States has not changed 
greatly in the postwar period. As shown in Table 3, industrial con- 
sumption averaged about tOO million ounces during 1949-52 and had 
only risen to about 110 million ounces by 1963, although it apparently 
increased to more than 120 million ounces during 1964. Thereis some 
evidence of a cyclical pattern, with declines in 1954 and 1958, but not 
much sign of the sharp upward trend that has characterized foreign 
silver consumption in most of the postwar period. 

Detailed statistics on the usee of silver coosimied in industry are 
scarce especially in the case of foreign countries. However, the U.S. 
data presented in Table 4 give some indication of the relative impor- 
tance of silver in various uses and of the changes that have taken 
place since 1959. The general picture is (me of relatively rapid ex- 
pansion in newer uses — batteries, electrical and electronic compo- 
nents — and s(nne contraction in more traditional uses — silverware 
and jewelry. Photographic use remained about constant from 1961 
through 1963, before increasing substantially in 1964. These end-use 
statistics suggest a slightly higher level of tJ.S, industrial consumption 
in 1964 than the 123-miIlion-ounce Handy and Harman figure used 
elsewhere in this study. 

U.S. coinage demand averaged a little under 40 million ounces an- 
nually from 1949 through 1960. Coupled with relative stability in the 
industrial use of silver during the same years, this meant that total 
U.S. silver consumption remained relatively constant. For example, 
U.S. industrial demand plus U.S. coinage demand was 148.8 millicm 
ounces in 1958 and 146.0 million ounces in 1960. Subsequwtly, silver 
requirements for coinage have grown at a tremendous pace, most re- 
cently because of the Treasury's efforts to overcome the shortage of 
subsidiary coin. Accompanied by a moderate increase in industrial 
demand, the result has been more than a doubling of overall U.S. con- 
sumptiiHi of silver in the 4 years since 1960. On the basis of avail- 
able statistics it appears that U.S. industrial consumption plus coinage 
use during calendar year 1964 amounted to about 326 millimi ounces; 
it was less than 150 milli<m ounces in 1960. 
Production 

Production of silver in this country has remained remarkably con- 
stant during the postwar period — a fact which suggests that there may 
be no dramatic increases in the offing. During the individual years 
covered in Table 3, production fluctuated narrowly between 35 and 40 
million ounces except for a 1959 decline to 23.0 million caused by a 
prolonged copper strike. Early indications are that 1964 refinery pro- . 
duction of silver may amount to about 36 millicai ounces. From 1949 



■d by Google 





COINAG 

1 a« 


B ACT OF 1065 

Si i 1 i 


5 ? 




8 13 


51 i ? i 


i ^ 




S i« 


at i S?3 


i ' 




S i* 


ii i ^i 


i ? 




1 i< 


a ij 55S 


d -■ 




1 i* 


?3 i 3^? 


! ? 




1 Sii 


" « ?ii 


S i 


5 


i " 


SI i fi| 


i i 


1 i< 


33 S| -ffi 


i i 


1 


1 i« 


i' el s3t 


? i 


1 


i *5 


SS i i : 


i * 

1 + 


6 


1 i^ 


53 i| n 


? * 




1 "■ 


si S 5 t 


* ? 




1 

1 


: : i i i 
ill 1 i 

: i : i : 

Sp a Is 1 


i i 

li 

1 s 



w 

ji 

ill 

li 

I 



1 



t! 

1 
'ili 



„Googic 



COINAGE ACT OF 1BS5 



189 



through 1960, approximate CMistancy in production and relatiTely 
stable consumption held the U.S. silver deficit around an average of 
about 100 million ounces annually, or about 65 millim ounces exclu- 
sive of coinage demand. However, the deficit has wid«ied witli the 
precipitous increase in the coinage demand tor silver and probably 
totaled more than 290 milli(si ounces during calendar year 1964. 

Table 4. — Ettimated U£. SUver Consumption, by Field of Use or End 
Product, 1969-ei. 

[Id millioDB of fine troy ounoefl] 



naldofDnoraidpnidpot 


l» 


ura 


ion 


mx 


IM 


1«M 




3.5 
10.5 
4.8 

20.6 

3.0 


3.5 
10.5 
4.8 

19. S 

3.0 


5.0 
11.0 
4.9 

24.0 

3.1 


6.0 
13.0 
5.0 

25.0 

3.1 

1.0 

33.3 
22.0 
2.0 


6.2 
13.0 
5.1 

26.0 

3.1 

.2 

33.3 
22.0 
1.1 




BrasingaUoyB and solden 


15.8 


















Photographic film, {dates, and sen- 


30.8 
28.0 


31.7 
29.0 


32.3 

26.0 

.2 




SUverware and jewelry.. 


22.6 










Net induBtrial use 


101.0 


102.0 


105.5 


110.4 


110.0 


127.1 



K [NiblUnd Id tba (teir» wt w» Ibm*. Apr. », UU, 



The lower section of Table 3 summarizes briefly the way in which 
the indicated deficit between n.S. silver consumption and production 
has been met. An excess of commercial imports over exports, rang- 
ing fnxn 50 to 100 million ounces, has typically met a substantial 
part of industrial needs. The decline of net imports in 1961 reflects 
higher silver exports and during 1964 there was a net export of 
silver because of the sharp increase in bullion redemptions, some 
of which were undoubtedly for foreign account. Lend-lease returns 
of silver are shown separately in the next line of the table, and \ha 
change in Treasury stocks of silver is the last- entry for whidl direct 
information is available. 

A final line in the table shows the discrepancy between the indicated 
deficit and the amount accoimted for by net imports, lend-lease re- 
turns, uid changes in Treasury stocks. While this discrepancy con- 
tains residual errors and Treasury sales of silver to Government 
agencies, it may also provide a rough measure of changes in domestic 
inventory. Be^nning in 1959 the residuals are consistently nega- 



■d by Google 



190 COINAGE ACT OF IQSS 

tiTB in fflgn which would be the case where there were net domeetic 
accumulation of privately held inventories of silver. 

Analysis of Changes in Treasary Stocks of Silver and a 
Projected Rate of Depletion 

The dominating feature of the world silver situation is the existence 
of a massive production deficit. As noted earlier, the indicated world 
deficit in 1963 was about 210 million ounces, 25 million ounces in 
the Free World outside the United States, and 185 million ounces 
in this country. During 1964 the overall world deficit widened to 
325 to 350 million ounces, chiefly because of a sharp increase in U.S. 
coinage demand. As Table 3 shows, the indicated U.S. deficit of 
185 million ounces in 1963 was almost exactly matched by a dedine 
in the Treasury's stock of silver. In 1964, U.S. silver consumption 
(both industrial and coinage) exceeded production by about 290 
million ounces, and Treasury stocks fell by an even larger amount 
because of increased redemptions of silver certificates. In 1966, tb% 
consumption deficit seems likely to be substantially larger than in 1964. 

The past decline in Treasury stocks of silver is detailed in Table 5. 
A rough indication of the possible rate at which remaining Treasury 
stocks might be depleted can be obtained by simple exten^on of the 
rate of loss in recuit years. It is true, of course, that any projec- 
tion of that nature is limited in its value by uncertainty as to the 
shape that future developments will take. The single most impor- 
tant future influence in 1965 will be the nature and timing of the 
Treasury's own legislative recommendations and subsequent devel- 
opm^tts in Congress. Additional factors are the extent to which 
the existing Coin shortage can be overcome by the much higher levels 
of coin production now underway, and the point at which declining 
Treasuiy stocks of silver would cause a sustained acceleration in the 
demand for the redemption of silver certificates. 

The data of Table 5 for past yeara have mainly come from Treas- 
ury DaSy Statements and Circulation Statements, In the interests of 
umplicity in presentation, a number of relatively minor influNicee 
upon the Treasury silver stock have been grouped into the single cate- 
gory "other causes of change." It should be noted that the total silver 
stock figure shown in Table 6 includes the four Daily Statement cate- 
gories : "Silver," "Silver dollars," "Subsidiary coin," and "OtJier sril- 
ver bulion," This overall figure customarily exceeds the single Daily 
Statement entry for "Silver" by varying amounts which have recently 
averaged some 30 to 35 million ounces. Working with the lai^r 
total allows Table 5 to provide a more coherent picture of the separate 
influences on the Treasury sdlver stock. 

The three memorandum columns at the extreme right give the 
amotmts of silver certificates outside of the Treasury ctniv^rted to a 

14 



Digitized byGoOgle 



COINAGE ACT OF 1966 191 

bullion equivalent at 0.7734376 ounce6 per dollar. It will be noted 
that b; the end of 1964 retiraiiMit of silver certificates had reduced the 
bullion equivalent of those in circulation almost 300 million ounces 
below the total TreasuTy silver stock. As long as retirranent of silver 
certi5cates proceeds at a rate in excess of the decline in the Treasury's 
silver stock — as it has thus far in 1965 — the Treasury's margin of 
"uncommitted" silver will be widening. No doubt the rate of retire- 
ment of silver certificates will fall over time, particularly since a rela- 
tively large amount of silver certificates are probably lost or destroyed 
and will never be presented for redemption or retir^nent. There 
would be no point in immobilizing any substantial fractitm of Treas- 
ury silver as backing for these notes and it might conceivably interfere 
with an orderly resolutipn of the coinage problem. 

On the basis of the information in Table 5, it appears possible that 
Treasury stocks of ^Iver might be depleted in 2 to 3 years if present 
trends continued. The iKY>iected rate of use of silver in coinage 
would probably fall back as the present crash coinage prc^;nun 
achieved its aims. On the other hand, it is quite poasdble that the 
Treasury would have to supply larger amounts of silver in holding 
the market price of silver—an absolute essential to protect the existing 
coinage — as its own stocks neared depletion. 

The latter possibility counsels against any delay in beginning the 
transition to a new coinage system. It is encouraging that redemp- 
tions of silver certificates in the early months of this year have been 
relatively modest in amount, well below the peak levels last year when 
a dock strike and other factors led to a sharp but temporary increase. 
This decline in the rate of redemptions has been more or less roughly 
paralleled by a decline in the futures price of silver which may well 
signify that market expectations of any increase in the spot price of 
silver are considerably dampened. However, it is clear that any 
failure to proceed promptly with the creation of a new subsidiary coin- 
age system reducing the need for silver would encourage speculation 
and might lead to a rapid depletion of Treasury stocks of silver. 

If the Mint were to switch over to the production of nonsilver coin- 
age by the banning of 1966, Treasury stocks would surely be adequate 
to stabilize the silver market through sales and/or redemptions during 
the time that would be needed to produce large amounts of new, non- 
silver coins. 

If the Mint were to switch over to the production of reduced contrait 
silver coinage during 1965, it is not self-evident that Treasury stocks 
would be large Miough to hold world silver prices below, say, $1.29-t- 
during the transition period, let alone for any extended period there- 
after. Stocks might conceivably be adequate to negotiate the transi- 
tion, but a favorable outcome depends upon a number of factors about 
which little assurance can be f^t. Ket coinage lequirements would 



■d by Google 



192 



COINAOE ACT OF lOSG 









I*- 



II 



sUiH iisssiliiisig 



IllsSi iSSSi^^i^^^^^ 



««<a3io# mmnMmm^oiSMSSS 



§§iig| &l§l$li;SlsgS 



+I1717 llllllllllll? 



Mill' 



I I I I I I I I 7 



ct ct S 5 S 5 s 



.llllllllllll 



Du,iiz=db,Google 



OOXNAOB ACT OF ItCC 



9 !Sc* 

SS3 



I I I I 



ili 



£sl 



! 1 



n I 

it! 



It! 
Pi 

ml 

IP 
pill 

-nil 



17 

db,Google 



194 COENAOE ACT OF 1966 

probably be smaller (private hoarding could outwei^ Treasury net 
recoveries of silver from the existing stock of coinage), but speculative 
demands for silver would surely be much larger. The market would 
not expect that the Treasury would, or could, hold silver prices at 
$1.29+ beyond a fairly short period of transition, and the volume of 
Treasury redemptions, or sales to the market, at $1.29+ could expand 
rapidly as the market anticipated the imminent appearance of much 
higher silver prices. Indeed, this psychology could even develop with 
a transition to base alloy subsidiary coinage if at the same time the 
silver content of the dollar were reduced since this would raise the 
monetary value of silver and encourage the belief that the market price 
would also rise. 

The problem of the transition to silver coinage of reduced content 
isexaminedmorefullyinSectionV of this study. 

The Influence of Price on Silver Production and Consumption 

The remainder of this section of the discussion will examine the 
extent to which an increase in the market price of silver would be 
likely to bring production and consumption into an early balance. 
In principle, there should be some increase in the relative price of 
silver that would help to bring about market equilibrium. Higher 
prices can be expected to encourage net substitutions and economies 
in use on the consumption side and also to encourage some increase in 
silver production beyond that which would otherwise occur. In the 
context of the present study, the pertinent issues are the size of the 
increase in price that would be required, and the nature of the adjust- 
ments that would take place during a transition to the new equilibrium. 
Only the first of these issues — the eventual price at which the market 
might balance — will be discussed at this stage. It must be ^nphasized 
that at this stage no attention is to be paid to the feasibility of achiev- 
ing a successful transition to a new system of reduced content silver 
coinage. 

Actually, the question of how the transition would be achieved is 
fully as important, indeed much more important from the standpoint 
of the Treasuiy and the provision of an adequate supply of coinage, 
than the eventutd price at which the market might settle. Any pro- 
posal to reduce the silver content of U.S. coinage would have to allow 
for the fact that a quicker supply response to rising silver prices would 
come from existing stocks of silver — including silver coinage in cir- 
culation — than from an expansion in new production, which would 
only occur after some lapse of time. Because an increase of market 
price much above $1.38 an ounce would imperil the existing subsidiary 
coinage, the transitional pn^lems take on unique significance. How, 
or whether, the transiticm to silver coinage of reduced silver content 
could be effected is a complicated issue, better explored separately 

Digitized byGoOgle 



COINAGE ACT OF 1966 195 

from the probable longer-nm effects of higher price on the consump- 
tion and production of silver. 

Consideration of the prices that might eventually be reached in 
silver mai^ets, after the transitional period during ^rfiich price would 
have been stabilized, can, however, throw a good deal of light on the 
practicability of replacing our present coinage system with one of 
reduced silver content. Reduction of the silver content of our existing 
coinage ^stem would increase the ceiling, or ceilings, to which the 
market price of silver could rise before Treasury sales of silver to the 
market would again be required. If it appears that the market price 
of silver might again reach the monetary value of our coinage within 
a reasonably short period of time, reduction of silver content could not 
be regarded as an eli^ble long-run solution, irrespective of whether 
or nc4. the immediate transition could be safely negotiated. 

A limiting consideration is the fact that straight silver-copper alloys 
with less than SO percent silver content are not acceptable because of 
their poor physical characteristics. It will be assumed, pending Sec- 
tion IV's examination of the technical and metallurgical character- 
istics of alternative coinage alloys, that silver-copper coins of 800, 
700, 600, and 500 fineness do meet at least minimum standards of ac- 
ceptability and are relatively easy to produce. However, lower silver 
contents can also be achieved by cladding silver on an inner core of 
copper or lower content silver and 1^ adding some nickel and zinc 
to otherwise unacceptable silver-copper alloys. These possibilities 
will be discussed subsequently. For the present, with attention con- 
fined to straight silver-copper alloys, the question is whether, after 
the transition to a coinage system with reduced silver content, silver 
prices would be at all likely to reach the ceilings listed in Table 6. If 
dialysis of supply and demand factors su^ests very strcmgly that the 
ceiling associated with a certain silver content could be reached in the 
foreseeable future, that particular coinage alternative would have to 
be ruled out as a Img-run solution. 

Table 6. — Monetary Value of UjS. Coinage of Existing Thickness 
and Diameter for VariouH Silver Contents 



silver conteDt 



90 percent.- 

80 percent- _ 

70 percent 

60 percent 

50 percent 

Sauna; Bureau ol thg Mint. 



$1. 29-1- 
1.48-1- 
1.71-1- 
2.03-1- 
2.48-1- 



$1. 36+ 
1.58-1- 
1.83-f- 
2. 17+ 
2.66-^ 



■dbyGoogle 



196 COINAGE ACT OF 1966 

The Inflnenee of Silver Price Upon Production 

An increase in the price of silver which led to an increase in tlie 
expected profitabilitj of silver mining would normally be expected 
to lead to some subsequent increase in production. Higher prices 
would tend to encourage more exploration, higher production from 
mines already in operation, reopening of sulHnarginal properties, and 
the reworking of old mine tailings. The strongest influence of higher 
silver prices, as such, would be upon the segment of the industry en- 
gaged in silver mining proper. In that case, the immediate effect is 
to increase total revenue per ton of ore in direct proportion to the 
increase in silver price. Where silver is found in association with' 
other metals, the importance of a silver price increase is modified by 
the proportion of total revenue attributable to silver. Where only 
traces of silver are found with other metals, the increase in revenue 
wilt obviously not be of much consequence. Between this extreme and 
that of pure silver mining there is a range of situations in which an 
increase in silver price will have a greater or lesser effect upon com- 
pany receipts. 

Against the nominal stimulus to production from a higher price 
must be set the fact that silver mining is not a manufacturing opera- 
tion. A higher price for silver may be required simply to maintain 
production at a given level. As marginal mines and deposits are 
worked out, continuing exploration activity is required even to main- 
tain known reserves at a constant level. This exploration activ- 
ity can be increasingly expensive in relationship to the market value 
of the new silver reserves that are discovered. Technological progress 
in exploration and mining techniques can arrest or even reverse a tend- 
ency for tJie level of reserves and the amount of current production 
to decline at any fj^ven level of silver prices. But, a fairly rapid rate 
of technolt^cal progress may be essential not only to overcome dimin- 
ishing returns to exploration effort, but also to offset the effects of 
steady increase in money wages and other costs over time. 

Shallow deposits of silver have presumably been well worked over 
and deep mining is very expensive. Private efforts here Emd abroad, 
and the Bureau of Mines fallow drilling program in this coontry, 
may discover sizable additional silver deposits near to the surface. 
The recent find of Texas Gulf Sulphur in the Timmins region of 
Ontario is impressive. Published reports at the time estimated that 
55 million tons of copper, zinc, and silver ore, with an average grade 
of 4.85 ounces of silver per ton, had been found under an overburden 
of 20 feet. It would seem unwise to count on finds of this sort oc- 
curring frequently, but it does suggest that sizaUe new finds may 
occur. 

Rising silver prices would exert some effect on the overall profit- 
ability of mining operatirais in which silver occurs in byproduct as- 



DigitizcdbyGoOgle 



COINAOE ACT OF 188* 197 

sociati<«i with other metals. Data are not avsil^Ie to estimate the 
extent of any stimulus to base-metal mining that would result frran 
a higher price of silver. However, it is well to recognize that the 
very concept of a byproduct is to some extent a convenient accounting 
fiction and while higher silver prices may not make "by-products" into 
"co-products" in very many cases, some overall stimulus to the profits 
ability of base-metal mining and some consequent increase in silver 
production could be expected to occur. There is no evidence, how- 
ever, that this stimulus would be very strong. 

The main line of causaticai is not likely to run from higher silver 
prices to base-metal mining. Instead, a major influence upon levels 
of silver production in the future, as in the past, will be the amounts 
of copper, lead, and zinc that are produced, and the proportion of 
silver in total tonnage. Therefore, estimation of the direct effect of 
higher silver price upon its production must be supplemented by esti- 
mation of the amounts of silver that will be forthctuning as a more or 
less natural ctmsequence of expansion in base-metal mining. 

World SilTO* Production 

Some major characteristics of world silver production since 1900 
are summarized in Chart 1. It will be noticed that there has been 
a substantial degree of correspondence between shcal-nm fluctuatitxis 
in the output of copper, lead, and zinc, and the output of silver. 
Longer-run trends in the production series were similar until the 
period following World War II. Since 1945 aggregate world output 
of copper, lead, and zinc has grown rapidly ; the output of silver has 
also increased, but more slowly. 

S<Hne of the appearance of syniihronous fluctuation in the upper and 
lower panels of Chart 1 is due to the three interruptions to productitm 
ca-used by World War I, the Great I>epres9ion, and World War II. 
HowevBr, there is little doubt that the byproduct Telatitmship also 
accounts for much of the parallelism in the production movements. 
Unfortimaitely, there are no comprelhensive historical data available 
at the wcH-ld level on the amounts of silver mined as byproduct and 
mined as pare silv^. This obstructs any conclusive atatistical evalu- 
Atioa of the separate influence of base-metal production and silvw 
price uptMi tJie production of silver. Such evidence as theffe is suggests 
that the byproduct relationship has generally been the more impor- 
tant.' 

'Tbe price and bn>riM)Dct InflneneeR were tntcd b; a multiple correlatioD of world 
tUver prodncUoD witb Bllver price and tbe aKgresite ontpat of copper, lead, aod line 
darlDK tbe lSOO-1968 period. Bnatlc Inflaencrs upon gUver productlOD were lo Btrong 
doring the period tbat the orerall corrclBtlon fa a verj poor one, wItb onl; aboat 35 percent 
of tbe overall varlatloD In lUTer production explained b; allTcr prices aod baae-inetala 
prodnctlon takea together. Silver pricea aad production were actually negntlTel; cor- 
related, althongb baae^netal production waa. aa expected, poaltiTelj' related with allrer 



^db, Google 



COINAGE ACT OF 1965 
Clurt I 



FACTORS AFFECTING SILVER PRODUCTION 
1900 to Date 



T0» 


S 

OutfM 


of Selecte 


Mintrala 




















i 




" 
















jM 














awv 


M 


Zmc 

4 






' 







— ^^ 




i 





19 


■ 
100 


g*^ 








m 


m 




Indeed, the statistical association of silver production and silver 
price does nob appear to have been pajticularly close or consistent. 
Until tlie depression of the 1930's, there is indication of an inverse 
retation^p with production falling when price was rising, and the 

prodnctton. T&e nditlonibliw are much clour Id the poltwar petlod, partlcalarlf betimu 
allTer production aod tbe production of bate metals, HoireTer, the period of time Is short 
and tht correlation between sllTer prices and blse-metBls production Is relatlTelj bi^. 
Under theee eondltlona, the multiple correlation technique does not yield dependable 
estimates of the Independent Influence of the elplonatorr variables, In this caie sUtct 
price an A base-metBls prodaetlon. 



Digitized byGoOgle 



COINAGE ACT OF 1965 199 

revOTse. Price and production did fall sharply togethw during the 
early depres^on years and liheii rose together under the stimulus of 
the U.S. Silver Purchase Program, and a gener^ revival in base- 
metal mining. Aside from this cyclical rise and fall, silver price and 
production seem to have been most closely related in tlie period fol- 
lowing World War II. But, this has abo be^i a period of veiry rapid 
growth in base-metal production which would account for tlie ob- 
served increase in silver produoti(»i. In all likelihood the sustained 
postwar expulsion in ocq>per, lead, and zinc output has, in faob, been 
the dtxninant influence on world mlver producti<»i. The postwar in- 
creases in the price of silver may bave played some limited part in 
encouraging the expansion of output, especially in regions where 
pure silver mining is important. However, it is only recently ihst. 
the price increases have been sizable and more time is needed to see 
just how much new production will be forthcoming as a result. 

Increases in copper and zinc production in the postwar period have 
far exceeded the expectations generally held in the early 1950's. It 
is itfteresting in this ccHmeetion to ctHupare the actual increases that 
have occurred with the projections for 1975 made I^ the Pfdey Onn- 
mission in 1952. Table 7 shows that by 1&62 copper production al- 
ready exceeded the Paley Ck>imnisBion estimate for 1975 by a wide 
margin. World copper reserves are very lai^ and the Pi^ey esti- 
mate for 1975 is quite unlikely to prove to be accurate. Zinc produc- 
tion also gives every indication of rising well above the Paley esti- 
nuvte; the estimate for lead producticHi may be closer to the mark. The 
apparent failure of these projecti<»is, made little more than a decade 
ago, to anticipate trends in base-metal mining is a sobering reminder 
of the difficulties involved in any long-range forecast. 

There are some general features of the experience since 1900 that do 
offer guidance as to probable future levels of silver productitm. Dur- 

Table 7. — Comparison of Paley Oommiaswn 1975 Estimates of Free 
World Copper, Lead, and Zinc Production vnth Actual Prediction, 
1950 and 196S 









wateaa 


lOBSKtml 


Filer Mtlmala 


FoiwbuttbiaMn 




imvmlKO 


omiMO 


Copper 


2,515 
1,644 
1,93! 


4,145 
2,060 
3,010 


3,850 
2,700 
3,200 


6K 
26 
56 




Lead 













Soorci: Report of the Prcaldent'* UftlerJali Policy 



um] BimMi ol Minea. 



Du,iiz=db,Googic 



200 comAOE ACT OF iftes 

ing the entire period since 1900 the overall trend in silver prodaction 
has been posdtive, but not vofj large. On the basis of the production 
experience ^nce 1900, the annual average increase in world mlvra- pro- 
duction has been only about 825,000 ounces. Silvw productiwi has 
known extrane variations in the past, and this cautions against the 
acceptance of any mechanical projection of past productitm lev^ as 
a guide to what could happen in the future. 

Conditions in the postwar years are more relevant as an indication of 
the degree of future expansion in silver output that may be expected. 
The 325,000 ounce annutd production increment, based upon the entire 
experience since 1900, is far too low as an estimate of future produc- 
tion increases. The aggregate production of copper, lead, and zinc 
has grown rapidly in the po^war period, and recent increases in the 
price of silver have offered additional encouragement for the expan- 
sion of silver mining. While base-metal production will not neces- 
sarily continue to grow so rapidly, increases in silver prices mi^t cwn- 
pensate for some slackening in copper, lead, and zinc production. On 
the basis of the relatively favorable production experience in the post- 
war period, an annual average increase in world silver productitm of 
about 3% million ounces might be exped^d in the futuie. In gmenl, 
this average increase of 3^ million ounces seems a much better guide 
to what may be expected in the future than the much lower 826,000 
ounce average increase over the entire period, 1900-63. 

Even this higher estimate of future production increases may veiy 
well be too low. Table 8, dated October 27, 1964, gives estimatee <kF 
new Free World silver production supplied to the Treasury by 1&. 
Simon D. Strauss, Vice Preeidmt, American Smelting and Refining 
Cranpany, and member of the Silver Committee of the American 
Mining Congress. These estimates of the new production of silver 
that may take place in the next 4 years were described as o(»isearvative 
and based upon projects for which financing was already ccmunitted. 
Table 8-A presents estimates made on the same basis but at a some- 
what later time by Robert O. Hardy, President, Sunshine Mining 
Company, and Chairman of the Silver Committee of the American 
Mining Congress. 'Hiese estimates of the new production of Edlver 
from knowledgeable industry sources should be more accurate, over 
the timespan to which they refer, than any mechanical projection of 
pa^ experience. Furthermore, the Strauss and Hardy estimates 
receive support from the fact of a 7 million ounce increase in Free 
World silver production during 1963. Preliminary data suggest that 
a much smaller increase of only some 2 million ounces may have 
occurred during 1964. The Strauss and Hardy estimates, if they 
were realized, would mark a fairly significant departure from postwar 
production experience, but would do very little to close the large gap 
between Free World consumption and production. 

Digitized byGoOgle 



COINAGE ACT OF 106S 201 ' 

Table 8. — EsUmaie of New Free Woiid Silver Production Expected 
m the Newt i Tears 

LitcaHon OoaoM 0/ 

Uulted States : •"wr 

Mineral Park 168, 000 

Battle Mountain 4S2, OOD 

Bast Tlntlc 2, BOO, 000 

Blngbam Canyon — : TBO, 000 

Hat Head 1, 000, 000 

800.000 

117,000 

600.000 

1, 500. 000 



C^itral and South America.. 



Conaolidated Mogul 680.000 

Northgate 1, 100. 000 



600,000 

Mount Isa 6, 800, 000 

Marinduane 1, 600,000 

Te Aroha 70, 000 

Total T, 870. 000 

Canada: 

Texas Gnlf Sulphur 7. 780, 000 

Oranduc — - 750,000 

Brunawicb-l 2, 500, 000 

Western Copper 570, 000 

Lake Dufaolt 1. BOO, 000 

Total IS. 070, 000 

8UHUABT 

United Statea 7,267.000 

Mexico 1,000.000 

Central and South America 1,000.000 

Eurc«ie 1. 650. 000 

7.870.000 

(•) 
Canada IS, 070, 000 

Total 81, 867, 000 

o cbinge. 



■dbyGOOgIC 



202 COINAGE ACT OF I9«B 

New foreign silver production in the next 4 years would amonnt to 
about 25 million ounces according to Table 8) and to about 30 million 
ounces according to Table 8-A. A net addition of this size to current 
production would be greater than the gains that have been made in 
recent years, although not drastically out of line with foreign produc- 
tion increases in the nud-1950'&. Between 1949 and the present time, 
tile 4-year moving total of increases in foreign production has been as 
high as 29 million ounces in 1949-53, and as low as 1.6 million ounces 
in 1959-62. 

Tablb 8-A. — Eatimaie of New Free 'World Sther Production Ex- 
pected in the Next 4 Years 

LocatlaH Omtcet «/ 

Unibed States: anver 

Minefal Park 168. 000 

BatOe MonnUin 4S2, 000 

Bast Tintic 2, 500, 000 

BlDKham Caafon 750, 000 

Flat Head 1, 000, 000 

Wah ChaDg MO, 000 

Blue HiU 117. 000 

Missouri licad Belt ^ 500,000 

Twin Buttes 1, BOO, 000 

SUver Summltt 1, 000. 000 

8,267,000 

Mexico 2, 000, 000 

Other America : E. Mocliito 1, 000, 000 

Peru: 

Oerro 1. 600, 000 

Macliieala 600,000 

Kiowa 200,000 

Areata 360.000 

QnimvUca 260,000 



Europe: 

Consolidated Mogul— 
NorUiKate 



Australia : 

Cobar 

Mount Isa.. 



■dbyGoogIc 



COINAGE ACT OP 1966 203 

Tabu: 8-A. — Estimate of New Free World Silver Production Ex- 
pected in the Neat 4 Years — Continued 

LoealUm OtHtcet 0/ 



Southeast Asia : 












Canada: 

Texas Gntf Sulphur 


1.570,000 
7,760,000 


Brunswick 




















Grand total (approximate) 


18,270,000 
38,000.000 



The projected 7- to S-million-ounce increase in U.S. production dur- 
ing the next 4 years may be slightly more difficult to achieve. Ko sus- 
tained increase of this magnitude has occurred in U.S. productitm 
during the postwar period. However, there is reason to believe that 
some increase in U.S. silver production will occur within the near 
future, possibly on the scale envisaged in the Strauss-Hardy projec- 
tions. A study of the silver situation prepared last year in the Depart- 
ment of the Interior projected an increase in U.S. silver production of 
about 1 million ounces per year, reaching a level ot 41 million ounces 
by 1970. While swnewhat below the increases suggested by Strauss 
and Hardy, the Interior estimate is essentially consistent mih them in 
anticipating some increase above the plateau upon which U.S. silver 
production has remained for more than a decade. On the other hand, 
the Interior study projects only an 18-million-ounce increase in world 
production by 1968, about half the amount anticipated by the Ameri- 
cwi Mining Congress.' 

U.S. Silver Production 

Needed increases in silver production will undoubtedly have to cmne 
very lai^ly from outside of the United States. Table 9 summarizes 
the world distribution of silver production in the postwar period. 
U.S. production of about 60 million ounces in the period inmiediately 
following World War I was some 30 percent of world production. 
The U.S. proportion of world output had fallen below 25 percent after 
World War II and it has fallen further to less than 20 percent at the 
present time. Separate discussion of the U.S. industry could hardly 

* It U nodentood thit the Interior atady wU! be pabllahed u iDfonuatloii ClreoUr S2ST. 
DigitizcdbyGoOgle 



204 coiNAaE ACT OF iftes 

be justified on the basis of its importance in the world supply picture. 
However, there are much fuller and more dependable statistics avail- 
able aa U.S. production than there are on most foreign sources of 
production. These statistics throw some light on the respective im- 
portance of the price of silver and the output of the metals with which 
silver is found. 

Table 9. — Free World Prochiction of Silver hy Countrieg, 194S-6£, 
195S-57, and 196£ 





a™^^, 


. ^^. 


ProdnoUoa, Um 


Coantry 


^ 


loUl 


Intboa- 
flnatroy 


tOUl 


S 


Mtal 


Auatralja- 


10,560 
6,998 
21,064 
50,083 
13, 322 
39,246 
24,715 


6.4 
4.2 
12.7 
30.2 
8.0 
23.6 
14.9 


14,222 
5,987 
28,931 
45,191 
22,164 
37,450 
34,223 


7.8 
3.2 
15.4 
24.0 
11.8 
19.9 
18.2 


17,260 
3,760 
30,669 
41, 249 
36, 017 
36, 345 
37, 816 


8. A 


Canada 


16.1 










United States 


17.9 






Total, Free Worid... 


165, 956 


100.0 


IS8, 168 


100.0 


203,106 


100.0 



Bdune; Animal StptrU ofUu lMrt€tor v/tht MM. 

The basic data are presented in Table 10. The variations in pure 
silver production of column 2 do not seem to bear any simple relatJcm- 
ship with the silver prices of column 4. Practically all of U.S. pure 
silver production is located in the Coeur d'Alene region of Idaho and 
most of it in one mine — the Snnshine. Changes in production some- 
times have been due to special reasons not directly connected with the 
price of silver. For example, there were fairly lengthy interruptions 
of production at the Sunshine Mine because of labor disputes in 1962 
and 1963. These could have prevented the appearance of producti<m 
increases encouraged by higher silver prices. An even more basic 
limitation of the price and output data of Table 10, as guides to the 
price- sensitivity of silver production, is the fact that silver prices had 
been approximately constant for a decade, until they began their ^arp 
increase late in 1961. Some time may have to elapse before the effect 
of ri»ng prices is fully registered in production increases. 

Average gross hourly earnings in metal mining rose by about 100 
percent between 1947 and 1961, while the price of silver rose by only 
30 percent. Productivity in silver mining can hardly have rism 
rapidly enough to prevent a continuing squeeze on profit margins. 



Digitized byGoOgle 



COINAGE ACT OF l«(tS 



Table 10. — United States Silver Production hy Type of Ore and the 
Price of Refined Silver in New York^ 1947~6S 



Y» 


Total dntpro- 


ss 


amrtmiidlii 


«ur 


1847 


38.6 
39.2 
34.9 
42.3 
39.0 
39.8 
37.7 
35.6 
36. S 
38.7 
38.7 
36.8 
23.0 
36.8 
34.9 
36.3 
35.2 


10.0 
10.6 
8.3 
14.0 
12.8 
12.6 
11.1 
14.1 
11.1 
11.3 
12.5 
15.1 
10.3 
13.8 
13.7 
11.9 
11.7 


28.6 
28.7 
26.6 
28.3 
27.1 
27.3 
26.6 
21.5 
25.4 
27.4 
26.2 
21.7 
13.0 
23.0 
21.2 
24.4 
23.5 


71.82 






















1953 


85.19 






I9SS 


80.10 














tgs9 


91.20 






1962 


108.37 











Whether or not a widening of profit mai^gins could achieve much of 
an expansion in pure silver production is uncertain, but the possibility 
cannot be entirelj disregarded. Higher silver prices in the tnid-1930'8 
were followed b; sharp expansion in n.S. «lver production from 
precious metal ores, although the paralleling increase in the price of 
gold at that time was also an important influence. In any case, the 
absolute magnitude of any future U.S. production increases from 
pure silver mining cotdd not be very great relative to total require- 
ments. 

While the data of Table 10 do not reveal much evidence of the in- 
fluence of price upon silver production, there is clear evidence of the 
importance of the byproduct character of most silvw production. An 
index of the silver found in association with other metals, computed 
from column 3 of Table 10, is plotted in Chart 2 along with an index 
of the aggregate U.S. output of copper, lead, and zinc These series 
fluctuate together very closely because of the conditions of joint sup- 
ply under which about two-thirds of TJ.S. silver output is produced. 
In addition to the close fluctuation of the two indexes, it ts interesting 
to note the overall decline in silver ouput relative to copper, lead, and 
zinc ouput. A falling ratio of silver per ton of base-metal production 
means that increases in silver price may be necessary simply to keep 
silver's contribution to $1 of total revenue at a constant level. Under 
such circumstances it does not seem at all likely that moderate in- 



■dbyGoogle 



206 



COINAGE ACT OF 1965 



creases in silver price would give any net stimulus to base-metal 
mining. 

If this observed decline in the amount of silver found with base 
metals should continue, the effect on overall silver output could be 
sizable. It is quite conceivable that silver production could fall in 
absolute terms even though silver prices were rising, if the yield of 
silver per ton of base ores were to decline at all rapidly. Statistics 
for silver mining outside of the United States are inadequate to deter- 
mine whether or not there is a worldwide trend toward lower silver 
yield in byproduct situations. Scattered evidence and geological 
considerations suggest to some observers that there may be such a 
trend. If there is, and if it should become pronounced, the outlook 
for any continued expansion of world silver production woidd be much 
less certain. Major dependence would then have to be placed upcm 
the effect that higher prices could exert on pure silver mining, an effect 
for which there reallr is not much direct evidence at all. 



ISO , 

140 . 


U.S. copp«r. lead, and ilnc produecign 








130 - 
120 , 


l^ 








110 , 


Si 









IKDBX "0 - 
7-49-100 90 . 


"^'"-^^^^■~~~T--~^^^^^sX;^^ 


X 


/ 


^""""^ 


80 . 


/ \/'^ 


\ 


V, 


r-~..^y^ 


70 ' 
60 . 


( 


\ 


J 




50 

AO 


wlefi oHIer macali. 




V 




30 
20 . 










,10 - 










4 


48 ^9 50 ;i 52 S'J i4 55 S6 57 


~i8* 


si « 


6^' e: 



The Influence of Silver Price Upon Consumptton 

DiscussifHk of the probable influ^ice of silver prices upon noncoin- 
age demand can be quite brief. Statistical information that bears 
directly upon the issue is very limited in its lange and coverage. The 
available statistics can be supplemented to some extent by descriptive 
material on new uses for silver, tlie extent to which rising silver prices 
are said to encourage economy in tlie use of silver, etc. Wliile of scone 
value, this descriptive material is not overly enlightening as to the 
actual effect that rising prices would exert upon consumption. 



Digitized byGoOgle 



COINAGE ACT OF 1965 207 

The chief influences upon silver consumption in the postwar period 
appear to have been (a) growth in the ike of silver as a consequence of 
rian^ consumer income, (&) changes in t^e industrial conBumption of 
silver as a consequence of new uses, and (c) the dampening effect upon 
the growth of demand exerted by increases in the relative price of 
silver. U-S- silver consumption, aside from coinage demand, has really 
shown only very moderate overall growth during the postwar period, 
although a very large increase in consumption did apparently take 
place during 1964. 

The statistics on U.S. silver ccntsumption presraited earlier in this 
section pointed to considerable expansion in rejatively newer uses, 
such as batteries and electronic and electrical components, but this 
expansion has been just about matched by decreasing uses in silverware 
and jewelry, while photographic uses have been relatively constant. 
The consumption statistics suggest that the declines in the more tnujir 
tional uses of silver be^an before the increase in silver prices during 
1961, but price increases undoubtedly intensified these reductions in 
consumption. In the 3 years, 1961-63, oventU consumption of silver 
in this country for noncoinage purposes remained relatively constant, 
before increasing by about 12 percent in 1964. 

Foreign consumption of silver experienced a very rapid growth 
phase in the postwar period until 1961. Between 1953 and 1961, the 
industrial use of silver outside of the United States approximately 
doubled. Most of this increase in consumption is undoubtedly attrib- 
utable to rapid increases in income in Western Europe and Japan. 
Foreign consumption of silver showed a tendency to level off in 1961, 
just as it did in this country. Subsequent upward revisions in the 
data on foreign consumption now credit 1962 Euid 1963 with small 
increases, but much below the earlier rate of growth and the increase 
that took place during 1964. It seems reasonable to believe that rising 
prices for silver have exerted some influence in dampening foreign 
demand. From 1953 to 1961, the increase in average monthly silver 
prices in London was a little less than 8 percent over all. Practically 
all of this increase occurred in 1955, and from 1955 through most of 
1961, the London price of silver was almost constant. Therefore, the 
marked postwar expansion in foreign consumption occurred at ap- 
proximiUely constant prices. In 1964, when silver prices levied off, 
foreign industrial consumption of silver rose by about 15 percent. 

The relative constancy in consumption of silver in 1962 and 1963 
very probably was the resultant of opposing forces; the continued 
growth in income and output that would encourage more use of silver, 
and tile higher price of silver that would encourage less. It is un- 
certain whether or not further price increases, similar in magnitude 
to those since 1961, would continue to offset the rapid growth in con- 
sumption that would otherwise occur because of rising incomes and 



■dbyGot^lt 



COINAOE ACT OP 1905 



new uses. However, the assumption of slow growth in ccmsumptitm 
of silver in physical tenns as a consequence of trend growth in income 
and rising relative prices of silver does find srana support in receid 



Projective Levels of Silver Price in a Free Market 

This concluding section considers the danger that within a few 
decades the market price of silver might reach the hi^er monetary 
values associated with various hypothetical reductions in the silver 
content of the existing coinage. Major reliance is placed upcm an 
lamination of the degree to which a given level of higher prices ioe 
silver would be successful in removing the excess demand that pre- 
vails at the current price of $1^9+, and in keeping silver markets 
in balance thereafter. This examination of silver supply and dmiand 
draws upon the earlier analysis of the factors that influence silver 
production and consumption. It does not lead to absolutely definite 
conclusions and there may also be SOTne value in a more direct i^ 
proach. Therefore, initial consideration will be given to what a direct 
extension of the postwar trend in the price of silver would imply 
for coinage alternatives. 

Monthly average New York silver prices are plotted in Chart 8 
from 1915 through 1964. The monetary values of U.S. coinage of the 
existing thickness and diam^«r for 800, 700, 600, and 500 fineness, 
taken from Table 6, have also been drawn on the chart. It appears 
frcan inspection that if silver prices were to continue something like 
their postwar increase, which really can be said to date from the de- 
pression low of 25^ silver, a level of $2 an ounce could very ea^y be 
reached within the next two decades. 

The general level of world costs and prices has moved upwards 
during much of the postwar period, and it could be si^ed that con- 
tinuation of an upward movement of similar proportions is less likely 
in the future. If so, one factor that has contributed to postwar in- 
creases in the pries of silver will be lessened in influence. On the 
other hand, there may be reason to believe diat future supplies of 
silver will be available at increasing real cost because of the stea^ 
depletion of known resources and the accompanying need to intensify 
expensive exploration effort. In such a case, silver prices would he 
expected to rise relative to a general index of commodity prices. A 
judgment on this latter'score is difficult enough ; the byproduct nature 
of two-thirda of silver production complicates it further. 

Extensicm of past price trends is obviously a very crude forecasting 
technique. For that matter, the accurate forecasting of a commodity 
price two decades in the future by any technique whatsoever is not 
within the realm of possibility. In the present case, however, the 
question is not so much the single most probable value for the price of 

82 

DigitizcdbyGoOgle 



ooiNAaB ACT or ISSS 




Digitized byGOOgIC 



210 COINAOB ACT OF 1965 

ffllver in, say, 1986, as whether there is reason to believe that by that 
time the price of silvra could have reached the various monetary values 
drawn in on Chart 3. The postwar trend of the price of silver doeff 
suggeert^ that an increase to ^ an ounce, within the next two decades 
or so, is far from impossible. Unless the analysis of supply and de- 
mand can point decisively to faot«»« that promise to hold the price of 
silver well below its postwar trend rate of increase, it would seem 
that 800, 700, and evm 600 silver contrait should definitely be ruled out 
as loDgrun solutions to the coinage problem. 

The alternative to direct projection of the apparent trend in the 
price of silver is a consideration of the factors bearing upon the supply 
and demand for »lver. The more important of these factors have 
already been discussed and it is only necessary now to pull together 
earlier conclu^ons and apply them to the question at htuid. There 
would, in general, seem to be three major detenninants of the extent 
to which silver prices would rise in a free market. The first is the 
initial size of the excess demand that will exist at the market price of 
$1.29+ when prices are permitted to rise. Excess demand will con- 
tinue to exert upward pressure on price ui^il it is eliminated l^ 
adjustmetits in consumption and production. The second d^»rminant 
of the price rise that would be required to bring silver markets into 
balance is the net effect over time upou silver production of rising 
^ver prices and trend growth in the production of metals with whic^ 
silver is found. The third determinant is the net effect over time 
upon silver consumption of higher silver prices and trwid growth in 
consumer income and the industrial output in which silver is used. An 
omitted factor of some consequaice on the supply side is the supple- 
ment to current production that woidd be forthcom ing at various price 
leveb from existing stot^ of silver. This omission is probably leas 
serious where longrun trends in prices are at issue, than it would be if 
the intent were to forecast prices a few years ahead. 

In holding the free market price of alver at $1.29+ an ounce the 
Treasury acts as residual supplier to the world ^Iver market. C<Hi- 
sequently, the amounts that the Treasury is obliged to supply to the 
mark^ are one measure of the excess demand — speculative and non- 
speculative — in the market at $1.29 + . Since the Treasury has ffltily 
been holding the line at $1.29+ for a relatively short time and be- 
cause of the presence of transitory speculative demands, it is quesdcm- 
able how accurate an indication of the behavior of excess demand over 
time one can gain from this source. 

An alternative approach is to subtract U.S. coinage demand fnnn 
the Free World production deficits presented earlier in this sectim. 
The results are shown in Table 11. They suggest a "normal" annual 
deficit from 1949 to 1958 of about 25 to 35 million ounces, mrt irom a 
range of sources other than current production. The price of ^ver 



Digitized byGoOgle 



OOINAOE ACT OF !965 211 

was approximately constant during this period. During 1959 and 
19^ the residual world deficit increased about 40 million ounces above 
the earlier level. In 1961 there was a further increase of about 40 
million ounces, some of which may have represented speculative de- 
mand in anticipation of the halting of Treasury sales of free silver. 
While deficits decreased somewhat in 1962 and 1963 as the price of 
silver rose to $1.29 + , they remained well above pre-1959 levels. In 
1964, the deficit increased by about 40 milli(m ounces. As in 1961, this 
probably reflected some inventory accumulation in anticipation of an 
increase in the price of ^Iver. This suggests that aside from ^tecula- 
tive demands, which could be expected to cany Treasury redemptions 
to much higher levels, there may now be excess demand of a "perma- 
nent" sort amounting to perhaps 75 million ounces at the current price 
of silver. 

Tabia 11. — Free World Silver Production Deficit, UJS. Coinoffe 

Demand, and the Residual Deficit, 19^9-6^ 

[In mlUlons of fine tror ontices] 





Indlated 
prodQcUon •lefldt 


''i^r 


iUsl<lD>l<tefldt 




-83.9 
-72.8 
-64 2 
-110.9 
-121.6 
-173.8 

-leas 

-205.4 
-334. 9 


36.5 
37.6 
38.2 
41.4 
46.0 
S5.9 
77.4 
111.6 
203.0 
























1962 


91. 1 






1904 


131.9 







What size this underlying deficit would be after a transition to 
coinage of reduced silver content is conjectural. Resumption of any- 
thing like earlier rates of growth in foreign ccmsumption of silver — 
and the apparent increase in 1964 was very large — could easily cause 
annual excess demand to increase to 100 million ounces or more in a 
few years. However, the more conservative course may be simply to 
estimate the market gap at 75 million ounces. 

How readily could this 75 million ounce gap be closed from the 
production side ? The postwar trend increase in silver production is 
only Zy^ million ounces a year; its continuation would do practiwilly 
nothing to close the gap and dampen the upward movement of price. 
The Strauss-Hardy estimate of an 8 to 10 millicoi ounce annual net 
increment to world silver production includes whatever may have been 
the stimulating effect of the increase of more than 40 percent in sUver 

Digitized byGoOgIc 



212 COINAQE ACT OF 196S 

prices between Iftte 1961 and 1963 and the generally improred out- 
look for primary metal output at the preeent time. That production 
estimate may prove to be an accurate one, but it is far frwo dear to 
what extent a higher price of silver accounts for the increase, or how 
long one could count on sustained increases in silver productimi of 
this size. 

It is even less clear to what extent, if any, excess demand could also 
be closed from the consumption side. The statistical information is 
meager and firm conclusions are very difficult to readi. There is no 
doubt that, other things being equal, steadily rising silver prices would 
reduce the volume of silver consumed. But world incomes will be 
rising and the potential for new uses of silver is said to be ctmsiderable. 
If the consumption of silver were to remain approximately cfMistant 
because of rapidly rising silver prices while producti<m grew at some- 
thing like 8 million ounces annually, excess demand would be nar^ 
rowed in time, but the potenti^ rise in the price of silver would be 
very great. Indeed, so long as any excess demand were chronic, silv« 
prices would be likely to rise, although not necessarily at a steady paoe 
because of the intermittent appearance in tJie market of ^ver drawn 
from existing stO(^ 

The price of silver rose more than 40 percent in 2 years between late 
1961 and 1963 and was only stopped by the U.S. Treasury redemption 
ceiling. Excess demand seems to have been about 70 million ounces, 
and this gap was only slightly reduced, if at all, by the increase in 
price. There are now some signs of a lagged response of productimL 
Consumption growth was slowed a little, but only t^nporarily. It 
is extremely doubtful whether recent experiraice offers any assurance 
whatsoever that silver prices would remain below $2 in the next two 
decades. Indeed, it is not at all difficult to contemplate price rising 
much farther. It is very hard to rule out the possibility of a dou- 
bling or even a tripling in the price of silver unless it can be shown that 
a higher price of silver would cut back the consumption of silver ap- 
preciably from present levels, A basic difficulty is that the silver sup- 
ply-demand situation has been changing very rapidly in the last half 
dozen years, so rapidly that little basis exists upon which to estimate 
with much assurance the independent effect of silver prices upon 
consumption. 

In the last analysis, it is the uncertainty as to how high silver prices 
might rise within two decades that argues most strcmgly against 
reducing the silver content of the coinage as a longrun solution to the 
coinage problem. That uncertainty could certainly be held to rule 
out 500 fineness as well as the higher silver contents. This is a ques- 
tion of judgment. No one can be sure that the price of silver would 
not double in the next two decades and reach the melting point of 500 
fine silver coinage. This does seem somewhat less likely Uian the possi- 



Digitized byGoOgle 



COINAGE ACT OP 1965 213 

bility that price would reach or exceed $2. Longrun supply and de- 
mand factors are not the only reason why silver coinage of 500 or lesser 
fineness may be unsuitable as a longrun solution. On the basis of IcMig- 
ron mark^ fectors alone, silver coinage of 500 fineness is not abso- 
Intely ruled out, although the case for it is seriously weakened even 
witiiout reference to the difficulties of the transition period. Its 
advantages and disadvantages from a technical and a metiUlurgical 
point of view will be considered subsequently altxig with those of a 
range of other possible allojrs. 

Ail of the discusfflon to this point has assumed that U-S. coina^ 
demand could be met in the foreseeable future from official stocks of 
silver remaining at the end of a transition period, possibly supple- 
mented by recovery of old coin. The validity of such an assumption 
is highly questionable. In the course of its investigation, Battelle 
made drtailed projections of the rates at which Treasury silvnr would 
be exhausted on various assumptions as to silver content and coinage 
requirements. With 60 percent silver content, Battelle predicted that 
Treasury silver would be entirely exhausted somewhere between 1969 
and 1975, if not beforeL If it were to prove necessary fco* the Treas- 
ury to add its own demfuid to that of the market, t^re can be little 
doubt that the price of silver would rise well above $2 during the next 
two decades. Indeed, once Treasury stocks were exhausted, the pros- 
pect of keeping any silver coinage in circulation would not be at all 
bright. 

Conclusion 

1. Recent years have seen the development of an enormous gap 
between Free World production and consumption of silver. Tlie 
overall deficit, inclusive of coinage demands, was over 200 millicHi 
ounces in 1963 and almost 340 million ounces in 1964. Even if all 
coinage demands, n.S. and foreign, are subtrad»d, a deficit remains 
although relatively modest in size. 

2. U.S. Treasury stocks of silver declined to 1,218 million ounces 
by the end of 1964 and will decline further to 1,000 million ounces or 
less by mid-1965. Legislative action on a new coinage system is essen- 
tial while Treasury stocks of silver are still large. 

3. On the basis of past experience, higher silver prices and increases 
in base-metal production promise to increase world silver production. 
The independent influence of higher Mlver prices cannot be estimated 
with any precision, but there is no reason to doubt that substantially 
Idgher prices would lead to some expansiwi in silver output. Unfor- 
tunately, the current production deficit is so large that it cannot be 
closed from the production side. 

4. During the last 16 years, most of the growth in the industrial 
consumption of silver has occurred in foreign countries; U.S. msisump- 
tion has grown more slowly. There were some signs that the recent 

Digitized byGoOgle 



214 COraAGE ACT OF 1965 

increase in silver prices had <iieck6d the oTerall growth in world indufl- 
trial use of silver, but only temporarily, and 1964 found silver con- 
sumption increasing sharply both here and abroad. 

6. A simple extension of the postwar trend of silver prices suggests 
that $2 an ounce might easily be reached by 1980 or 1986. Analyas 
of supply and demand factors does not yield any precise estimate of 
the level that silver prices might reach in a free market. The anal- 
ysis does suggest that there is a vecy appreciable risk that price could 
reach $2 an ounce then, or even much soon^. Battelle's detailed 
quantitative projections of the rate of exhaustion of Treasury stocks 
lead to an even more pessimistic appraisal since with 50 percent ^ver 
content they can foresee the complete exhaustion of Treasury silver 
as early as 1969. 

6. In view of these considerations, it does not appear that reduction 
of silver content to 800, 700, or 600 fineness would amstitute a longnm 
(20- to 25-ye&r) solution to the coinage problem. On the basis of 
longrun supply and demuid factors, silver coinage of 500 fineness is, 
perhaps, not definitely ruled out, although there certainly is substan- 
tial risk that a rising market price of silver would soon imperil coin- 
age of BOO fin^ess. That risk would be overwhelming even for lower 
silver contents if future U.S. coinage demand could not be met delu- 
sively from Treasury silver holdings. 



■dbyGOOgIC 



COINAQE ACT OF 19S5 



IV. Metallurgrical and Teehnical Characteristics of 
Alternative Coinage Alloys 

This secticHi of the discussion is concerned with the metallur^cal 
and technical characteristics of the various coinage alloys that mi^t 
replace ralver of 900 fineness in a new cmnage system. The objective 
. is to narrow the field of possible coinage alloys to tiioee which are 
acceptable frc»n a metallurgical and technical standp(nnt. It will 
then be possible to deal more effectively with problems of the traj)^- 
titm to a new coinage system. 

The analysis of the preceding 9ecti<»i has led to the elimination of 
diver alloys of more than 600 fineness because of the prohibitiTe risk 
that the market price of mlvar would reach, or exceed, $2 an ounce 
within the next 20 years tn* so. The metallurgical and technical char- 
acteristics of silver alloys of 500 fineness remain to be considered 
along with those of a fairly wide range of base alloys. In addition, 
there are possibilities in the form of composite coinage materials vnih 
silver or base alloy outer layers clad on an inner core. These will be 
discussed in the course of the present section. Intensive analysis of 
the technical and metallurgical characteristics of theee clad materials 
will be found in the Battelle study, and the Mint has, itself, been con- 
ducting an exhaustive investigation of the feasibility of the use of 
clad material in U.S. coins. 

The alternative alloys are taken up in alphabetical order and any 
material that has been seriously proposed to, or by, the Treasury 
receives at least brief consideration in the course of the discussion. 
Ija the interest of brevity, attention is chiefly concentrated upon those 
alloys that seem to show promise. Except in the case of fewmoterials 
which are readily eliminated because of some glaring deficiency, each 
coinage alloy is considered under five general headings. Iliese are : 
Public acceptability, operation in vending machines, coimterfating 
potential (including the use of blanks uid foreign coins in vending 
machines), ease and certainty of production, and cost and availability 
of raw material& Results of the discussion under Utea^ headings ue 
Bummarized in Tables 1 and 2, at the end of Qaa section, whidi show 
acceptable and rejected coinage alloys separately. 



■dbyGOOgIC 



216 COINAOE ACT OF 1966 

Alnmltmiii 
Public Acceptability 

Aluminum coins are unlikely to be acceptable to the public. Para 
aluminum is very light in weight with a density of 2.7 gramB per cuIhc 
centimeter, in contrast to a density of 10.8 for 900 fine silver. Alu- 
minum is ftlso very soft. It could be hardened by the addition of 
manganese but its weating qualities would still be relatively poor. 
Aluminum can be [HXKxesed so as to produce different colorad coins 
but this seems unlikely to increase its chances for public acceptance. 
Foreign coinage use of aluminum is chiefly limited to low dentnnina- 
tions. There are some examples of use by developed industrial oonn- 
tries; namely, Austria, Italy, and Japan. On balance, it would seem 
that aluminum would be rated very low in acceptability hy the public 
if proposed as the basic alloy in a new coinage system. It is eaa.- 
oeivable that an aluminum 1-cent piece would be acceptable to Hm 
public, but its use in high denominations lacks precedent etewhera 
and probably would encounter strong public opposition. 
Operation in Vending Machines 

Pure aluminum has an electrical resistivity of about 2.7 microhms- 
cm. This is close to the 2.1 resistivity of 900 fine silver and the 8.1 of 
the present 1-cent piece. However, current vaiding machines depend 
not only upon coins being nonmagnetic, of proper size, and of appro- 
priate electrical resistivity ; they also depend upon coins bung of a 
certain minimum weight in order to roll properly and they use a 
bounce test for hardness.^ Aluminum coins fall below minimum 
weight requiremraits and existing vending machine rejectora cannot 
easily be redesigned to handle lightweight coins. Furtbermorei, if 
manganese were added in order to harden aluminum coim, thor 
electrical resistivity would be raised well above that of the preeeid 
1-, 10-, 25-, and 50-cent pieces. Undoubtedly, some rejection t^ 
paratus could eventually be designed to take aluminum coins and 
reject other alloys. No such apparatus is available now and no one 
is known to be working on the problem. 
Counterfeiting Potential 

Unless aluminum coins were to receive some special procesenng, Uie 
potential for counterfeiting would seem to be very great. Shert alumi- 
num is readily available and the manufacture of coin blanks would 
not be difficult at all. The metal is soft and would take impressions 
readily from counterfeit dies. If the dies were of high quality, the 
minting of aluminum counterfeits might become a problem of some 
proportions. 

*31i« belt ilngle parameter fa tlila eonneetlon I* probaU; the inttdact of an ■Iloj'l 
eleetrleal realatlvltT and Iti denKltf. Tbronghont mait <rf the enialng dlacanlon that 
deals with TcndlDf madUoe ofwratloo, atteotlM 1* eonllned to deetrieal realatlTltT bMaaa* 
the daniltlM of ellciMe coliuve aUOTs do not T«rj wldralr< 



Digitized byGoOgle 



COINAaB ACT OF 1966 217 

Aside from the tiireat of direct counterfeiting, aluminnm blanks 
would probably pose a real problem for the vending machine industry. 
Rejectors might eventually have to be equipped with some sensing 
device by which blanks could be told from coins. This would un- 
doubtedly prove to be difficult and expensive. 
Ease and Certainty of Production 

Aluminum is a very easy material to work and over the long run 
it probably would not present any difficult minting problems. The 
Mint has had no production experience working with aluminum, 
but experimentally it has been established that present techniques 
could be adapted readily to the fabncation of any material as soft 
as aluminum. 

Coat and Availalnlity of Raw Materials 

Alumintun is cheap with a domestic market price of 24V^ cents per 
pound for unalloyed primary aluminum ingot. Mint requirements 
would be tiny in proportion to U.S. annual consumption of aluminum 
otsome 3 million short tons. 

Conclusion : itq'ected as possible coinage alloy. 
Reasons: Lack of public acceptability, vending machine, and 
counterfeiting problrans. 

Colnmbinm 
Public Acceptability 

Columbium has been proposed as a coinage material in the SO-cent 
piece and as a cladding material. The density of colnmbium is 8.57, 
just a little less than copper (8.96) and nickel (8.90). The color is 
gray, the ring is about the same as with silver, and the material is 
tarnish resistant Wearing qualities should be appreciably better 
than those of silver coins. Public acceptability, as with any "exotic** 
material, is stnnewhat imcertun. 
Operation in Vending Machines 

Very little work has been done on the adaptation of vending mach- 
ine rejectors that would be required with a pure columbium coin, or 
a columbium aUoy. In theory, there would not appear to be any 
insuperable difficulties but practical experience is lacking. Colum- 
bium is fairly heavy and it is ntmmagnetic. Its electrical resistivity 
is in the range of 12.5 to 16.0 microhms-cm, depending upon tempera- 
ture. This compares with an average resistivity of 2.1 for 900 fine 
silver and 32.0 for cupronickel (the alloy in the 5-cent piece). 

There have been experiments with powder metallurgy techniques 
in an e£Fort to develop a columbium alloy which would work in exist- 
ing vending machine rejectors without any alteration being required. 
However, at the time of writing, these efforts had not progressed much 



Digitized by Google 



218 COINAGE ACT OF 1966 

beyond the experimental stage and had not achieved the required 
degree of success irndw operating conditions. 
Counterfeiting Potential 

Colnmbium coins would be very difficult to imitate with any mattt- 
rial of relatively low value. 
Ease and Certainty of Production 

The melting point of columbium is exceptionally high — 1,474° F. 
to silver's 1,760" F. Columbium strip would have to be purchased 
frtMn suppliers, or the Mint would have to acquire new equipment. 
It is said to be a very ductile material which does not work-harden 
when cold fabricated. The Mint should be able to make coins from 
purchased strip of columbium, although costs of fabrication would 
be smnewhat greater. 
Cost and Availability of Raw Materials 

While fairly acceptable from other points of view, the cost of 
columbium is prohibitive. A price of $20 to $35 an avoirdupois pound 
was initially mentioned to the Treasury but a price range of $36 to 
$60 is quoted in the Americam. Metal Market. Even the $20 to $35 
price is well above a current price of $18.81 for silver. It is conceiv- 
able that on a large guaranteed coinage demand unit costs might be 
reduced to, or below, $10 a pound. This would still be a very expensdve 
coinage material. 

There has been no U.S. mine production of columbium ore in recent 
years. About 60 percent of U.S. imiports of columbium concentrate 
are from Canada; the rest are rather widely dispersed. Domestic 
stocks of concentrate and ingot are fairly sizable relative to demand 
for the metal but it is estimated by Battelle that it would take 2 to 8 
years to expand production appreciably. Furthennore, coinage re- 
quirements would apparently be very large relative to current wrn- 
sumptioD of the metal and large relative to the national (stirategic) 
stockpile. 

Conclusion : Rejected as possible coinage alloy. 
Beasons: High cost and uncertain supply outlook. Not 
accepted in present vending machines. Mint cannot falnicate 
with existing equipment. 

75 Copper-S Nickel (Cnpronlckel) 

Public AcceptablUty 

Ct^»(MUckel is the alloy presently used in the U.S. 6-cent piece and 
the most widely used coina^ material in the wco-ld. The weight is 
good with a density of about 8.6 in ccmtrast to a density of 10.S for 900 
fine silver, and about 9.6 for 500 fine silver. A cupronickel 36-cent 
piece would weigh 6.S7 grams in contrast to 5.83 grams f<a- 500 fine 



Digitized byGoOgle 



COINAGE ACT OF 1666 219 

wlv«e, and 6.2S grains for the preeent 900 tine 25-cent piece. The 
colcH' ia v&y good. Oupronickel does lack the luster of coin ^Iver 
when the silver is untarnished. Also, its ring is not quite so impres- 
sive as that of the existing silver coins. However, a cupronlijEel coin 
ages well and its physical wear characteristics are very good — appreci- 
^ly bettra- than those of silver. 

Cupronickel coinage has been used for relatively high denominatim 
coins in the United Kingdom and has circulated side by side with silver 
coinage. Smne objection to the use of cupronickd here would be 
lodged by individuals and groups who, for one reason or another, favor 
coinage with high intrinsic value. However, this sort of objection, 
would be encoui^ered if tuiy base alloy were proposed for use in the 
10-, 26-, and 50-cent pieces. It should be countered by insistence that 
under modwn conditions high intrinsic value in subsidiary coinage 
tends to interfere with, rather than facilitate, performuice of the 
essential medium of exchange function. 

A question arises as to the role of the present 6-c«it piece in a cupro- 
nickel system. Continuation of the 5- and 10-cent pieces in their 
preswit dze and diameter, which probably is desirable, would lead to 
the anomaly of a 5-cent piece larger than the 10-cent piece, but made 
from exactly the same material. Opinions will differ as to whether 
this is important, but it is possible that some other material should be 
used for the S-cent piece if cupronickel were to be used in the sub^di- 
ary dwiominations. 
Operation in Vending Machines 

Cupronickel has a resistivity of 32.0 microhms-cm., which is well 
ahove the 2.1 resistivity of 900 fine alvw. Because existing rejectors 
are ccaistnicted to accept cupronickel 5-cent pieces, no unusually dif- 
ficult-problems are encountered in making a rejector thfU; will accept 
cuprtmid^el subsidiary coinage along with silver subsidiary coinage. 
The National Rejector Company has built a prototype which accepts 
cuprtmictol and silver 10-, 26-, and SO-cent pieces — NBCO 8000 Series 
Model X The estimated factory cost of this new rejector, not cur- 
rmtly in production, is $20. ITiere are now about 4.5 millitm NRCO 
r^ectors in service of three different series — 4900, 5800, and 8000 
regular. Many of theee could be modified, at the factoiy or at a 
branch service facility, to accept existing silver coins and a new cupro- 
nickel system at an estimated cost of perhaps $10 each. 

It has been estimated by the rejector industry represmtative that 
the required changeover could be accomplished within 2 years. Pos- 
gnbly it could be made even more rapidly at some increase in expense. 

The rejector industry has concmtrated up<»i designing a mechanism 
that would accept cupronickel 5-, 10-, and 25-cent pieces. A rejector 
such as NBCO's Model X would also accept the existing 6'Cent piece, 
but, as mentioned previously, it may seem desirable to use a different 

4ft-S88 O— 6B IB , - , 

Digitized by LiOOgle 



220 COINAGE ACT OF 1060 

alli^ for the 5-ceiit piece if cupronickel is used for subsidiary coinaga 
Ko work has been done on the addititmal modification that would be 
required if the rejector were to accept a new 5-cent piece and cu^t>* 
nit^el 10-, 26-, and SO-cent pieces, along with existing coins. One poe- 
Enble way in which that additional rejector modificaticni could be 
avoided would be to make the 5-cent piece in a cuprmicket system 
frcan nickel-silver (discussed below). The resistivities and other 
properties of nickel-silver and cupronickel are close mongh so that 
both old and new S-cent pieces would be acceptable in rejectors. On 
most rejectors no modification would be required <m the S-coit 
channels. 

A much more promising resolution of vending machine difficulties 
would be to use outer layers of cupronickel clad on a coppw core for 
all of the subsidiary denominations. Such coins would work in imal- 
tered vending machine rejectors. They are discussed subsequently 
nnder the heading of "Other Clad Coins." 
Connterfeiting Potential 

The direct counterfeiting potential with cupnmickel coinage should 
be quite low. Despite its comparative cheapness, cupnmickel is not 
readily available from commercial suppliers. There are vending ma- 
chine problems with a proposed subsidiary cupnmit^l coinage, but 
they relate to the use of foreign coins, or expanded U.S. 5-cen.t oolns. 
The problem, in the instance of vending machines, is not so mudi the 
potential use of blanks, for they would be relatively difficult to obtain. 

The rejector industry representatives do anticipate that a problem 
would arise if the U.S. were to switch to cupronickel subsidiary coin- 
age, because of the use in vending machines of low-value foreign coins 
made from cupronickel. They have furnished a lengthy list of these 
coins which are sufficiently close in size to the U.S. 25-cent piece to 
operate a rejector mechanism set for a U.S. cupnmickel 25-cetit piece. ' 

In addition, there is a potential problem with a cuprMiickel systeon 
in that the 6-cent piece could be flattened in a hydraulic press or by 
some other means and used as a 25-cent piece. Whether or not this 
would occur on any significant scale is questi<mable, but it is a further 
minor difficulty with a cupnmickel system. This particular difficulty 
would not be overcome by substituting a S-c^it piece made of nickel 
silver in the cupronickel series since the two alleys have similar elec- 
trical resistivity. 
Ease and Certainty of Production 

The Mint has had long experience with the fabrication and mint- 
ing of cupronickel. This is an important consideration where lai^ 
numbers of coins may have to be produced in a very short period of 
time. Cupronickel is a tougher material than silver and is not quite 
so easy to mint. However, no unusual problems would be enconntexod 



Digitized byGoOglC 



COINAGE ACT OF 1966 221 

and cupronickel must be rated very high in terms of ease and certainty 
of production. 

Cost and Availability of Raw Materials 

Cupronickel is also very attractive from the standpoint of the cost 
and availability of raw materials. Copper at 33 cents a pound and 
nickel at 79 cents a pound — alloy cost 45 cents — would be used in place 
of silver at $18.81 a pound. Coinage at the projected fiscal 1965 rate 
would use approximately 5,355 short tons of copper and 1,785 short 
tons of nickel annually. Copper presents no serious supply problem 
on a long-run basis, although intermittent shortages and sharp price 
movements can be expected to occur at times. Coinage needs would 
be a very small fraction of total consumption. The annual amounts 
of nickel used would be very small relative to U.S. consumption of 
124,500 short tons in 1963. 

Conclusion : Acceptable as coinage alloy. 

Copper-Zinc Alloy (98 Copper-2 Zinc) 

This alloy is red in color luid its use for higher dentHnination coins 
does not merit any extended discussion. Along with similar alloys 
such as 96 copper-4 nickel, it does have an electrical resistivity simi- 
lar to that of silver and could be used in existing rejectors. Some 
rejectors, which have been set specifically to reject copper slugs and 
cut-down pennies, would require minor adjusbnuit. Copper-zinc 
coins could be easily fabricated on existing and planned Mint equip- 
ment Because of their red color, they would merit consideration 
chiefly as an emergency measiire, if sUver were not available for coin- 
age, and necessary vending machine adjustments were not yet com- 
plete. It is also conceivable that such an alloy might be used for the 
5-cCTit piece if cupronickel were used for subsidiary coinage. 

Nickel (Pure) 
Pablic Acceptability 

Pure nickel has a density of 8.90 approximately the same as cup- 
ronickel. It is whitish-gray in color and in mint ocaidition is gen- 
erally considered to be slightly more attractive than a cupronickel 
coin. Wearing qualities are excellent. Nic^ is being more and 
more widely used as a coinage material although often a silver coin 
of higher denomination is retained in the series. This has been the 
case in Switzerland, Canada, France, the Netliorlands, and Japan. 
South Africa has recently announced plans to r^lace its existing 
subsidiary coinage of 500 fine silver {reduced from 800 fine in 1961) 
with pure nickel coins, while retaining one high-denomination nlver 
coin. Pure nickel coins would probably be readily accapted by the 
American public The coins are v^^ attractive and more closely 



■dbyGoOgle 



222 COINAGE ACT OF 1966 

resemble silTer coinage than is the case with any of the base alloys, 
except nickel silver when it is in mint ccmdition. 
(^ration in Vending Machines 

Pure nickel is magnetic and existing rejector mechanisms are de- 
igned 80 as not to accept' coins which are magnetic. It would be 
necessary entirety to redesign Tejector mechanisms so as to be able to 
pass magnetic nickel coins but to reject magnetic irtm slugs. While 
this probably could be done, it would be very difficult and could not be 
done quickly, particularly since practically all coin-operated mecha- 
nisms now depend upcm the magnetic principle to some ezt«it, and 
many less sophisticated mechanisms depend upon it entirely. The 
extent of the problem may be inferred from the fact that the Inter- 
national Nickel Company has directed its efforts to the deTek^Mnent 
of a nonmagnetic alloy (discussed below) rather than to the modifi- 
cation of vcoiding machine rejectors in order to make them capable 
of accepting pure nickel coins. 
Counterfeiting Potential 

Pore nickel coins would be extremely difficult to counterfeit becanae 
of the metal's relatively high melting point (2651" F.) and He hard- 
ness. There is little basis upon which to assess the potential foe the 
use of nickel bhinks, or blanks with comparable electrical reeistivity, 
in vending machines since it is not clear what sort of rejectfM* could 
be designed to accept pure nickel coins. The electrical resistivity of 
pure nickel is 9.5 microhms-cm. No other cwnmonly used coinage alloy 
has a resistivity very close to that value althou^ many brasses and 
brtmzes, available ccnnmerciBlly, do have similar reedstivities. 
Ease and Certainty of Production 

Production of pure nickel coins would pose a very difficult problem 
for the Mint. Existing brass mill equipment could not be used be- 
cause of the high melting point of nickel. The new Mint would have 
to be specially designed and/or nickel strip would have to be purchased 
for use in existing Mint facilities. The minting of nickel coins would 
still be very difficult with existing equipment even if strip were pur- 
chased, but it could be accomplished. 
Cost and Availability of Raw Materials 

Nickel costs 79 cents per pound. The International Nickel C(Kn- 
pany has estimated that at fiscal year 1965's projected rate of produc- 
ti<m of 10, 25, and 60-cent pieces about 15.7 millicm pounds of nickel 
would be required. These requirements would have to be met by im- 
IKxts from Canada or from the domestic stockpile. U.S. mine output 
comes exclusively from the Hanna Mining Company's properties in 
Oregon. In 1968, the nickel content of Hanna's productiim of ferro- 



DigitizcdbyGoOgle 



COINAGE ACT OF 1965 223 

nickel was about 21.4 million pounds but this ferronicke] would not be 
suitable for mint requirements. 

Ctmclnsion : Bejected as possible coinage alloy. 
Reasons: Vending machine problem associated with use of a 
magnetic alloy. Otherwise acceptable, although difficult to make 
with existing Mint equipment. 

Nickel (Inco Alloy 95 Nickel-5 Silicon) 

The International Nickel Company has developed an alloy of 96 
nickel and 6 silicon which is nonmagnetic, thus removing, at least po- 
tentially, the major barrier to the use of nickel in slug rejectors of the 
present type. A further effort has been made to modify the alloy so 
that it will simulate the properties of 900 fine silver coinage and work 
in unaltered coin rejectors. 

As one of their tests, existing rejectors roll the coin through a mag- 
netic field. A coinage metal such as silver with very low electrical 
resistivity is slowed more in its travel, by eddy currents induced as it 
passes through the magnetic field, than is a material of higher electrical 
resistivity. Silver is a relatively "alow" coin, while cupronickel, for 
example, is a relatively "fast" coin. Having removed the magnetism 
of pure nickel coinage through the addition of 5 percent silicon, Inco 
technicians have sought to restore just such a sufficient degree of wet^ 
magnetism to the coin as to make it as "slow" as silver. In their most 
successful effort, the weak magnetism pulls the coin into contact with 
a piece of aluminum oxide tape which retards the rolling coin through 
physical friction. Without this retardation the 95 nickel-5 silicon 
coin would be too fast, since its electrical resistivity is higher than that 
of silver coins. The required magnetism has been sought at various 
times by adding a thin core of pure nickel, or a core of 80 percent 
nickel and 20 percent iron, to the coin. The 80 percent nickel and 20 
percent iron core is now preferred since its magnetism does not vary 
within the ranges of temperature that would be encountered. 

Despite this, early test results were not entirely satisfactory, and the 
feasibility of the Inco approach has never been demonstrated conclu- 
sively. According to the rejector industry, on its initial tests the Inco 
coin was only successful in fooling rejectors about 70 percent of the 
time; 95 to 97 percent success was required in their view. Inco sub- 
sequently dunonstrated that slight modification of existing rejectors — 
application of the small strip of special tape referred to above — is 
capable of achieving a higher success ratio, at least undw controlled 
test conditions for a limited number of trials. However, in the judg- 
ment of the vending machine and coin rejector industries, even with 
the application of the special tape the Inco coin cannot achieve a satis- 
factory success ratio under actual operating conditions. Wearing of 
the tape and variability in the strength of the magnets in the rejector 

43 

Digitized byGoOgle 



224 COINAGE ACT OF 1965 

mechanisms could be expected to create difficult problems in actual 
practice. There was a comparable negative finding b; Battelle on the 
ability of the Inco coin to work in existing vending machines. 

Aside from the technical issue of use in vending machines, comment 
on the modified nickel coin can be relatively brief since many general 
comments applicable to pure nickel coinage are also applicable here. 
Public Acceptability 

The public would seem likely to accept the modified coin about as 
readily as a pure nickel coin. 
Operation in Vending Machines 

Discussed above. 
Counterf eitins Potential 

This would be a very difficult coin to counterfeit, at least as dif- 
ficult as a pure nickel coin, and probably more difficult. The use of 
blanks in vending machines would present about the same problem as 
with existing silver coins since the modified coin simulates silver's 
electrical resistivity. Some additional difficulty might arise if it were 
not possible to simulate the narrowed resistivity range of 2.0 to 2.6 
microhms-cm. that some rejectors are using in order to reject copper 
blanks and foreign coins. 
Ease and Certainty of Production 

It is very doubtful whether the Mint could make the modified nickel 
alloy; certainly it would be an expulsive undertaking requiring dif- 
ferent eqmpment. Tlie necessary facilities could probably be included 
in the new Philadelphia Mint. If the modified alloy were to be used 
it apparently would be necessary to buy annealed blanks from Inco, 
at least until the new Mint is on stream. It is possible that current 
and planned rates of subsidiary coin production could be achieved us- 
ing the purchased blanks. Even when annealed the alloy wotdd be 
harder than cupronickel, and this makes minting a more difficult task, 
but not an insurmountable one. 'Hie material is being patented; ex- 
clusive rights to the patent would be turned over to the U.S. Govem- 
ment, for use by the Mint or designated suppliers, in the event that the 
Mint were to decide to use the material for coinage. 
Cost and Availability 

Inco has estimated that the coiled strip would cost $1.50 per pound; 
this includes a metal cost of about 80 cents per pound. Tlie coinage 
requirements for nickel have been discussed above. At the fiscal 1965 
rate, about 15.7 million pounds would be needed, rouj^y 6 percoit of 
U.S. annual nickel consumpticHi. The overall supply situation is prob- 
ably adequate. It is true that nickel was regarded as scarce in the 
early IflSO's, and it still is not in such assured supply as copper, for 
example. 



Digitized byGoOgle 



COINAGE ACT OF 1965 225 

The Bureau of Mines estimates known Canadian nickel reserves at 
6 millicHi tons and describes this as a very conservativB appraisal. 
Canada is tiie principal Free World supplier of nickel and has ac- 
counted for about 80 percent of Free World producticm in recent 
years, and has supplied almost all of T7^. import requirements. Free 
World production of nickel was some 270,000 tons in 1963 ; almost half 
of this was consumed in the United States. If Free World consump- 
tion continued at the 1963 rate, known Canadian reserves would be 
depleted in about 25 years. Very large nickel reservee exist in Kew 
Caledonia and Cuba; but these should be excluded in determining the 
adequacy of nickel supply. 

Nickel prices have almost tripled during the postwar period. 
Market shortages do not now exist but it cannot be said with complete 
assurance that they could not arise within, say, 20 to 25 years. The 
possibility that nickel prices could rise during that period so for as to 
imperil the subsidiary coinage, as has beeoi the case with silver, is ex- 
tremely remote. In this sense, nickel coinage can properly be regarded 
as a "permanent" solution; it would offer much less seigniorage than 
cupronickel. 

Conclusion: Acceptable coinage alloy if consist^it operation 
in vending machines could be demonstrated under operating con- 
ditions. Could not be fabricated on existing Mint equipment but 
coins could be struck at the Mint from annealed blanks. 

Nickel Silver (65 Copper-18 Nickel-17 Zinc) 

Public Acceptability 

Also termed Germui silver, this alloy differs frwn cupronickel by 
the substitution of zinc for same nickel and copper. Proporti<ms can 
vary but the 65 copper, 18 nickel, and 17 zinc alloy is probably best 
suited for coinage use. Because the alloy is fairly close in metallurgi- 
cal composition and other characteristics to cupronickel, its advan- 
tages and disadvantagee are perhaps best established by direct com- 
parison with cupnmickel, where that is possible. Nickel silver is 
sli^^tly lower in weight than cupronickel because some zinc with a 
density of 7.1 is substituted for nickel and copper with densities of 8.9. 
When newly minted, the coin is very attractive wid has a silverlike 
appearance, but it develops a yellowish cast as it tarnishes with age, 
while cupronickel keeps its grayiah-white color indefinitely. Wear- 
ing qualities of nickel silver are also somewhat inferior to those of 
cupronickel ; the ring of the two coins is similar. Ni(^el silver is not 
very widely used for coinage. Some current examples are Portugal, 
Philippines, and Taiwan. 

In general, nickel silver must be rated a little below cupronickel in 
most of the characteristics that would be likely to influence public ac- 
ceptability. The margin of superiority for cuprcmickel is not ex- 



■dbyGtK^le 



226 COINAGB ACT OP 106S 

tremely wide but it is ccmsistent. Pd^tic acceptability of ni^el silTer 
might conceivably be afTected adversely by the fact tJiat it is a radier 
cheap silver substitute with extensive household uses, e^., it is the 
ccHnmoQ base for silver-plated flatware. 
Operation in Vending Machines 

Very little work has been done on the use of nickel silver in voiding 
machines. However, the electrical resistivities of nickel silver (29.0) 
and cupronickel (32.0) are close, both are nonmagnetic, and would 
have «milar roll properties. Xickel silver coins of the right size will 
work in existing rejector apparatus set for the cupronickel 5-cent piece. 
As noted previously, this opens the possibility of making the 6-ceat 
piece in a, new system from nickel ^Iver and making 10-, 35-, and 60- 
cent pieces from cupronickel. From the standpoint of minimizing 
the vending machine adjustment problem another possibility wonid 
be to leave tlhe current 5-c«it piece unchanged and to introduce nic^ 
silver 10-, 25-, and 50-cent pieces. Either system wonld work in 
the prototype NRCXD Model X rejector alcmg with existing coinage. 
Either system, or ones exclusively of cupronickel or nickel silver, 
would have a 5-cent piece that could be flattoied to work as a quarter 
in vending machines. 
Coiuiterfeiting Potential 

Nickel silver would offer slightly more jjotential for counterfeiting 
than would cupronickel. Both are relatively cheap materials but 
nickel silver is much more readily available from a wide range of 
commercial suppliers. The same consideration suggests that the use 
of nickel silver blanks in vending machines would be more likely 
than cupronickel. Although the use of nickel silver blanks in the 
5-cent slots of existing rejectors has not been brought to the Treas- 
ury's attention, it is possible that a problem might develop if a new 
system were to use nickel silver in the higher denominations. 
Ease and Certainty of Prodaction 

The Mint has made nickel silver coins for foreign countries and the 
experience was satisfactory. The melting of the alloy materials pro- 
duces zinc fumes which could be a problem where Mint facilities are 
located in downtown regions. The fumes can be removed by the 
installation and operation of electrostatic precipitators, or the copper 
and zinc can be prealloyed in a separate melting operation. The re- 
sulting increase in cost can be estimated at roughly 10 percent De- 
spite this complication, nickel silver undoubtedly could be fabricated 
and minted in large volume on existing Mint equipment. 
Cost and Availability of Raw Materials 

Manufacturing costs would be somewhat highw on this allc^ than 
on cupronickel fdthough materials cost would be sli^tly lower since 

Digitized byGoOglC 



COINAGE ACT OF 19«5 227 

some zinc is substituted for copper and nickel. Zinc is only about one- 
sixth as expensive as nickel, and ordinarily about one-third to one- 
half as Kcpensive as copper. The overall difference in cost between 
cupronickel and nickel silver alloys would not be large enough to influ- 
ence the choice between them. 

Conclusion : Acceptable as pos^ble coinage alloy. 

Plastic Coinage 

Several exploratory letters have be«i written to the Treasury by 
firms engaged in the manufacture of plastics. One firm sent a sample 
plastic medallion to the Treasury, hut the overall appearance of the 
medallion did not inspire confidence as to the degree of public accept- 
ability plastic coinage would find. It is possible that in time some 
combination of powdered metal and plastics technology could be used 
to produce satisfactory coins. However, the Treasury has no reason 
to believe tJiat such developments are imminent. The case for the 
introduction of plastic coins was argued by the Comptroller of the 
Royal Mint several years ago. At the time this aroused some inter- 
est in plastic as a coinage material. This interest seems now to have 
ebbed. There are no known instances of the use of plastic as a coinage 
material, and it must be rejected from consideration on the basis of the 
present technology. Much the same verdict must be given on glass 
coins. 

Conclusion : Rejected — poor quality and probable public avei^ 
sion to nonmetallic coins. 

Stainless Steel 
Pnblic AcceptaUlity 

Stainless steel is lighter than most of the conventional coinage ma- 
terials with a density of about 7.8 to 8.0 depending upon its ctnnposi- 
tion. Coins made of stainless steel are white in color and their wearing 
qualities are superior to those of any other coinage material, except 
possibly pure nickel coins. Because stainless steel is very hard, coins 
have to be made with less relief, ue., the design and lettering are not 
raised as far from the coin background as in the case of coins made 
from softer alloys. The overall appearance of stainless steel coins 
suffers as a consequence. The foreign use of stainless steel coins is lim- 
ited to Italy (100 and 50 lire) and Turkey. Public acceptability of 
stainless steel coins in this cotmtry is conjectural. 

Plain carbon steel can be clad with a relatively thin layer of anothtt* 
material, usually about 16 percent of the thickness on each side. Clad- 
ding materials currently being used in this way are nickel and cupro- 
nickel in Argentina, brass and copper in West Germany. The edges 
of these coins are unattractive and susceptible to rust. The coins do 
not merit serious consideration for use in this country. 

Digitized byGoOgle 



228 COINAGE ACT OF 1966 

(^ration in Vending Machines 

Vending machine teet results on stainless steel have not been en- 
couraging to date. Stainless steels containing 10 percent and more of 
nicbe) are nonmagnetic in their unworked state. But, a major diffi- 
colty is that so-calted nonmagnetic stainless steels become magnetic 
when cold-worked, and the coins would then be rejected in rending 
machines. Three types of stainless steel, presumably nonmagnetic, 
were supplied for rejector tests. Blanks made from each of the three 
types of steel were refused t^ the rejectors. These blanks had been 
upset at the Mint before testing and even this small amount of fabri- 
cation was apparently sufficient to induce some magnetism. The 
actual stamping process might well have an even stronger effect upon 
stainless steel blanks. It may be that some stainless steel, suitable for 
coinage, can be found that will remain nonmagnetic. 

Assuming that a stainless steel can be found that will remain ntm- 
magnetic imder deformation, the nature of the required adaptation of 
rejectors will then depend upon the electrical resis^vity of the stainleas 
steel. The National Rejector Company has done some wotk on the 
problmi of building a rejector that would accept silver coins astd stain- 
less steel coins of relatively high resistivity {e.g., 76 microhms-cm.). 
It should be noted that a rejector such as the one NRCO is working 
on would continue to accept the cupronickel 5-cent piece. No worik has 
been done, so far as is known, on the presumably more difficult problem 
of designing a rejector that would accept existing coinage, a stainless 
steel 5-cent piece, and cupronickel 10, 26, and 50-ceiit pieces. 
Counterfeiting Potential 

Actual duplication of a stainless steel coin would be a very difficult 
task because of the hardness of stainless steel. Although direct coun- 
terfeiting would probably not constitute a serious problem because 
coins would be so difficult to mint, the use of stainless steel blanks 
in vending machines would seem to pose a threat of some consequence. 
Material from which blanks could be made would be readily available. 
It might be possible to find a stainless steel for coinage purposes 
which had dectrical resistivity imlike that of the more readily avail- 
able types but this is by no means certain. 
Ease and Certainty of Prodaction 

Stainless steel presents serious problems for the Mint. It would 
be necessary, pending the construction of necessary facilities, to pur- 
chase the stainless steel from outside suppliers in the form of strip. 
Even so, the methods of coin fabrication would be ^itirely different 
from those used in the past, or those that are presently contemplated 
for the new Mint. It is true that the Mint made some magnt^ic 
stainless steel coins for Costa Rica but only with great difficulty. 
Mint experience on l^t production established that entirely new fab- 

Digitized byGoOgle 



COINAGE ACT OF 1965 229 

rication techniques would be required for coins lar^r than the U.S. 
25-cent piece. 

Conclusion : Rejected as possible coinage alloy. 
Beasons: Some question as to public acceptability, replacement 
of existing vending machine rejectors, and difficult production 
problems. 

Silver (500 Silver-500 Copper) 
Public Acceptability 

Silver coins of 500 fineness would be slightly lighter than existing 
coins because the density of copper is less than that of silver. The 
present SO-ceot piece weighs 12.50 grams; a silver 60^c«it piece of 
500 silver and 500 copper would weigh 11.66 grams. It would be 
possible to t«ll 500 fine coins from 900 fine coins simply by weighing 
the coins in question. 

Newly minted 500 fine silver coins could be made to resemble exist- 
ing silver coins by being given an acid bath at a fintd production 
stage. This bath etches away the copper from the surface of the 
coin, leaving a thin film of silver. With wear, now intensified 1^ the 
use of coins in vending machines which test for size, the external 
film of silver is rubbed off. This exposes reddish and yellowish areas 
on the coin and gives it an unattractive mottled appearance. 

Largely because of these poor wearing qualities, 50O silver-500 
copper is not generally considered to be an acceptable coinage alloy. 
The last country using 500 aIver-500 copper is South Africa which 
has recently announced its decision to replace the 500 alloy with pure 
nickel coins. 

Public acceptability of a 500 silver-600 copper coin is highly 
questionable. 
Operation in Vending Machines 

A strong point with 500 silver-SOO copper coinage is the very minor 
adjustment of vending machine rejectors that would be required. 
The slight change in weight and electric^ resistivity from existing 
silver coinage would not affect the majority of vending machines at 
all. Some vending machine rejectors whose selectivity range has been 
made very narrow would probably require some adjustment. For all 
practical purposes, it can be said that the 500 silver-SOO copper coin- 
age would woii in existing rejectors. 
Connterfeiting Potential 

There probably would be no serious increase in counterfeiting pot^< 
tial with the 500 silver-500 copper coinage, at first. As worn 600 fine 
coins began to make up the bulk of coins in circulation, some wider 
latitude for counterfeit coins would b^in to emerge to the extent 
that the worn 500 fine coins would be less readily distinguished than 
the present coinage from dieap imitaticHis made frcHn base metals. 

Digitized byGoOgle 



230 COINAGE ACT OF 1965 

The use of blanks in vending machinee should be onl; sli^tly mon 
serious with 500 fine silver than it is at present. 
Ease and Certainty of Production 

It is estimated that the use of an acid tnth treatment to improve 
the initial appearance of the coins would increase current Mint opec- 
ating costs by about 10 percent. In additim, new equipment and 
additional space would be required which the Mint doee not have at 
present. 
Cost and Availability of Raw Materials 

The reduction of silver content from 900 to 500 fineness would 
reduce the direct cost of coinage metal by more than 40 percent for 
a given level of silver prices. Questions of the availability of raw 
materials are complex and center upon the adequacy of Treasury sil- 
ver stocks to meet future coinage demand, without noaarae to mar^ 
purchases. These questions are discussed 8ubsequ«itly. 
Conclusion: Rejected. 

Reasons: Very poor appearance when worn. A quaternary 
silver, discussed next, is preferred on the basis of wear charac- 
teristics. A clad silver coin, subsequently discussed, would have 
the desirable vending machine properties of 500 silver-500 copper. 

Silver Alloy— United Kingdom (500 SilTer400 Copper-50 NickeN 

50 Zinc) 
Public Acceptability 

The ITnited Kingdom and a large number of other countries have 
in the past used an alloy consisting of 500 silver, 400 copper, 50 nicfel, 
and 50 zinc, Sweden coins an alloy of 400 silver, 500 copper, 60 nickd, 
and 50 zinc; Finland, one of 350 silver, 570 copper, and 80 zinc; and 
Mexico, one of 100 silver, 700 copper, 100 nickel, and 100 zinc. TitB 
addition of nickel and zinc to low silver content alloys reduces the 
rst« of deterioration in appearance. When newly minted the coins, 
and even those of lower fineness than 500, are relatively attractive. 
However, the appearance of circulated coins would stiU leave much 
to be desired, despite the addition of nickel and zinc that helps to 
dday the appearance of the mottled surface that is oharacteristic of 
coins of low silver content. On technical and metallurgical gronnds, 
the 500 quaternary alloy is not acceptable if coins are required to 
wear well and retain t^eir appearance for 20 to 25 years. Conse- 
quently, it is clear that the alloy merits consideration only if a very 
high premium is placed upon the retention of some silver in the coin- 
age. Even then, in the judgmrait of the Mint technical staff, the 
quaternary alloys would be a poor way to accomplish this end. Silver 
clad coins with high content silver as the outside layers would be 
preferable on the groimds of appearance and wear characteristics. 

Digitized byGoOgle 



COINAGE ACT OF 1965 231 

Operation in Vending Macliines and Counterfeiting Potential 

The addition of nickel and zinc in the quatemaTy alloy r&iseg the 
electrical resistivity of the hardened coin to about 6.8 microhms-cm. 
This means that the coins would not work in vending machinee with 
the eddy-current rejector. The resistivity range of rejectors could 
probably be widened to accept the existing coinage and the quaternary 
alloy but this would be a major undertaking, involving major revamp- 
ing or replacement. Furthermore, if this were done, vending ma- 
chines would be much more vulnerable to a variety of foreign coins 
and blanks than they are at the present time. The potential for direct 
counterfeiting of this alloy would not differ greatly from that for 500 
silver- 500 copper. 
Ease and Certainty of Production 

A quaternary alloy is a much more difficult problem for the Mint 
but it could be made without drastic change in existing procedures and 
equipment. The most significant modification of current practice 
would be the double melting process required so that zinc could be 
added in alloy form. Approximately a 30-percent increase in melting 
equipment would be required. 
Cost and Availabilify of Raw Materials 

As in the case of 500 silver-500 copper, the major uncertainty is 
the price and availability of silver in the event that Treasury stocks 
did not prove adequate to meet coinage and other requirements. 
Conclusion : Barely acceptable as a coinage alloy. 

Silver Clad Coins 

Battelle has examined a wide range of multilayered coinage ma- 
terials, including some with high-content silver alloys as the outside 
layers. The inner core <m these coins could either be pure copper or 
a low-content silver-c(q)per alloy with the overall fineness of the alloy 
varying according to the exact specifications of the outside layers and 
the inner core. If the present 900 fineness alloy were to be clad on a 
pure copper core, the resulting material would be approximately 400 
in fineness. Much the same overall fineness could be achieved by 
using 800 fineness silver as the outside cladding and substituting a 
low-cont«it silver-copper alloy as the inner core. For example, the 
Mint has made ezperimraital strikes from 800 fineness silver clad on 
a 215 finffliess silver-copper core which gives an overall finmess of 400, 

The requirement of a minimum thickness of (Padding to insure rea- 
scmable wear characteristics precludes any marked reduction in ovot- 
all silver content and tor practicid purposes an avu^ge fineness of 
400 can be taken as broadly representative of the minimum silver oon- 
t«ii, acceptable from a tedioical and metalluigical standpoint, where 
high finMieas silver is clad va a pure copper or a low-wmtent silver ooro. 

85 

Digitized byGoOgle 



232 COINAGE ACT OF 1965 

Any fineness much lower than 800 in the outside cladding would not 
make an acceptable coin.* 
Public Acceptability 

Silver-clad coins would be qaite attractive in appearance if the out^ 
aide cladding were at least 800 fineness. In such a case, the color would 
be the same as that of the present silver coinage except on the edges of 
the coins. When the core is composed of silver-copper alloy the edges 
of newly minted coins differ very slightly from the preswit coinage. 
Wear characteristics of silver-clad coins would be satisfactory if 
minimum thickness requiremaits were observed on the out^de 
cladding. 
Operation in Vending Machines 

The high silver-copper clad on low silver-copper alloys would work 
in all vending machines without adjustment. If a pure copper core 
were used, most machines would need adjustment and pure copper 
slugs would then be accepted. 
Counterfeiting Potential 

Clad coins would be more difficult to counterfeit than the existing 
silver coinage. 
Ease and Certainty of Production 

The Mint has a sub^antial but limited capacity for the melting 
and rolling of silver-copper alloy strips but would probably ha.ve to 
purchase strip from outside suppliers. As a general proposition, it 
appears that the cladding of silver would present some difficulties 
where dependence had to be placed upon outside suppliers for a large 
volume of material. In any event, all bonding (cladding) operations 
would have to be performed in private plants. 
Cost and Availability of Raw Materials 

As with coinage of 500 fineness, the crucial question is whether 
Treasury stocks of silver would be adequate to meet longrun coinage 
requirements, and, if not, what effect Treasury purchases of sUver 
in the market would have upon price. 

Conclusion : Acceptable coinage alloy from a technical and met- 
allurgical point of view. . 

1 On tbe butt of their anttl/aia of tbe oTernU lUver sltnatloD, Battelle determlnMI tbat It 
would probabi; be neceiaary to reduce tbe aUver ointent of tbe coinage to about IB iwrcent, 
and even lo the need might arise to abandon ailrer altogether aa a coinage material Knnc- 
time In tbe ISTO'i. Conaequentl;. tbeir primary recommends tlona veie for base allay 
coinace, but tbey also luggeited that tf any lilTcr were to be retained In the finbuidlarj 
coinage, it ahonld eltber be limited to a blgb-content balf-dollaT or epreid ver/ thinly 
through the labaldlary coinage. In the Utter case, they auggcBted that ■ 400 BDeneaa 
■liver Quatemarr aUoy nud a« ontalde cladding on ■ copper-alloy core "might poulUy 
meet minimum atandarda of acoeptable appearance." In the Judgment of the Mint tech- 
nical ataS, the quaternary Bllver alloya are undesirable on technical and metallarglcal 
grannda and the exterior allTer cladding on any compodte coin ahoald not be rediwed 
below SOO. 



Digitized byGoOgle 



COINAGB ACT OF 1965 236 

Other Clad Coins: Capronickel (or Nicket-^ilTer) Clad on a 
Copper Core 

The multilayer principle recommended by Battelle can be applied 
to base alloy coinage. Coins with outer layers of capronickel clad on 
a copper core will operate in existing vending machine rejectors along 
with the present silver coina^ (probably nickel-silver would also 
work as outside cladding but tests have not been made) . This resolu- 
tion of the vending machine problem would allow the rapid introduc- 
tion of new coins without the difficulty, expense, and inconvenience of 
modifying existing coin rejectors. On the other hand, the clad coins 
would be more expensive to produce than the straight cupronickrf 
alloy and strip will have to be purchased from outside suppliers. 
Public Acceptability 

These cupronickel clad coins would be only slightly lighter in 
weight than the existing coinage. The color of the coins with cupro- 
nickel cladding is very good. Because of the copper core, a reddened 
edge is exposed in the blanking process. Milling of thecoins improves 
their appearance. Wear tests conducted by Battelle and by the Mint 
technical staff point to an expected average life of 20 to 30 years. The 
coins are expected to retain an attractive appearance throughout their 
life in circulation. 
Operation in Vendii^ Machines 

As recommended by Battelle, the Mint and the rejector industry have 
conducted extensive testing of the operation of cupronit^el clad coins 
in existing vending machines. This testing has demonstrated that 
when produced according to specifications ( which are not intolerably 
narrow) these coins work in unaltered vending machine rejectors. 
Counterfeiting Potential 

The reddened edge of these coins and the difficult production process 
for the clad material from which they are made should insure against 
counterfeiting on any substantial scale. Vending machines set for 
silver coins will accept these clad coins and in time, the sensitivity of 
rejectore could even be narrowed slightly from their present settings 
if desired. 
Ease and Certainty of Production 

The Mint has made sizable production runs using the cupronickel 
clad material and has not encountered any difficulties of consequence. 
Given adequate supplies of the clad strip, hi^ levels of production on 
the new coins could be reached quickly. 
Cost and Availability of Raw Materials 

The availability of the cupronickel clad strip from outside suppliers 
has been under intensive investigation by the Mint. This investigaticm 



■dbyGcK^le 



234 COINAGE ACT OP ig«6 

is continuing but enough is known at this time to insure that adequate 
supplies of the strip will be available to support the full-scale produc- 
tion effort on the new coins that will be necessary during any transi- 
tion to a new coinage system. Cost eetimatee are not yet entirely 
firm but it appears that the processing cost on the strip material will 
be in the neighborhood of $1 per pound, perhaps less as experience is 
gained with large-scale production. 

Conclusion : Acceptable coinage material. 

Titaniam 

Titanium has been suggested to the Treasury as a coinage material 
but does not appear to be suitable. A major shortcoming is t^e alloy's 
light weight. No work is known to have been done on the rejector 
problem, nor is there any experience with mint fabrication of the metal. 
The melting point of titanium is too high to permit the use of ordi- 
nary brass mill equipment. 

Conclusion : Rejected, 

Zirconinin-Hafniuin 

Zirconium-hafnium has been su^ested to tiie Treasury as a possibte 
alloy from which 50-cent pieces might be made. However, the coat 
of the alloy would appear to be prohibitive, wholly aside frwn other 
considerations. Zirconium strip was quoted to the Treasury at about 
$8 per pound — the 1963 Minerals Yearbook quotes $10 to $14 per 
pound. However, the addition of hafnium, recommended to enable 
the detection of counterfeit coins, would raise the price sharply. Haf- 
niimi is quoted at $138 a pound. One company thought that a zirccHii- 
um 88-hafnium 12 alloy could be provided at a cost about equal to 
silver with some chance that the resulting volume of productitm mig^t 
lower tlie cost to 50 percent of silver. Under the circumstances, neither 
zirconium nor zirconium-hafnium appear to be eligible coin alloys. 
Conclusion: Rejected. 

Summary 

For summary of the material in Section IV, see the tables in the 
Summary at the beginning of the document. 



■dbyGOOgIC 



COINAGE ACT OF ISeii 



V. Problems With a Changeover to Reduced Content 
Silver Coinage 

The diacussion of technical and metallurgical conslderatitnis has 
reduced the potentially acceptable coinage materials to six. These 
are: cupronickel (75 copper-25 nickel), nickel silver (65 copper-18 
nickel-17zinc,orsHghtlydiffereKt proportions), cupronickel or nickel 
silver clad on a copper core, the IN CO alloy (95 nickel, 5 silicon with 
a magnetic core), the United Kingdom silver alloy (500 silver, 400 
copper, 50 nickel and 50 zinc), and silver clad alloys (overall fineness 
about 400) . The present secti<m discusses the feasibility of a change- 
over to silver coinage of reducai content; a section to follow will 
discuss similar problems for the base alloys. 

Special Problems With the Silver Alloys 

The major questions not yet discussed with respect to the two re- 
duced content silver alloys — tlie United Kingdom quaternary and 
silver clad — are whether Treasury silver stocks would be large enough 
to achieve two objectives: (a) Hold the spot market price of silver 
below $1.29+ ' by means of redemptions and/or sales of silver to the 
market during a period of transition, and (b) meet Treasury coinage 
requirements after the period of transition and thereby minimize tiie 
danger that the longrun market price of silver would again imperil 
the subsidiary coinage. 

The first objective of holding the market price during the transition 
period is absolutely essential to protect the Existing coinage. If the 
market price were to break loose, much of the existing coinage would 
quickly go out of circulation and there would be a risk of serious dis- 
ruption to commerce. The second objective of retaining large Treas- 



■It tB occailonaUr BusKeated tlut tbe Hoe be hdd at tl.8S+, Instead of 11.29+ bIdcc 
■liver dollar* are not Ilkeir to Btaj In circulation anywR]'. It la aleo BnegeBled that mme 
■neb rite In price might be Induced bf msklng tbose vho want silver collect tbelr own 
BllTsr certificates ; otberwlse It Is clear that the law woold have to be altered to that 
tbe redemption right did not coatlnue to place an ettectlFe celling at tl.S9 + . In anj 
erent, the sllgbt narTOwlDg of eiceaa market demand that the B-cent price [Dcreaae cal^t 
eoncelvabl; encourage would sorelf be ontwelghed bj the Immediate stimulus tbat vould 
be glTen to large private apecalstive parebaaeB of allver, apot and forward Tbe Judgment 
of anjone wbo had earlier gone long on aUver at 11-29+ would be vindicated. AltboDgb 
some profit taking might reault, the net effect would undoubted!; be to encourage mach 
larger speculative poaltlona In anticipation of tbe next price Increase. If the Treasarj 
could aaanre the market that tbe tl-3S+ line would be held Indeflnltel?. a move to fl-SS-K 
might be regarded as advantageous. It ta ver; hard to aee how the market conid be anre 
tbat the new celling would be held after the earlier one had been abandDned, 



Digitized byGoOgle 



236 COINAGE ACT OF 1960 

ury stocks of silver after the transition is perhaps not quite so vital, 
but it would be difficult to recommend reduced content coinage if ft 
were uncertain that Treasury stocks of silver would meet coinage needs 
for a good many years after the transition period. 

The approach employed here will be to work through arithmetic 
examples of the possible effect upon rreasury silver stocks of two 
alternative ways in which the transition to reduced content silver 
coinage might be attempted. These examples are not intended as 
definite forecasts of what would necessarily happen. 

Forecasting the future behavior of silver markets is extremely 
hazardous. This, itself, cannot fail to be a major factor in determin- 
ing the eventual decision on coinage alloys. However, despite the 
wide margins of uncertainty, it is believed that the examples presented 
here provide some insight into the feasibility of a tratisiticm to silver 
coinage of reduced content. While every effort has been made to 
choose assumptions that seemed inherently plausible and consistent 
with the available data, inevitably the choices may be subject to ques- 
tion. Therefore, the assumptions that have been made will be dis- 
cussed in some detail, and the components of the projected changes 
in silver stocks will be separated as clearly as possible. 

The Mint Coini^e Estiinates 

The basic coinage estimates in Table 1 were supplied by the Mint. 
The columns for 500 fineness coinage reject an assumption that, be- 
cause of the time required to obtain necessary legislation for a change 
in coinage alloys, the change to 500 fineness coinage would not occur 
until January 1, 1966. The estimates of total coinage requirements 
are based upon an assumption that the crash coinage program will have 
been concluded by the end of fiscal 1966, after which time the Arthur 
D. Little trend estimates of coinage requirements will be valid. Fiscal 
1964 coinage is actual, while the estimates for fiscal 1965 and 1966 are 
based upon the latest budget estimates. 

Other tables in this section use the Mint coinage estimates, ad- 
justed to A calendar year basis, and the figures for calendar 1964 will 
differ slightly from the actual amounts of silver that were used. Addi- 
tional assumptions regarding redemptions, transitional and replace- 
ment coinage requirements, and recovery of old coinage have been 
made in the course of the present study and underlie the arithmetic of 
some of its tables. 

Treasury RecoTery and Replacement of the Existing Coinage 

It will be useful to begin with a brief description of the way in which 
the Treasury might attempt a transition to reduce content silver coin- 
age. The Treasury would have to plan to recover as much as it 



Digitized byGoOgle 



COINAGE ACT OF 1065 



237 



could of the 900 fineness coinage, meanwhile producing new lower con- 
tent coins at a rate sufficient to insure an adequate supply of total 
coinage at all times. Throughout this process, the price of silver 
would have to be held below the melting point of the 900 fineness 
coinage in order to assist the recovery of old coin. It would not be 
sufficient merely to prohibit the melting and export of coins since 
hoarding oould also prevent the Treasury from making substantial 
recoveries. Indeed, controls over the melting of coins are redundant 
so long as the market price of silver can be held and they are likely to 
be ineffective If the market price cannot be held. As discussed later, 
it may nevertheless be desirable for the Treasury to obtain standby 
authority for controls over the melting, hoarding, and export of coin 
and bullion. 

Table 1. — Estimated Use of Stiver Bullion for Coinage at 900 and 
500 Fineness 

[In millionB of fine ttoj ounces] 





TfacBlyeBT 


BsttnuM aUTO D»eiled br 




900 fine eoliuce 


MW 


flne 


c-ta^ 




144.0 
27Z2 

33ao 

119.9 
111.9 
11R3 
12a 2 
125 3 

isao 

136.4 










272.2 








6&0 


1968 


61.6 






1970 


6&2 








71.6 













Attempting to call in the old coinage and have it exchanged for the 
new coinage does not appear to be practical or desirable. It would 
be too difficult, indeed impossible with present Mint facilities, to pro- 
duce and accumulate a substitute set of coins while also meeting cur- 
rent coinage requirements. 

Table 2 summarizes a hypothetical situation in whidi the Treas- 
ury attempts recovery of tlie existing coinage through ordinary chan- 
nels in a transition to 500 fineness silver coinage — the United Kingdom 
alloy with 400 copper, 50 nickel, and 50 zinc. Column (1) of Table 2 
presents an iidaptntion of tlie Mint coinage projections of Table 1. 
In Table 2, coinage estimates have been placed on a calendar year baas 
by successive averaging of Table I's fiscal year figures, and it is as- 



DigitizcdbyGoOgle 



238 COINAGE ACT OF 1965 

Bumed that 500 fineness coinage would not begin until January 1, 
1967, because of the need to modify existing rejector mechanisms. 

It will be recalled that the addition of nickel and zinc to the alloy 
raises its electrical resistivity out of the resistivity range of the present 
silver coins. It is possible that the vending machine adaptation could 
be accomplished more rapidly than is assumed io Table 2. In such a 
case, the introduction of the new <»ins might even be brou^t forward 
to January 1, 1966. The essential conclusions to which Table 2 points 
would not be greatly modiiied as a result. 

Table 2.—Proiecte& Behavior of Treaivry Silver Stock Through Calendar Year 
J97$ Where Coinage of 500 Finenetg Begin* Jan. 1, 1967, 900 Fine Coinage It 
ParHallv Recovered and the Market Price of Silver I» Held at tl.23+ During 
a i-Year Tran«ition Period 

[MUUona of fine tio; ouncea) 





PotentlBl .11101111111 of iUtw used In oolnipi 


PotenlW 


Tnwory 

(B) 




Calendar 
yeiirs 


Mint 
or ordinary 

(1) 


neaacolnace 
0) 


required to 
(3) 




.Si 

(S) 


'ST 

stock at 
end of 
period 

CD 




-208.1 

"5: 

-61* 

-es.7 

::: 

-TIT 






-208.1 
-29(Il9 

-321.0 
-3m. B 

-Tao 

-T3.7 






























Iter 

1M8 

IBM 

WTO. 


-186. T 
-U.B 


-83,3 
-83. S 
-83.3 


-loao 


-N0O.O 
+M0.0 
+20aD 

+ioao 


ITI.« 
3U.1 
(-) 



























It is possible to conceive of even earlier introduction of the new 
coins. This would cause some disruption because the new coins would 
not work in aU vending machines. As long as the new coins were a 
fairly small part of all coins in active circulation, the situation might 
be tolerable. However, the new coins would require a slightly different 
production process, and it does not appear that it would be possible to 
start productitm much before early 1966 under the best of circum- 
stances. 

The treatment of silver dollars in Table 2 and all of the subsequent 
tables in this section is the same and should be explained at this point. 
The 45 million authorized for this fiscal year have not been produced, 
and it is possible that they will not be. However, this will not reduce 
the overall amount of silver used by the Mint^ The chief limitation on 
current production of subsidiary coinage is the amount of slab anneal- 



DigitizcdbyGoOgle 



COINAGE ACT OF 1065 



239 



ing capacity in the Mint. It is understood that silver not used in 
coining silver dollars would be used in subsidiary coinage, up to thfl 
limit imposed by annealing capacity, during the remainder of the 
crash coinage program. Therefore, the amount of silver originally 
included for silver dollars is appropriately left in the tables during 
the crash coinage program. 

Columns (2), (3), and (6) of Table 2 all relate to the recovery and 
replac^nent of the existing coinage. Estimates of the silver content of 
subsidiary coinage that would be in circulation at the time of the trMi- 
siti(Mi are necessarily approximate; but the Mint estimates that some- 
thing like 1,600 million ounces of silver is probably outstanding in the 
form of subsidiary coinage. In a recent press release, the American 
Mining Congress has mentioned a figure, apparently based upon 
Circtdation Statemeni estimates, of 1,400 million ounces in subsidiary 
coinage, and 400 million in silver dollars, for a total of 1,800 miUion 
ounces, of which they feel foreign experience suggests that some two- 
thirds, or 1,200 million ounces, could eventually be recovered by the 
Treasury.' It would seem unwise to count on recovering any 900- 
■fineness silver dollars, and the Mint figure of 1,600 million ounces 
of subsidiary coinage will be taken as representative of the size of the 
pool from which recoveries might be made. 

How much of the old coinage really could be recovered by the Treas- 
ury is very uncertain. It has been suggested that, on the basis of 
foreign experience, eventually as much as two-thirds of the old coinage 
could be recovered. However, the attempt to recover our existing 
coinage would come at a time when severe coin shortages have just 
been overcome and would have to proceed with the market price of 
silver at its monetary ceiling. Hence, the foreign experience of sub- 
stantial recoveries may well be irrelevant. 

A question also exists as to the probable time profile of the recovery 
of the old coinage since it obviously would not "pay" to hold the price 
of silver indefinitely while only a trickle of recoveries was being made. 
Current figures on the flow of coin to and from the Keserve banks are 
not of much aid in this connection because they are distorted by the 
coin shortage and consequent changes in the circuit flow of coin. This 
changing pattern is reflected in Chart I which shows coin payments 
and inventories of the Federal Reserve banks and their receipts of 
coin from the Mint and the member banks since 1961. The success of 



' On the bBBlB ot B BtatlaticBl saniplliis of Uie ase dtatribntloD of coins In drcnlatloii, 
.\Tthnr D. Little Inc.. eetlnlBted the value of bIItcf aubaldlarr coinage In clrcalatlon an 
January 1, 1S63, at $1,117 million, a allver content of about SOO mlUton fine oddccs. (See 
Btaringi on B. S^^ brfare the Subcommittee an Financial Inatltutlona of the Senate Com- 
mittee on BaDking and Currency, March 2fl. 1903, pp. 117-120.) On January 1. IMS, tb« 
Cinmlation Statement showed a valne of (1,739 mlUlan, a BllTer content of abonl 1,400 
million ounces. The Hint estimates used in this section Implr a loaa rate falllni between 
that Id the A. D. Little study and that osed In the <7lrc«latlon Statement. 



dbyGoogle 



240 COINAQE ACT OF 1965 

the Mint crash coinage program in rebuilding coin inventories during 
early 1965 is clearly apparent. However, in the present context, it is 
the reflow of silver subsidiary coinage that is pertin^it. This is shown 
separately in Chart II. The statistics for fiscal 1961 and 1962 do indi- 
cate relatively large annual gross flows of subsidiary silver coin hack 
to the Federal Reserve banks in normal periods. However, these dat* 
are seriously defective for the purpose at hand, not only because of the 
constricted flows now occurring, but also because there is no way of 
knowing to what extent the larger flows in earlier years simply re- 
flected a continual recycling between the Reserve banks, the member 
banks, and some coin users of a relatively small fraction of the total 
outstanding coinage. 

Column (6) of Table 2 shows total Treasury recoveries of 1,000 
million ounces over a 4-year period, with recoveries declining stead- 
ily. Total recoveries are placed at five-eighths, rather than two-thirds, 
of the amount assumed to be in circulation because only 4 years are 
allowed for the recovery period, instead of the longer period to which 
the estimate of two-thirds recovery must be taken to refer. Even bo, 
the estimate of recoveries is very generous, and to recover this amount 
of coin in 4 years it is doubtful whether the Treasury could depend 
solely upon routine recovery through the Federal Reserve banks even 
if there were no coin shortage. The cooperation of commercial banks 
and coin-collecting agencies probably would have to be sought. It 
should be emphasized very strongly that unless the coin Mortage hiMl 
been entirely broken by the time recovery of the old coinage was atr 
tempted, nothing like this amount of coinage could possibly be re- 
covered. The estimated scale of recovery is included in Table 2 and 
later tables not because it is inherently plausible, but simply to work 
out the implications of attempting a transition to reduc^ content 
silver coinage under favorable circumstances. 



■dbyGOOgIC 



COINAGE ACT OF 19«S 




Digitized byGoOgle 



COINAGE ACT OF 1965 



Receipts of Silver Subsidiary Coins by the Federal Reserve 
Banks from Member Banks and Others, Exclusive of Eecelpts 
of Coin from the Hint, Itonthly, 1961-1963 



120 








110 
















100 


\ 


/2\ 




90 


\/^ 


^^>^^ 


:VX 


80 


v% 


^^^v<;nx^. 


\ ^^ 


70 


\ 




'\h\ 


60 


^^ 




\ 


50 


\ 




\ 


40 


^ 


\ 


1963 


30 


^^ 


\^ 




20 


1965 


^^— .^ 


^^•-^ ^ 


10 






1964 



Du,iiz=db,Google 



COINAGE ACT OF IftOS 243 

ThB gross recovery of the existing coinage by the Treasury is not a 
net addition to Treasury silver stocks because of ths need to replace 
the higher content coin withdrawn from circulation. Additi«ially, 
the Treasury probably should plan to replace the higher amtent coin- 
age which is not recovered, since it would have to be assumed that 
much of it had been hoarded and would no ItMiger be available tor 
transaction purposes. The estimates of coin in circulation possibly 
include a certain amount of coin that has been lost Althoo^ the 
Mint estimates do attempt to correct for this, the correction may not be 
entirely adequate. Hence, complete replacemmt of the coinage re>- 
corded as being in circulaticm would not necessaiily be essential. The 
table is omstructed oa the assumption that complete replacement is 
Bttemtd«d. The effect of rdazing this assumption will be noted 
subsequently. 

Column (2) shows the amounts of 500 fineness coinage required to 
match recoveries of 900 fineness coinage, and column (S) shows the 
estimated amounts required to offset ntHirecoveries. On the assump- 
tion of totid recoveries of 1,000 millicHi ounces from a stock of 1,600 
million ounces, there are 600 million ounces of the old coinage to be 
replaced at five-ninths of the original fineness. The amount is alio* 
cated in column (3) evenly among the 4 years. The sum of columns 
(1), (2), and (3) gives the total coinage requirements whidi the 
Treasury should plan to meet 

In addition, some silver would have to be used to hold the market 
price of silver during the transition pmod. Column (6) shows the 
amounts of redempticMis or outright sales to the market that might be 
required. It should be noted in this connection that to revoke the 
redemption right would not free the Treasury from the need to sdl 
^ver to the market Protection of the existing coinage requires that 
the market price of silver be stabilized; this requires sales of silver to 
the market equal to excess demand at the stabilized price ; whether or 
not certificates are retired is a separate, although impc»tant, questicm. 

The amounts shown in column (5) for market stabilizaticn are nec- 
essarily fairly approximate, although they do not seem unreasonably 
high in the light of recent experience. Bullion exchanges against sil- 
ver certificates in 1964 were close to 150 millicm ounces. It is assumed 
that excess demand would decline to 100 million ounces in 1966, reach a 
"normal" level of about 75 million ounces by 1966, and remain there 
through 1968. As the tran^tion period neared completion, the matkrt 
would come to expect an increase in the price of silver and scHne specu- 
lative demwid would be added to ordinary requirements. Therefore, 
sales to the market are increased to 100 million ounces in 1969 and to 
150 million ounces in 1970. 



■dbyGoogle 



244 COINAGE ACT OF 1960 

Such a pattern of Treasury sales does not make allowance for any 
strong feedback from the sharply falling silver stocks in colunin (7) 
to the redemptions in column (5). Yet, as the stock of silver feiU, 
there could be an acceleration of redemption demands. Very heavy 
speculative pressure could develop in the case of any transition to silvMT 
coinage of reduced content. The rate of redemptions in late 1964, dur- 
ing a mild speculative Surry, should remain as a sobering reminder of 
the potential scale that speculation in silver can quickly take. 

The decline in Treasury silver stocks on the assumptions embodied 
in table 2 would be rapid. Despite the recovery of a large amount of 
900 fineness coinage, stocks would be entirely exhausted before 1870. 
The overall result is not very sensitive to moderate chongee in the 
assumptions that underlie it, although the exact point at which Treas- 
ury stocks would run out is shifted in time by most changes in 
assumptions. 

On the as8umpti<Mis of Table 2, about 800 million ounces of silvw 
are used in replacing the coinage that is not recovered. It could be 
argued that this need not be done because some unrecovered coin will 
have been recorded in circulation when it actually was lost. This 
may well be true and implies that not all of the unrecovered coin 
need be replaced. However, to argue that none of it need be replaced 
is to assume that the coinage stock just prior to the transition would 
be in excess of public requirements so that some increase in hoard* 
ing could be tolerated. Certainly there is no present evidence that 
the stock of silver coinage is excessive relative to the demand for it. 
It is very difficult to know how much, if at all, the more than 300 
million ounces of silver scheduled to be used in replacing unrecovered 
coinage could safely be reduced. Therefore, the table carries the 
full amount. 

It could also be argued that the time pattern of recovery of old 
coin might be more rapid than has been assumed here. This would 
permit a shorter transition period and possibly reduce the overall 
amounts of silver used in stabilizing the market price. The probl«n 
here is in knowing just what degree of shortening of the time pat- 
tern of i-ecoveiy would be a practical possibility. This is explored 
subsequNitly with the aid of an example based upon slightly differ- 
ent assumptions. 

In summary, if it were decided to try to replace the existing coin- 
age, the likelihood of successfully negotiating a transition to sub- 
sidiary silver coinage of 500 fineness does not appear to be very great 
at all. On the assumptions used here, the Treasury would be back 
in the market before the transition was even complete, but the Treas- 
ury would now be buying silver to meet its coinage requirements, 



■dbyGOOgIC 



COINAGE ACT OF 1965 245 

rather than selling to protect the existing coinage. The total ex- 
haustion of Treasury silver stocks before the transition was even 
completed would not necessarily occur on all assumptions. With a 
shorter period of transition, instituted somewhat sooner, the sav- 
ings in the sales or redemptions required to peg the market price 
of silver could be sufficient to leave the Treasury with some silver 
after the transition. On any reasonable set of assumptions, how- 
ever, it does not appear that the Treasury would be likely to have 
very much silver left. 

The general conclusion remains, therefore, that it would appear 
to be impractical and extremely hazardous to attempt to replace 
the existing subsidiary coinage with 500 fineness silver. 

Recovery and Replacement With 400 Fineness Coinage 

Table 2-A presents the comparable situation where a transition 
is attempted to subsidiary silver coinage of 400 fineness; for example, 
800 fineness silver clad on a low-content silver-copper core. The pic- 
ture is somewhat improved relative to 500 fineness coinage, although 
the decline in Treasury silver stocks is still very rapid. The decline 
in Treasury silver is not quite so precipitous for two reasons. First, 
new coinage at the 400 fineness rather tlian 500 takes only four-fifths 
as much silver. Second, coins made from silver clad on a copper 
core would work in existing vending machines. Hence, it is as- 
sumed that the production of new coins, and recovery of old coins, 
could begin on January 1, 1966. This shortens the transition period 
and reduces the amount of silver that must be used to stabilize the 
market price of silver at the melting point of the old coinage. The 
transition could not begin much sooner than January 1, 1966, be- 
cause of the probable leadtime required for the production of re- 
quired amounts of the clad strip. Other assumptions are the same 
as those discussed for the transition to 500 fineness and do not re- 
quire additional comment now, other than to reiterate the earlier 
warning that recovery of any substantial part of the existing coinage 
in presrait circumstances seems extremely doubtful. 



■dbyGOOgIC 



246 



COINAGE ACT OF 1966 



Tarli a-A. — Prnjcrlfd Behavior of Trcamry Silver Slock Through Calemfar 
Year 1978 Where Coinage of iOO Fineness Hegim Jan, 1, 1986, 900 Fine Cnin- 
age Ik Partiallv Recovered and the Market Price of Silver la Held at tt.t9+ 
Durtng a i-Year Troniitiott PerioA 

[UUIloos ot tin* tray oanca] 





Potenttal MDOUDtool »U«r and In ooliuc* 


Potenttol 
unoanbiol 






CilandM 


raqnlie- 

(1) 


required to 
ntplw* 

SJSSt 

nWMlTiW 


(» 


SIM 


lUncartS- 
tbB market 


•odor 
period 

(7) 




-m, 
-nan 

-1(0.8 
-I12.§ 

-sat. 
-s».» 

-M.» 

-ea4 






-mo 

-■2ia.i 
-207. e 

-1M.0 
-Ml 4 


-wao 


' 


i,m.o 










i;;;;;;; 

IW- 


-133.3 


-e<i7 


-73. 
-l»0 


+4oao 

4-3O0LO 

+3nao 
+ioao 


«1.T 

m.1 







































i); column (3) eqoala U ol total nonneoTerlu ot no, diTidad 



However, accepting the hypothesis of substantial recoveries upon 
whidi Table 2-A is based, ihen is some room for difference of opinicm 
whether or not it would be possible to negotiate the transition and re- 
place the existing coinage with 400 fineness coinage. The arithmetic 
of Table 2-A implies that the transition might be made. Certainly, no 
very large margin of safety would exist, particularly since the steady 
decline in Treasury silver quite possibly woul(^ give rise to the need 
for even larger sales to the market than are allowed for in column 
(5) of Table 2-A. In any event, the amounts of silver available to the 
Treasury for use in coinage after the transition would be small, par- 
ticularly if any allowance for strategic needs were included.' On the 
basis of the projections of Table 2-A, Treasury silver would be gone 
by 1976 or 1977. After that time, the Treasury would have to bny 
silver in the market. This would greatly increase the chance that the 
market price of silver would again eventually be driven to the melting' 
point of subsidiary coinage. It is true that the new melting point in 
excess of $3 would provide more leeway for price-induced adjustments 
in market supply and demand. 

A Different Approach 

Tables 2 and 2-A are necessarily based upon fairly rigid assump- 
tions and these affect the pattern of decline in Treasury stocks. It 
would be possible to vary some of these assumptions and note the effect 



Digitized byGoOgle 



COINAGE ACT OF 1985 247 

that this would have aa the result, lliere may also be some value in a 
slightly different approach. Instead of assuming a certain pattern of 
recoveries of the old coinage and observing the net effect upon the 
Treasury silver stock, the example can be turned around in order to 
show what pattern of recoveries would actually be required to hold the 
silver stock at any given amount. This is not oalj convenient in that 
it allows one to see more clearly what rate of recovery of the old coin- 
age would be required for a successful tran^titm ; it also involves a 
minimum of assumptions, since recoveries of cmnage can be treated as 
a residual. 

It will be assumed that replacement of the entire subsidiary coinage 
is attempted within a 2-year period to minimize the drain on Treas- 
ury stocks from holding down the mai^et price of silver, and to reduce 
the likelihood of coin shortages in the transition period. The rates of 
coin production required for this rapid replacMuent would not be pos- 
sible with existing Mint fadlities even if silver strip were purchased. 
This limitation is ignored in the examples that follow although, in 
practice, it would be a matter of overriding significance. 

The rate at which old coins could be recovered is extremely un- 
certain and in Tables 3 and 3-A no att^npt is made to allocate the re- 
coveries among particular years. This means that the extreme right- 
hand column of these tables no longer purports to give the actual 
Treasury silver stock but simply registers what the stock would be 
without allowance for recoveries of old coin. 

Table 3 shows the situation for a 2-year replacement of the exist- 
ing subsidiary coinage with coinage of 500 fineness, beginning Janu- 
ary 1, 1966. Table 3 suggests that fully fiOO million ounces of silver 
would have to be recovered by the end of 1967 to prevent Treasury 
stocks team falling to zero. If it were snnehow possible in the space 
of the 2-year transition period to recover the entire 1,000 miUicHi 
ounces used in the earlier examples. Treasury sto<^ would still be 
reduced to leas than 600 million ounces at the end of the transition. 

The parallel situation with respect to 400 fineness coinage is pre- 
sented in the accompanying Table 3-A. This example is ba^ upoi 
, the same assumptions as those of Table 3 except for the lower fineness 
of the new coins. In this case, it would be necessary to recover about 
260 million ounces by the end of 1967 to prevent Treasury stocks from 
falling to zero. TTie recovery of 1,000 million ounces of silver during 
the transition period would leave the Treasury with a stock of about 
750 million ounces at the end of the transition. However, it is not at 
all clear how recoveries on this scale could actually be accomplished 
within a 2-year period. 



■dbyGOOgIC 



248 com AGE ACT OF 1965 

Tablk 3. — Example of the Replacement of the ExtsHnc Coinage With Cotnage to 
500 FineneM During a i-Year Period; No Attowance Made for Recovery of the 
Old Coinage 





llnmllUoi 


isofanetioyoimotii] 








Potential unounli of lUvcr 
lued In coliugB 


silver und 
oertlflcatea 

market 


JSsa 


C*l«ndiry«n 


Mint 
ptojectlooof 
ordliury 

(1) 


ooln 


Total 

£3) 


ass, 




-X0.9 
-US.0 
-ti.t 

-«.T 

-70. B 
-TS.7 




-aaB 

-MB. 4 
-M8.B 
-SI. 4 


-100.0 
-1010 












-«*.4 
-444.4 




























I!^ 




-71. T 























M Of mbildlarT oiln ai 



Tablb 3-A. — Example of the Replacement of the Exitting Coinage With Coinage 
of too Finenei* During a£-Year Period, No Allowance Made for Reooverg of 
the Old Coinage 

[In mllUons of floe tro7 ouneea] 





uatd In coinage 


PotantW 


Traaanr; 


Cftlandar years 


requlre- 
(1) 


a) 


Total 
oolnace 

niquliFd 

(3) 


sUnr 

CMtlflcates 

orlnmaklnc 

Dutrlibt 

(4) 


St 

alli^^uua 
?tSSd°^ 

(« 




-IBaB 
-112.11 
-SIB 




-a».i 
-aiae 

-4fi8.1 

-408.4 


-isao 

-lOOiO 

-loao 












-KB.t 




M» 


-m4 




-B.9 




-IB.9 
-M.1 
















-«.! 



























The example does show that a successful transition to reduced con- 
tent silver coinage, if possible at all, would require a very short transi- 
tion coupled with a liigh rate of recovery of the old «>in. In interpret- 
ing these examples, it should be kept in mind that the prodacti<ai of 



Digitized byGoOgle 



COINAGE ACT OF 1985 249 

the new coins has been set arlHtrarily at required rates, without ref- 
erence to the fact that such production would exceed Mint capacity. 
Furthermore, no' attention has been paid to the very real possibility of 
an accelerating speculative demand for silver as Treasury stocks de- 
clined. It is one thing to construct an example in whidi Treasury sil- 
ver stocks fall and are then reconstituted by recoveries of old coin, and 
quite another thing to estimate just how destructive of confidence a 
sizable fall in Treasury silver could be during an admittedly haxard- 
ous transition to silver coinage of lower ctHiteut. 

CondnricHis 

1. llie examples that have been presented do not exhaust all the pos- 
sible ways in which a transition to reduced content silver coinage 
might be attempted. It is believed that they do cover the more prom- 
ising alternatives open to the Treasury. The general conclusion must 
be unmistakable. The transition to silver coinage of reduced content 
would be an extremely risky undertaking, and Treasury silver stocks 
would probably be depleted within a relatively ^ort period of time. 
If there is a partial and limited exception to this overall conclusion, 
it arises with 400 fineness where a high proportion of the existing 
coinage is recovered at a rapid rate. 

2. £ven there the risks would have to be judged intolerably great 
unlen there were clear evidence, at the time a decision was reached, 
that the coin shortage had raded and subsidiary silver coinage was 
temporarily redundant.* No one could be sure in any case that the 
price of silver would not be drivot again to the melting point of sub- 
sidiary coinage; this might not occur within the immediate future. 
In general, analysis of the special problem of the transitiim to reduced 
content silver coinage suggests that attrition can appropriately be 
concentrated from this point in the study upon the base alloy 
alternatives. 

3. However, thrare may be special reasons for continuing to produce 
a single silver coin whidli would circulate alongside the new b^alloy 
coins. This issue is discussed briefly in an appendix to this section. 

Appendix : Notes on the Retention of a Silver 50-Cent Piece 

There may be advantages in retaining a single clrqulating silvei' coin. 
It seems reasonably certain that a clad silver 50-cent piece of 400 fine- 
ness could be continued in our coinage system for a good number of 
years, perhaps indefinitely. Furthermore, if for some reason it did 
become impossible to continue silver in this limited role, a shift to a 



> Tbli U elMrl; not tbc e«w At th« pruant Ums. 



7S 

■dbyGOOgIC 



250 COINAGE ACT OF 1965 

base-alloy 50-cent piece could be effected without seriouB difficulty or 
disruptive effect 

The amounts of silver which might be used in a clad silver 50-ouit 
piece can be estimated approximately. Between 19fi7 and 1961, pro- 
duction of 50-cent pieces ranged between 25 and 30 million pieces an- 
nually. Since then production has increased sharply, rising to 93 
million pieces in 1963 and to 206 million pieces in 1964, wh«i hoarding 
of Kennedy SO-cent pieces was severe. The more recent levels are, 
of course, abnormally high. A more reasonable figure might be an 
annual production of 100 million pieces. This would still be about 
twice the number of pieces projected by Arthur D. Little for 1968, and 
it might even be preferable to start with a lower amount initially. 

The important consideration, in the present context, is that the pro- 
duction of 100 million 50-cent pieces from the 400 fineness silver aJloy 
would use only some 15 million ounces of silver, about 5 percent of the 
current rate. This amount would clearly fall within permissible 
limits of silver usage, particularly since with a transition to base alloy 
coinage this amount of silver might very possibly be recovered by the 
Treasury from the existing coinage. 

The advantage in retaining a silver 50-cent piece is the extensdon of 
a continuous tradition of circulating silver coinage. Of course, senti- 
ment and tradition must not be allowed to obstruct the transition to a 
secure coinage system, adequate to the needs of the present. However, 
by eliminating silver from the dime and quarter, a major drain «» 
Treasury silver stocks would have been removed, and the retentim of 
a silver 50-cent piece should be possible. 

The retention of one or two silver coins is common practice inter- 
nationally. Some examples are Japan, France, Italy, the Federal 
Republic of Germany, the Netherlands, Belgium, and Greece. In 
c<Hitinuing with the silver dollar at its existing fineness and a clad 
silver 50-cent piece of 400 fineness, our own coinage system would come 
more nearly into corresponding with present practice abroad. As it 
stands, our own consumption of silver in coinage dwarfs that of the 
rest of the world and threatens to dislocate silver markets and letid to 
severe shortages for industrial use. 

In suggesting the possible retention of a silver 50-cent piece, it must 
be stressed that the uncertainties of the future silver situati<Hi preclude 
any definite commitment as to the amounts of 50-cent pieces that would 
be produced. Also, during early stages of any transition to a new 
coinage system, the Mint should be concentrating heavily upon the 
production of the new base-alloy coins. Production of the 400 fine 
50-cent pieces should only be phased in gradually as capacity became 
available and silver supplies were clearly adequate for the purpose. 
Finally, at the risk of some repetition, it should be emphasized that 



■dbyGOOgIC 



COINAGE ACT OF 1965 251 

the use of an; silver whatsoever in the 10- and 25-cent pieces (which 
are crucial to the needs of commerce in a way that the 50-cent piece is 
not) is ruled out for the reasons developed earlier. 

The feasibility of retaining a 400 fineness silver half dollar should 
be examined exhaustively by the Treasury before making its legislative 
recommendationB. These notes are only intended to raise the pos- 
sibility of keeping a silver 50-cent piece, not to provide the full 
justification that such a course of action would require. 



7S 

■dbyGOOgIC 



COINAGE ACT OF 1985 



VI. Further Consideration of the Base Metal Alloys' 

The previous seaion has concluded that the transition to r reduced 
content silver alloy used throughout the subsidiary coinage would be 
extremely risky and that Treasury stocks of silver would probably be 
depleted during or soon after the transition period. This negative 
conclusion applies without reservation in the case of the 500 alloy, and 
it does not appear that the outlook is much more promising in the case 
of the 400 alloy. None of the silver alloys of lower fineness Ihan 400 
meet minimum standards of acceptability. As noted previously, in 
the judgment of the Mint technical staff, the exterior silver cladding 
on any composite coin should not be reduced below 800, and this pre- 
cludes reducing the overall fineness much below 400. Therefore, the 
silver alloys are eliminated as the basic subsidiary coinage material. 
The possibility remains of using very limited amounts of silver in a 
clad 50-cent piece, but the bulk of future subsidiary coinage produc- 
tion must be nonsilver. The present section will consider the advan- 
tages and disadvantages of the base alloys that remain and discuss the 
ways in which the transition from the present silver coinage to a new 
system largely of base alloy coinage could best be attempted. 

Relative Merits of the Remaining Alloys 

There are four remaining alloys : Cupronickel, nickel silver, cupro- 
nickel or nickel silver clad on a copper core, and the Inco coin. No 
final choice will be made from among them at this stage, but their 
respective advantages and disadvantages will be summarized and a 
tentative judgment established. At an early stage of this study, 
criteria were developed against which it was suggested that a future 
coin program might be judged. It will be helpful now to compare the 
extent to which the remaining alloys do successfully meet the differwit 
criteria. 



■Tbli ebapter w>b written beloie tbe Mint bad completMl Its lDteD«l>« iDTMtltmtlon 
or tbe clad colnase matertalH with respect to production feastblllt; aod an amared unpplr 
of the bonded atrip. Conaeiiuently, It doeH not full; reflect Information availably to the 
Hint and Treamry at the time the erenlual coinage dedalon wan made, nil* fact ahonld 
be borne Id mind In reading the present chapter and Id Interpreting the Itodr'a Ba*I 
conclnBlona and r 



db,Google 



COINAGE ACT OF 1965 253 

Median) of Ezchansre Function and Permanence of the Solution 

Any of these base alloys would ajjpear to meet the essential require- 
ment of no interruption to the essential medium of exchange function, 
althougli specific changeover problems with the alloys remain to be 
discussed. Any of the alloys would also appear to meet the require- 
ment that there be a minimal chance of any serious disruption to the 
new coinage system within the next 20 to 2fi years. 

Assured Access to Raw Materials 

On tlie question of assured access to raw materials, the Inco coin 
does present potential problems. As noted earlier, nickel does not 
seem likely to present a really critical overall supply situation. But 
the fact remains that U.S. production of ferronickel is unsuitable for 
coinage, and U.S. coinage requirements would have to be met from 
the existing stockpile of nickel and/or Canadian production. In addi- 
tion to the overall nickel supply picture, the special nature of the pro- 
duction process with the Inco coin means that for a considerable period 
of time the Mint would be largely dependent upon a single commercial 
source of supply for the alloy itself. In order to adiieve a rapid 
transition to high level of production, it would apparently also be 
necessary to have annealing and blanking operations carried on by 
Inco at its Huntington, West Virginia, plant. 

Provisi<Hi could possibly be made subsequently to carry on all or 
some of these operations in the new Philadelphia Mint or perhaps to 
look to a later transition to a pure nickel coin and plan the new Phil- 
adelphia Mint facilities accordingly. All of this adds uncertainties 
and complications at a time wh^i planning for future Mint operations 
is difficult enough. These considerations and those of raw material 
supply should not entirely rule out the Inco coin, but they do suggest 
that it must offer some clear advantages over the other alloys to com- 
pensate for its less than ideal position from the point of view of 
supply. 

Public Acceptability 

Public acceptability of a new coinage system was viewed as rest- 
ing upon a number of factors among which were demonstrated neces- 
sity of the need for a change to the new system, physical character- 
istics of the new coins, minimum of inconvenience to the public, and 
absence of extreme hardship to a particular group or industry. The 
first of these factors, the need for the change, applies equally with all 
of the alloys. The physical characteristics of different coinage mate- 
rials were discussed in some detail in Section IV when these four base 
alloys were selected from a larger number of potential alloys. 



dbyGoogle 



254 COmAGB ACT OF IBOS 

Physical Characteristics of the Coins 

Aside from questions of operation in vending machines, it can be 
argued that on the basiB of their physical characteristics the coins 
should be ranked : Inco, cupronickel or nickel silver, and the clad coins. 
Such a ranking would be based upon the belief that nickel is a slightly 
more desirable coinage metal than cupronickel or nickel mlver and 
that clad coins are generally not quite so desirable as ctHiTentional 
alloys. However, extensive Mint testing of the clad materials has 
revealed that their wear properties and other physical characteristics 
are in no way inferior to homogeneous alloys made frxan the outade 
cladding mnterinl. The reddened edge of the clad coins is a matter 
of appearance on which opinions might possibly differ. So long as 
the coins are durable, attractive, and perform the medium of exchange 
function, the reddened edge would not appear to be a matter of very 
great importance. 

Operation in Vending Machines 

Public acceptability will also depwid upon the new coins woiiing 
in vending machines. The strong point claimed for the Inco coin 
is its ability to work in existing vending machine rejectors. In srane 
machines, the application of a small piece of tape has improved pw- 
formance. As noted previously, the claims made for the Inco coin 
have never be«i dem<Histnited convincingly, despite repeated tests. 
There is reason to believe that all of the problems have not yrt been 
overcome, and may never be. The case for the Inco coin does rest 
primarily upon its consistently successful operation in vending ma- 
chines under actual operating conditions. Consequently, the failure 
of the Inco coin to demtmstrate its compatibility with the existing 
silver coinage in vending machines is very nearly a decisive objectiim 
to its use, Inco claims that an entirely new type of rejector mecha- 
nism, based upon electronic principles, might be designed aroimd their 
coin. No such equipment exists, and even if it did, it would not meet 
the immediate problem. 

The cupronickel clad coins have, on the other hand, conclusively 
demonstrated their ability to work alongside the existing silver coins 
in the 10-, 25-, and 50-cent channels of existing vending machines. 
Similarly, the silver-copper alloy clad on a low-content silver core, 
which has be«i suggested for use in the 50-cent piece, would work in 
vending machines with no alterations required. Nickel silver clad 
on a copper core has not been tested in vending madiines, but on the 
basis of its physical characteristics it would work. A possibility, in 
the case of the base-alloy-clad materials, would be to use one or the 
other of them as a transitional coin wliile vending machine rejectors 



Digitized byGoOgle 



COINAGE ACT OF 1966 255 

were being modified or replaced to accept ordinary cupronickel or 
nickel silver coins. 

The relative importance of compatibility of the new coinage and 
the present coinage in vending machines will be discussed further 
in the context of changeover problems. To this point, major em- 
phasis has been placed upon the inconvenience to the public if new 
coins will not work in vending machines and the possibly disruptive 
effects upon the vending machine and coin rejector industries. In 
addition, large companies whose products are nationally distributed 
through vending machines would understandably be concerned in 
such a case. These are very important considerations that should 
be weighed carefully before reaching any final decision — particularly 
the inconvenience to the public and possible disruption of commerce. 
It should also be pointed out that under conceivable circumstances 
the effort to insure that new coins would work immediately in every 
vending machine could come into conflict with the more important 
objective of insuring an adequate supply of coins at all times. This 
could be the case if the compatible coinage material were not available 
quickly in needed volume. Since this is a matter which the Mint is 
investigating intensively, it need not be considered further here. 

Absence of Hardship 

The absence of serious hardship to any single group or industry is 
a reasonable objective, whichever one of the base alloys is selected 
for the subsidiary coinage material. As noted above, this suggests 
the desirability, if not the absolute necessity, of finding a coin which 
will work in existing vending machines, or possibly offering some 
assistance to the vending machine industry if such a coin is not used. 
Tlie needs of the silver users will be met if silver is removed from the 
coinage — except for the relatively small overall requirements if silver 
olad is used in the 50-cent piece — and the price of silver is held at 
the present level during a fairly lengthy transition period. Silver 
producers might reasonably be protected by a proposal that the Treas- 
ury would stand ready to buy newly mined domestic silver^ — say at 
$1,25+ — for a period of time. In the absence of such a purehase 
program, producers might fear the market -depressing impact of the 
liquidation of speculative stocks of silver, accumulated in the mis- 
takeiied belief that the price of silver was sure to rise above $1.29 + . 

Ease and Certainty of Production 

Ease and certainty of high levels of coin production are extremely 
important; they could become a vital consideration in the case of a 
quick changeover. It is clear that cupronickel has many advantages 



79 

Digitized byGoOgle 



256 COINAGE ACT OF 1906 

here because of long Mint experience with the material and depend- 
able commercial sources of cupronickel strip. Nickel silver is also a 
relatively easy material for the Mint to work with ; f(s noted earlier 
the addition of zinc does complicate melting procedures to some ex- 
t«nt But, nickel silvw strip should be readily available from com- 
mercial suppliers. 

Both the Inco coin and the clad coins offer pot«itial difficulties, al- 
though in the case of clad coins the difficulties quite possibly can be 
resolved. The Inco coin will be hard on dies and may require heavier 
presses. This assumes that annealed blanks would be supplied by 
Inco, but certainty of supply cnnnot be absolutely assured in such an 
event. Unless the Mint could build up very large inventories of the 
blanks, which would hardly be possible at first, there would be the 
threat thnt a strike at Inco, a failure in quality control, or some other 
temporary interruption to the steady flow of acceptable blanks could 
disrupt Mint production schedules. With the clad coins, there is 
little question of the Mint's ability to work the material. But, assur- 
ance of an adequate supply of the clad strip is uncertain on the basis 
of what was known at the time this report was written. This imcer- 
tainty will be resolved by intensive Mint investigations currently 
underway. 

Minimization of Cost of Coinage 

The minimization of the cost of coinage is a sensible objective <mly 
at an acceptable level of coinage quality. Cupronickel would probably, 
offer the most seigniorage. Nickel silver should run a close second 
with some increase in cost because of the need for special procedures 
where zinc is alloyed with copper and nickel. The exact cost per 
pound of clad strip has not yet been determined. Approximate in- 
formation is available, and suggests that the cost of clad cupronickel 
strip would initially be in the range of $1 to $1.50 per poimd. 

Cupronickel alloy costs about 45 cents a pound and only a further 
5 cents, or so, need be added in the case of the homogmeous alloy for 
melting and rolling operations performed in the Mint. Where the 
strip is purchased from outside suppliers, the comparable cost would be 
about 65 cents per pound. The cost of cupronickel clad on a copper 
core would fall in the range of $1 to $1.50 per pound, assuming the 
same 45-cent cost of alloy. The Inco strip would probably cost about 
$1.50 per pound. In view of the relatively large amount of seigniorage 
with any of these materials and the general importance of the coinage, 
it could be argued that alloy cost should not be given very much weight 
in the final decision. It probably should receive some consideratitai. 

One type of cost calculation which may be relevant is the extra 
cost of clad strip, or the Inco coin, over straight cupronickel or nickel 



■dbyGOOgIC 



COINAGE ACT OF 1966 257 

silver. Since the clad coins are chiefly attractive because they will 
work in existing vending machines, their extra cost, if they are used 
permanently, should be contrasted with the once-and-for-all cost of 
altering vending machine rejectora Where clad coins were used only 
during a transition period, the extra cost could be viewed as necessary 
to achieve speedy introduction of the new coins. But, if clad coins 
are used permanently, cost more than conventional alloys, and are 
superior in no respect other than use in vending machines, a question 
arises whether eventual modification of rejectors to accept conven- 
tional alloys might not prove desirable. 

With the clad coins, the increment paid (in the first instance by the 
Mint and ultimately by the public) in lieu of altering vending machines 
is probably on the order of 50 cents to $1 per pound of coinage material, 
and about $1 in the case of the Inco coin. The extra cost in the case of 
cup ronickel -clad coins might be $10 to $15 million annually at high 
rates of coin production, and reduced proportionately at lower rates 
of production. This extra continuing cost contrasts with a one-time 
vending machine conversion cost that might range from $50 to $100 
million if a straight cupronickel or nickel silver coin were to be used. 
The use of either of these coinage materials would also, in the opinion 
of the vending machine industry, involve intolerable continuing costs 
because the selectivity of their rejectors would be so greatly impaired 
that they would accept a wide variety of slugs and foreign coins. In 
addition, there would be losses because of "downtime" while rejectors 
were being modified. These losses are difficult to quantify, but could 
be considerable. 

Cost comparisons of the sort described here while of some relevance 
could not be a decisive factor, even if plausible magnitudes could be 
assigned to them. They cannot measure the inconvenience to the 
public and the attendant disruption to commerce that might follow a 
decision to introduce large amounts of coin into circulation which 
, would not be compatible with the present coinage in vending machines. 

Balance of Paj^ments Cost 

Alternative base alloy programs would not have an appreciably dif- 
ferent eflfect upon the balance of payments, except for the Inco coin. 
There, unless nickel were used from the stockpile, imports of nickel 
from Canada would increase, possibly by $10 to $20 million annually. 

Other possible effects upon the U.S. international position are less 
t angible and very difficult to estimate. Advocates of silver in the coin- 
age will stress the importance of its retention and cite the return to 
some silver in coinage by Western P^uropean countries. The retention 
of the present silver dollar and the use of the 400 fineness clad alloy 
in the 50-cent piece would seem to meet the requirements of prestige. 



81 

Digitized byGoOgle 



258 COINAGE ACT OF 1005 

Somtnary: The Relative Merits of the Base Alloys 

The choice between cupronickel and nickel silver on the one hand 
and between the Inco coin and clad coins on the other is best considered 
separately. Cupronickel and nickel silver are "permanent" coinage 
alloys; they will not work as subsidiary coinage in existing vending 
machines. The Inco and clad coins can be regarded as "transitional'' 
coins which will wort in vending machines while rejectors are being 
altered for a permanent coinage of pure nickel, cupronickel, or nickel 
silver; or equally well, they may be regarded as permanent coins if it 
is determined that modification of vending machine rejectors is not 
desirable. It will be assumed, simply for the purpose of discussion, 
that eventual modification of rejector mechanisms may be 
contemplated. 

Assuming that vending machine rejectors were to be modified even- 
tually, the choice of permanent coinage materials lies primarily be- 
tween cupronickel and nickel silver. The transititm to pure nickel 
coinage appears to be impractically difficult since, as indicated in 
Section IV, it would mean the replacement of practically every coin 
testing device currently in use. As between cupronickel and nickel 
silver, the differences are not great, although in most respects cupro- 
nickel is a slightly superior coinage material. Some people feel that 
nickel-silver makes a slightly better looking coin, i.e., more like silver, 
when newly minted. But, this is probably more than offset by its 
tendency to yellow with age and its general inferiority to cupronickel 
from the Mint standpoint. The upgrading of the 5-cent coin mat«ri^ 
that would occur with cupronickel would, perhaps, not be an idetd 
solutioD, nor is it an altogether attractive prospect to have 5- taid 10- 
cent pieces of present size made from the same material. However, 
all things considered, the preference here would be slightly in favor 
of subsidiary coinage made from cupronickel, with the pr^wit 5-c«it 
piece unchanged. The alternative of leaving the present 6-cent piece 
unchanged and using nickel silver for the subsidiary coinage would 
also be acceptable. 

The cupronickel or nickel silver clad on a copper core has the great 
advantage of avoiding the need for modification of vending ma- 
chines. The Inco coin does not work acceptably and even if it did 
it would be superior to the clads only on the basis of appearance. The 
clad coin is to be preferred since it would lead It^cally and easily 
to a permanent coinage of cupronickel, or nickel silver, or, as seems 
equally desirable, could be retained as the permanent coinage material. 

Changeover Problems with the Base Alloys 

While the announcement of a plan to switch to a base alloy lor 
subsidiary coinage is not likely to cause intensified hoarding of silver 



Digitized byGoOgle 



COINAGE ACT OP 1065 



259 



coins by the public, the Mint must be prepared to offset any conceivable 
scale of withdrawals. Similar considerations would apply in the 
ca,se of reduced content silver coinage, and it will be recalled that 
some of the arithmetic examples in Section V allowed for complete 
replac^nent of the coinage in circulation at the time of the change- 
over, whether or not the old coins could be recovered. Most of those 
not recovered were assumed to have been hoarded. A crucial differ- 
ence is that the prospect of a sharp increase in silver prices would 
disappear, and the major threat to a smooth transition would be 
removed. 

However, the public may want to hold relatively large amounts 
of silver coins; new ones because they are the last of their kind, old 
ones because of enhanced numismntic value, real or imagined. This 
could mean that a large part of the production of 1964 silver coins 
might fairly rapidly, if temporarily, be withdrawn from circulation 
along with an appreciable amount of older coins. The effective 
countenneasure is a very high rate of production of the new coins 
and their introduction in large volume. If a. silver 50-c«nt piece is 
continued in production, the withdrawal of silver coins may well be 
minimized. 

Possible Need To Replace Existing Coinage 

The net effect of these considerations is that, while side-by-side cir- 
culation of the new and old coins is altogether likely, there are residual 
uncertainties and the prudent course is to he prepared to replace the 
coinage fairly rapidly, if required. The "replacement problem" with 
a base alloy is very difficult from the case of a transition to silver coin- 
age of reduced content. In that case, the situation was complicated 
t^ the need to recover as much as possible of the existing coinage and 
turn it out again in the form of lower content coins. With the change- 
over to base alloy coinage, the problem is inherently a much simpler 
«ie of rapidly achieving a rate of production sufficient to offset with- 
drawals from circulation. Because the rate of withdrawal of the old 
silver coins is difficult to estimate in advance with accuracy, the 
Treasury must plan to replace much of the existing coinage and have 
the capability to do it within a relatively short period of time. If 
the coin shortage should ease by early next year, the changeover prob- 
lem should be a relatively simple one. At the preswit time, planning 
should go forward on the less favorable assumption that there will 
still be a coin shortage at the period of peak demand in the second 
half of 1965. 



■dbyGOOgIC 



260 COINAGE ACT OF 1965 

Possible Interim Expanmon of 5-Cent Prodaction 

Assuming for the sake of disciission that l^slation providing for 
a new base alloy coinage were passed by late spring or early summer, 
only a limited amount of the new coins could be produced by the 
end of the calendar year, and their introduction should probably be 
delayed until 1966. At the same time, the public might possibly be 
making s(»ne net withdrawals of silver coin from circulation. This 
could ccaitrihute to a tight coinage situatitm next year at about this 
time (December). One step that can be taken even before the l^s- 
lative consideration of the Treasury proposals is to plan for extra 
production of 6-cuit pieces beyond the amounts scheduled imder the 
current crash coinage program. The logic of such a procedure would 
be diat whatever the eventual decision on the subsidiary coinage mate- 
rial, extra 5-c«it pieces would be a valuable addition to the circulating 
coinage during the difficult initial stages to the changeover.^ 

If it were considered certain that silver would not be continued 
in the coinage, there might even be something to be said for a 
reduction in the rate of silver coinage after the beginning of the 
year. To the extent that this allowed increases in the rate of coin- 
age of 5-cent pieces, coins which would stay in circulation would be 
increased at the expense of coins which possibly might not to the 
same degree. There are, however, difficulties with such an approach. 
A much larger number of 1- and 5-cent pieces must be produced to 
carry on a given dollar amount of commercial transactions. Fur- 
thermore, such a shift might cause some disruption in Mint produc- 
tion schedules. For these reasons, it probably is better to plan to 
continue to produce silver coins at fairly high levels up to the time 
that a switchover is made to a new subsidiary coinage alloy. 

This would not, however, preclude some intensification of the pro- 
duction effort next year on 6-cent pieces, at the expense of 1-cent 
pieces. It is understood that the Mint will have considerable flexi- 
bility in this respect as new presses already on order are delivered. 
A further but more far-reaching effort along these lines would bo' 
the establishment of additional temporary facilities which could be 
used to produce cupronickel 5-c6nt pieces from purchased strip and 
rapidly shifted to the production of subsidiary coinage at a later time 
in the year. 

Possibilities of this sort have been canvassed thoroughly on earlier 
occasions when planning the current crash coinage program. Great 
progress has been made along these lines. Approximately 50 coin 
stamping presses and additional blank annealing and cleaning lines 



' As U DOW amplr cleir (Haj ie6B), the UlDt'i craib coinage proKram tui been eml- 
nenUy succeBsful In OTercomlnc the sbortage of 1-cent and B-cent pieces and baa baUt ap 
tbe Bort of backloB referred to In the teit. 



Du,iiz=db,Googlc 



COINAGE ACT OF 1985 261 

are on order, and it is understood that further 10-coin stamping presses 
are about to be contracted for. However, the changeover to a new 
coinage alloy may mean that even higher levels of coin producing 
capacity will be required until the new Philadelphia Mint comes on 
stream. If so, there probably is a need to reexamine the possibility of 
seeking authorization to obtain additional space where supplementary 
minting of coins from purchased strip could take place. This might 
involve the installation of coin-stamping pre.sses in the present San 
Francisco building, or in temporary facilities elsewhere, or both. In 
any event, "outside" operations should remain under Mint control 
and jurisdiction.' 

Dimensions of the Changeover Problem 

Some rough idea of the production effort that might be required 
to insure an efficient changeover to base alloy coinage can be gained 
by reference to the volume of subsidiary coin estimated to be in cir- 
culation at the time of the changeover. Table 1 presents approximate 
estimates of the number of pieces of subsidiary coin that will be in 
circulation at the end of calendar year 1965 and their face value. 
These estimates supplied by the Mint are lower than those that would 
be carried in the Cirdulation Statement, but higher than those implied 
by the A. D. Little estimates for January 1963 based upon the age dis- 
trihution of a selective sampling of coins by the Federal Beserve 
banks. Further internal studies of the amount of coin in circulation 
should probably be made by the Treasury, but the present estimates 
are adequate for the purpose at hand. 

One dimension of the changeover problem is simply the total amount 
of base alloy coins that would have to be produced in order to re- 
place silver coins now in circulation. There is every reason to be- 
lieve that there will be extensive side-by-side circulation of silver and 
base alloy coins. However, to be entirely secure, plans should be made 
for the full replacement of the existing coinage. Another dimensicm 
of the changeover problem is the peakload production that will be 
required in early stages of the changeover when withdrawals of old 
coin would possibly present a problem. Complete replacement of the 
more than 12 billion pieces of outstanding subsidiary coinage with 
base-alloy coinage would probably take about 3 years. This assumes 
that 1- and 5-cent production would be continued at roughly the rates 
now scheduled for fiscal 1966 and that the remainder of Mint facili- 
ties would be shifted as rapidly as possible to the production of base- 
alloy coins with the maximum feasible reliance upon the purchase 
of strip. Heplacement could be accomplished even more rapidly, if 
existing and planned capacity were to be expanded. 



<Tbe Treamir'i propoted Ie(1slftaon Inelndei antliortutlon to mrame th« mlotlnf of 



■dbyGoogle 



COINAGE ACT OF 1868 



Tabia 1. — Bttimated Subsidiary Coin in Gircvlation at End of 
Calendar 1956 





(uSSw 


«?- 




1,233 
3,317 
7,8« 


SS16 








784 








12,394 


8,3» 



Full replacement of the existing coinage is hardly likely to be oblig- 
atory vrithin 3 years, but this does set an approximate upper limit 
on the overall production task. What does seem likely to be required 
is the ability to reach peak rates of production very quickly in <^er 
to offset any net withdrawals of old coin in initial stages of the trann- 
tion. This does tend somewhat to increase the attractiveneflB of 
cupronickel as the subsidiary coinage material since the Mint is thor- 
oughly familiar with its processing, no period of ezperimentaticMi 
would be required, and dependence upcni outside suppliers would be 
minimal. 

Purely for the sake of illustration it may be useful to ctmsider the 
timing of a shift to cupronickel subsidiary coinage. At tiie time of 
writing, it is not possible to evaluate a similar changeover to cupro- 
nickel clad coin, but the Mint is examining the problem in depth and 
detail. In the case of straight cupronickel, if the Mint were able to 
commence full-scale production of subsidiary coins by July 1 of next 
year, it might be possible to produce as many as 1.9 billion pieces by 
the end of the calendar year. The maximum annual production rate 
would be 3.8 billion pieces of cupronickel subsidiary coin with esdsting 
production facilities and approximately the existing distribution 
among 1-cent, 5-cent, and subsidiary coin production. If this maxi- 
mum rate could be quickly achieved, a little more than 15 percent of 
the outstanding amount of subsidiary coinage could be replaced in the 
first 6 months. If the coin shortage eases early next year, this rate of 
replacement of subsidiary coin should he entirely adequate. Still, 
there is much to be said for an immediate effort to provide an even 
larger temporary productive capacity, and if there is continuing evi- 
dence next year of a coin shortage, some action will be obligatory. 
The leadtimes for expansion in coin-producing capacity are l<mg, and 
deliveries of needed equipment and materials are sometimes uncertain. 
However, the Mint's efforts under the crash coinage program have 
been prodigious, and, if required, they undoubtedly can expand thur 
capacity ev&i further. 



Digitized byGoOgle 



COINAGE ACT OF 1965 263 

Vending Machines and the Changeover 

The possible need for very intensive production of the new coins 
is complicated by the vending machine problem. Where the new 
coinage material did not work in present rejectors, there would be two 
extreme alternative courses of action. In one the vending machine 
constraint would be accepted and coin production would be adapted 
accordingly. Production of silver coins would be continued at high 
rates while vending machines were being modified and parallel pro- 
duction of the new coins was begun, but the introduction of new coins 
would be delayed imtil vending machines were fixed. The objections 
to such a program are obvious. Even if vending machines could be 
altered in less than 2 years, the drain on silver stocks during that time 
could be very great. Furthermore, it would be extremely difficult to 
arrange for the parallel production efforts on old and new coins with- 
out running the risks of a divided effort and inadequate production of 
both. 

The other alternative would be to commence production of the new 
coins as soon and as rapidly as possible and place them in circulati<ni 
without awaiting the modification of vending machines. This would 
have the advantage of not continuing the production of silver coins 
at a time when many of them would go out of circulation as soon as 
they were issued. The obvious disadvantage would he the fact that 
new coins would not work in unaltered vending machines. While this 
should, in fact, tend to keep some additional amounts of old coin in 
use, it could hardly fail to disrupt machine merchandising and greatly 
inconvenience the public. In early stages of the transition, new coins 
would still be a small fraction of the total amount of coin outstanding. 
If vending machines could be altered rapidly, and their operators 
would have some incentive to do so, the changeover might be achieved 
without dire results. Wliether such a program could gain legislative 
approval, or should be recommended, is another question entirely 
which will not be examined here. 

The Transitional Coins 

The obvious attractiveness of the clad and Inco coins, is the po- 
tential they offer for avoiding the vending machine problem. Intro- 
duction of the new coins into circulation could proceed as rapidly as 
they could be produced. The critical factor then tends to become the 
leadtime required to obtain adequate amounts of the Mint input — 
clad strip or annealed Inco blanks. While successful resolution of 
vending macliine difficulties is highly desirable, it will be necessary 
to guard against attaching too much importance to that single ob- 
jective. The supply of the material for the transitional coin must be 
completely assured. Otherwise, there is a danger tliat a high rate 

87 

Digitized byGoOgle 



264 COINAGE ACT OF 1960 

of production could not be sustained. This could potMitially even be 
more serious in its overall effects than the difficulty with vending ma- 
chines that would result if ordinary cupronickel coins were used. 

Tnco apparently has the capacity to malcB the required amounts of 
strip but the Mint would need annealed blanks at least initially. Eren 
if the Inco coin were satisfactory in other respects,' assurance would 
be needed that adequate amounts of blanks would be forthcoming, 
and that tliey could be struck on existing Mint equipment. Similar 
considerations apply in the case of clad strip upon which the details 
of assured sources of supply were not available at the time of writing. 
Battelle has recommended tliat the Mint initiate an exhaustive in- 
vestigation on this crucial point and just such an investigation is un- 
derway. 

Melting, Hoarding, and Export Controls 

Brief comment will be made on the role that melting, hoarding, and 
export controls might play during the changeover to a base alloy, al- 
though full examination and analysis of the problem will not be at- 
tempted liere. It may be desirable to obtain standby authority for 
the Secretary of the Treasury to institute controls over the hoarding, 
melting, and exporting of silver in the event he determines certain c(hi- 
ditions occur. But, with the possible exception of export controls, the 
usefulness of such controls as part of an orderly changeover appears 
questionable; rather, their function would appear to be that of em«r- 
gency maneuvers to be taken only if the possibility of holding the 
silver price through sales from our own stock during the critical 
changeover period is seriously threatened. If the changeover is started 
soon to a base alloy, this threat will undoubtedly be avoided. 

The purpose to be served by controls over the melting of coin if 
the Treasury is able and willing to hold down the price of silver is 
questionable, since there would then be no incentive to melt coins. 
Furthermore, the prohibition of melting at the same time as the price 
of silver is being held could foster the misconception that the price was 
shortly going to he allowed to rise, and stimulate speculation in 
bullion. 

Melting controls might be obligatory in a "last ditch" effort to main- 
tain coin in circulation where the Treasury had tried to hold the price 
of silver, but then ran out of silver which could be sold in the market. 
In general, this would not even seem to be a remote possibility wha« 
the transition is to a base alloy, rather tlian to a reduced content silver 
alloy. Moreover, while melting controls could be required under some 
circumstances, too much should not be expected frcan their applica- 
tion, since a prohibition on melting could not effectively prevent 
hoarding under those circumstances. 



■dbyGOOgIC 



COINAGE ACT OF 1985 265 

Controls over the hoarding of coin, while perhaps conceivable in 
theory, \Yould be extremely difficult to enforce effectively. It is hard 
to see just how controls could be designed which would discriminate 
successfully between prohibited hoarding and the accumulation of 
coin in the ordinary course of business, and in coin collections. Pos- 
sibly, penalties for coin hoarding could be devised that would limit 
lai^ accumulations by professional speculators, and such controls 
might play some part in effecting the recovery of old silver coin in the 
tran^tion to silver coinage of reduced content. Even this se^ns doubt- 
ful, however, since a legal apparatus effective in dissipating large 
hoards would seem almost certain to encourage even more widespread 
"family" accumulations. While the question deserves fuller discus- 
sion and analysis than it will be given here, there does not seem to 
be much value in controls on the hoarding of coin. Controls on the 
hoarding of bullion might conceivably be more effective. 

There is a stronger case for export controls during a changeover 
period. Certainly, they would be an essential backstop to any con- 
trols over the melting or hoarding of coin. But if these controls are 
not used because the Treasury is holding the market pnce of silver, 
the case for export controls on silver ismuch less clear. 

The only situation in which we would want to prohibit the export of 
silver bullion would be during a period when there was heavy foreign 
speculative demand, which added to the drains on Treasury stock — as 
was the case temporarily in the latter months of 1964. However, one 
result of applying export controls would be a partial separation of the 
U.S. market from the world market, and there would be some increase 
in world prices above the pegged U.S. price. As a consequence, some 
U.S. domestic demand for silver, previously met from imports, would 
now be met from Treasury stocks, a cheaper source of supply. By 
frustrating the foreign demand for Treasury silver, it could be argued 
that some net saving would arise. It should be recognized that silver 
users would probably regard the separation of U.S. and world markets 
as a threat to their assured sources of supply. If ib, export controls 
might stimulate silver users to make precautionary purchases of 
Treasury silver in advance of their currwit requirements. The fact 
that, aside from speculative demands, the United States is a natural 
importer greatly increases the possibility of this response to a higher 
world price. 



■d by Google 



COINAOE ACT OP 1960 



VII. Conclusions and Recommendations 

1. Cupronickel is the best permanent material for a new subsidiary 
coinage, ignoring; the vending machine problem. A close second 
choice would be nickel silver for 10-, 25-, and 50-cent pieces. 

2. Either cupronickel or nickel silver coins would require "factory" 
adjustment of sophisticated vending macliine rejectors, entailing sig- 
nificant costs and transitional inconvenience. This may not be ad- 
judged intolerable, in view of their advantages in other respects. 
However, since extensive experiments confinn that cupronickel (and 
probably nickel silver) clad on a copper core operates successfully 
in unaltered vending machine rejectors, preferable opticMis are avail- 
able. A clad coin can be used during a tnuisition period, or perma- 
nently. 

3. Information on the wear properties of clad coins is altogethN' 
encoura^ng, and they undoubtedly meet all the requirements tor per- 
manent use in the coinage. If desired, they could, with equal facility, 
serve as a transitional coin while further study and research on the 
adaptation of vending machines was being conducted. An overriding 
requirement with clad coins is the production feasibility of the strip 
and the assurance of an adequate supply for processing in the Mint. 

4. Because of a number of unresolvBd questions, the Inco coin comes 
into the picture only if an assured supply of clad strip cannot be ob- 
tained. In any event, the Inco coin would have to have demonstrated 
conclusively that it would work in vending machines with minimal ad- 
justments, that it could be struck successfully in large volume on exist- 
ing Mint equipment, and that adequate supplies of strip or annealed 
blanks would be available 

5. Subsidiary silver coinage of reduced c<»)tent, such as silver- 
copper alloys clad on a low-content silver-copper core, suffers both 
from difficult transitional problems and incomplete assurance that the 
subsidiary coinage would not be imperiled again within a fairly short 
period of time. The danger of a complete breakdown during the 
transition period cannot be ruled out, and the use of silver through- 
out the subsidiary coinage should not be viewed as an eligible option. 
If any silver is to be retained in the silbsidiary coinage system,^ it 
should be limited to the silver dollar and to a clad 50-cent piece of 400 
fineness. In any event, the retention of the monetary value of the sil- 
ver dollar at its present fineness is absolutely essential to a successful 
transition. 



■dbyGOOgIC 



COINAGE ACT OP 1965 267 

6. During the transition to a new coinage system, it will be obliga- 
tory to hold the market price of silver at its current level in order to 
protect the existing coinage. Since this will remove the incentive to 
melt the existing coinage, controls over melting would probably not 
serve any useful purpose. Effective controls on the hoarding of coin 
appear impractical. Controls on the export of silver coin and buUicm 
may serve a useful purpose during the transition period. There is 
something to be said for having standby authority to invoke controls. 
A prompt transition to base-all<^ coinage would make the actual use 
of controls unnecessary. 

7. Kew coins should be placed in circulation through normal chan- 
nels. Every effort should be made as soon as possible to prepare for 
extremely high rates of production of the new coins. This should 
include an interim expansion in the production of 5-cent pieces (which 
would provide substitutes for silver coin and subsequently release Mint 
capacity for the new coins) and arrangements for additional tempo- 
rary production space. If this were to be outside of existing Mint 
facilities, it should remain under Mint control. 



■dbyGOOgIC 



db,Google 



FINAL REPORT 



February IZ, 196^ 



BAT TELLE MEMOKIAL 

505 King Avenue 

, Ohio 43201 



Digitized byGOOgIC 



270 COINAGE ACT OF 1966 



Battelle Memorial Institute • columbus l«bon«toiiics 

2fiB-SISI - CABLE ADDRESS: BATHIH 



I-ebnikiy 12, 196S 



Director ol the Mint 
U. S. Treaaury Departi 
Waahington IS, D. C. 



no aingle material waa fouod which could entirely aaliafy 
ectlve and objective onea. We balieva, however, that the 
praaent lalialttctory compromiaea that conalder the many 
ought to light by our inveatigation. 



The other Battelle 
itaU. ax well a« other n 


atafi members join me in eicpreaaing thanlca lor 1 
)rk on thia projecl. We have enjoyed worldng wit 
lembera of the Treaaury Department ataff. 


Pleaae c.U upon u 


a if we can be of additional aaalatance at any time 




Very truly youra, 




H. J. Wagner 
Aaaociate Chief 
Ferroua and High-Alloy 

Metallurgy Diviaion 



Du,iiz=db,Google 



OOINAGB ACT OF 190S 



ACKNO WL£DGM£NT 



The aalhorm wi»h to thank the Bureau of the Mint and the Tr«»«ury Dep 

this reporl. In addition, the contributiong of varioui Battelte (Caff members 
Department ol Msteiiali EngineeTing. Department of Economici and tnfarmj 
Research, and Department of Proceti and I%yilcal Metallurgy are appreciai 



»umeri, silver producers, coin-selector mani 
activated machines are gratefully acknowledged 



Digitized byGOOgIC 



272 COINAGE ACT OF 19S6 

TABLE or COMTENTS 

SUMMARY 

lNTRCtt>UCT10N 

CRITEHIA FOR SELECTING ALTERNATIVE COnUCE MATERJAU . . 

OUTLOC« FOR THE AVAILABILITY OF SILVER AS A CODUCE 
MATERIAL 

AVAILABIUTY AND COST OF VARIOUS METALS CONSIDERED 
AS ALTERNATIVES TO SILVER IN COINAGE 

PHYSICAL, CHEMICAL, AND MECHANICAL PROPERTIES 

MINT OPERATIONS AND THEIR RELATIONSHIP TO ALTERNATIVE 
COINAGE MATERIALS 

COUNTERFEITING, ILLEGAL DUPLICATION, AND SLUGGING . . . . 

PC6SIBLE CHOICES OF MATERIALS FOR U. S. COINAGE 

PRELIMINARY EVALUATION OF MATERIALS FOR SUBSIDIARY COINS . 

ALTERNATIVE CHOICES FOR VARIOUS DENOMINATIONS OF COIN . , 

POSSIBLE ECONOMIC CONSEQUENCES OF A CHANGE IN CCHNAGE 
MATERIAL 

CONCLUSIONS AND RECOMMENDATIONS 



SUPPLY -AND- DEMAND OUTLOOK FOR SELECTED METALS CONSIDERED 
AS ALTERNATIVES TO SILVER IN UNITED STATES COINAGE A-1 

APPENDIX B 
SILVER SUPPLY AND DEMAND B-l 

APPENDIX C 
COIN-OPERATED DEVICES C-I 

APPENDIX D 
MINT OPERATIONS D-1 



Digitized byGOOgIC 



COINAGE ACT OF 19B5 







Public »<:<: 


eptability 


Phy.ical, 




Effect o» < 


:om-operited devJ 


Effect on . 


Hint operation. 


Counterfei 


ting, illegal dupli 



No material can entirely saliafy all the criteria, though certain material! are 
outJtandlog in one reipecc or another. For example, the preaent sUver-copper alloy 
is excellent in every reipect except that it doeg not gatiaiy the availability and price 
criterion. The atudy indicatei that the Treagury diver gtoctii will bo depleted In 3 to 

judged thai a limit of about 15 per cent Bhould be placed on the gilver content of the 

of time to serve 1b a means of preventing a riae in the price of .ilver. 

Cupronickel (75 coppeT-25 nickel) ig attractive from the etandpoint of the transi- 
tion to the new coinage, because of the ease with which it could be adapted to Mint 
operallooa. However, it would not be completely acceptable in coin-operated devices, 

degired, would be the use of a composite material. One such material is a sandwich- 
like combination that combines into outside layers, elements of appearance and, in Its 
core, physictd properties th^t make the composite completely compatible with present 

11 is recommended that a composite material be adopted consisting of a 75 
coppe[-Z5 nickel alloy on the outside and a core of eoj^er. It is alto recommended 
Ihat the Mini take whatever steps are required to eatablish the availability of tha ma- 
terial and the feasibility of maintaining quality control under mast -production 



Du,iiz=db,Google 



COmAOE ACT OF ISSS 



U the multilayer 

■lloy. 

If tb> rctinUon ol ■!!¥» 
any of the other objective!, It 
One it to use etlver in the ^O-ccnt piece only, by makliig a multilayer compaiUe con- 
■iatlng of SO allver-ZO copper on the outiide, and s low lilver-coppcr alloy in the core. 
The other option la to spread the silver evenly throughout all subsidiary denoxninationB 
by making a composite conitstlnB of the 40 eilver-SO copper-3 nickel-5 sine alloy on a 
silver -bearing copper alloy core. It la further recommended that the ailver-containli^ 
coloSj if adopted, be changed to the 75 copper-25 nickel on a copper core on July 1, 
I9TS, oral such tlnu >• the Treasury ctoek of silver reaches a prcdMermiiMd 



db,Google 



COINAGE ACT OF 1968 275 



During the pait 



Ing so rapidly Ihat Iherc is danger that the supply of silver from the Tre 
and mine pioduction will soon not be adequate to fulfill the combinEd nee 
induBtry, ind defen.e. 



and engineering judgment. Thi* study did not delve deeply into the political or economic 
consequences of a change from our present silver coinage to some other alloy, eneepl 
where such effects are closely related to the choice of a particular metal or alloy. 

producers, silver consumers, and economists that the available Treasury stocks of 
sUver for coinage wUl be depleted in the not -Coo -distant future. The area of disagree- 



o light. Most of these suggestions are based 
ions both for lowering the silver content of tl 
intlrely. However, suggestions have also be. 



n into account in judging Che suitability of various candidate metals, alloys, or 



Du,iiz=db,Google 



COINAGB ACT OF 1965 



Availability and price 

Public acceptability 

Fhyiical, chemical, and mechanical propertiei 
Effect on eoin-operated devices 
Effect OD Mint operatioea 

Counterfeiting, illegal duplicallon, and slugging potential, 
riteris are discussed in detail In the next *ectlon of this leport. 



Digitized byGOOgIC 



COINAGE ACT OF 198S 



:erla for rating candidate materialt are lifted below and die- 
It ie believed that sll of the imporUnt factora governing the 

oy are included. 



■ the present predicamenl in silvt 
■supplyofeUver. It i» moet imp> 
ivsilable at reaeonable price and 



of suppliers, and Government ttockpiles for defense purpoies. From the standpoint of 
inlernalional poHtica and economicH, it would be best for the source! of supply lo be in 

tinenl. Under all but the moat eiftraordinary circumstances, this would insure the 



Judging from the widespread attention paid lo the current problem in the public 
press, and the feelings expressed by members of Congresg and other Government 

porcant factor. Acceptability to the public, however, is B subjective criterion which 

were available, a public poll using carefully chosen sampling techniques might provide 
some measure of public acceptability for a new coinage material. In the present report 

Public acceptability, it is believed, is related to a number ol more easily recog- 
distinguish genuine coins from counterfeit ones on the basis of such factors as color, 

distinguish between genuine and counterfeit coins. It is quite likely that a coin which 



Digitized byGOOgIC 



COINAGE ACT OF 1«S5 



t poteniial and criteria [or mechanical, chemical, and pbyiical 
alio relatid to both counterfeil patential and public acceptability. 



civilization a> malerialj ol worth or e«t*em. Such matEriaU often lerve >■ media of 
exchange. The markel value may or may nol be influenced by the utility of these ma- 

because of their intriniic value. On Ihe other hand, fiduciary coinage [coinage whoi* 
meul value i» 1«»» than its face value) has also been in common use. In (act, until 
recently, U. S. lilvoc coinage has been eaientially fiduciary in nature. At the present 

dollar actually contains one dollar's worth oi silver. Furthermore, in the other allver 
coins (dimes, quarters, and half dollara], the silver market value has approachad tfas 
face value. This trend is actually unfortunate. In effect, the high market value ol our 
present silver coinage has become a liability. The reason is that it is now necessary 
for the Government to prevent the price of silver from rising above the point at which 
the metal value exceed* the face value of the coinage, at which point coins might be 
melted down for their atlver content. This the Government does hy supplying silver 
from its reserves at $L.Z9Z9 per ounce, which is the "melt point" of the silver dollar. 
This silver-sales activity constitutes another serious drain on Governrosot sUver stocks 
in addition to the unprecedented demand from coinage. 

There is potential danger in any coinage material that might rise in market value 
as silver ha* done. Technological progress results in ever-increasing demands (or 
nearly all materials, especially lor metals and alloys. Thus, some technical advance 
could make a significant difference in the supply and demand of any high-price material 
used in coinage for ite intrinsic value. The situation now existing with silver coiild 
then occur with other metals. 

Public feeling with respect to intrinsic value in our coinage la perhaps aaaociatad 
with tradition rather than a realization of actual metallic value. Arguments hav* baan 
advanced both for and against coinage having significant intrinsic value. Evaluation of 
theee arguments is a difficult matter and is regarded as lying beyond die scope of tba 



d Mechanical Properties 



rial. By contrast, the public -accepUbility factor 
', since it depends on the public's altitudes rather 



Digitized byGOOgIC 



COINAGB ACT OP 1966 



It, The phyaical. 



Color . For well over ISO years, the moat valuable denomlnatlonB of U.S. coing 

copper aJloy. Therelore, it ie reasonable to eurmiae that the public will be more likely 
lo accept a new coinags material for dimea, quirtora, and half dollars If the color ia 
similar lo that of the silver alloy currently used for these denominations. If these coins 

cause they would look like the U. S. one-cent coin, or the low-denomlnallon coins of 
various foreign countries. A yeUow eoio (brass colored) might be more acceptable than 
9 red one because there are no U.S. Iradiliona other than gold coins aasociated with 



Density . The public probably is 
that differs markedly in density from i 

for the present silver-base alloy). The same reasoning would apply in the case of a 
material much heavier than the present alloy, such as lead or tungsten. The public 
probably associates "off weight" with counterfeit coins or play money. In spite of Ihi 
cons' leratione, a number of countries now have aluminum coins. However, it must 
recog.dzed that the problem, associated with Ihe introductior. of aluminum coins are 
considerably different in these countries than they would be In the United States. 

minimum weight to actuate Ihe mechanisms. A coin that is too light is undesirable. 






For example, a metal should be soft and ductile enough so that it may be readily rollec 
blanked, and coined. At the same time, It should possess enough wear resistance after 
coining to have a useful liie in normal circulation of about 25 lo 30 yean. The harder 
the metal the better the wear resisUnce. On the other hand, as Ihe hardness increase 
the "coinabilily" decreases, and fewer coins can be made with a given set of dies 
Hence, some compromise is called for. 






ance after having been in circulation a while. In addition, the : 
ssenlially nonreactive and nontoxic if accidentally swallowed. 






Digitized byGOOgIC 



280 COINAOE ACT OP tflOS 



Th* unique ring of the preeent «ilver coini cinnol ba overlooked at an anti -counterfeiting 
factor. Moreover, lome emphaaii has bEcn placed upon it in recent publicity re- 
leases. Technically, metallic ring is probably aiaociated with the moduluj at elasticity, 

ing. Regardless ol its physical nature, a metallic "ring" Is associated by many people 

Physical Properties . Among the physical properties of coins, the electrical and 
magnetic properties have a profound effect upon their everyday usage as media of eit- 



Efiecl on Coin-Operated Devices 

The ability of coins to be accepted in coin-operated devices is considered aa a 
separate criterion, even though basic physical properties, iueh as dsnaity, magnetic 

coin-operated equipment has become a large industry in the United States. Nearly 

candy machines, toll-road collect. on boxea, juke bMes, and many olhert. 

Considered as individual industries, the two largest users of coins are th« 

that in 1963, about 28 billion coins passed through vending machines*, while another 4 
to 5 billion coins went into the pay telephones of the Bell System alone. ■• 

All industries which use coin-operated devices have a large investment in coin- 

the coinage alloy. The successful operation of this type of business depends to a large 
degree on special devices, which are referred to in this report as "coin selectors" (see 
Appendix C). Although these devices vary in degree of sophistication, their main pur- 
pose is to accept genuine United States coins and reject all foreign coins*** and slugs. 
An essential feature of their ability to discriminate between good and unacceptable coins 

is based on the fact that United States coinage is nonmagnetic and has cerUin definite 
values of electrical resistivity. If the material selected to supplant the present sUver 

terial that may be recommended should be usable in the present coin-operated devices, 
with the minimum amount of disruption in business or alteration of equipment. 



Du,iiz=db,Google 



COINAGE ACT OF ISflS 



^ifact on Mint Operationa 

Two Mints arc now in operation, one in Philadelphia and one in Denver. They are long- 
eslabliahediacilitieB, and are geared Bpecifically to handle the melting, rolling, blank- 
ing, and commg ot copper- and silver-base alloys. Thus, in effect, each Mint la an 
integrated unit with essentially "in house" control of all steps in the process o( making 
coins from melting to the final Inspection, counting, and sacking operations. The 
nature of the operatmg facilities at each mint, particularly at the Philadelphia Mint, 
imposes certain limitations on the kind of coinage alloy thai can be handled. Much of 
the equipment is old and of insufficient eapaeily. However, this is not a serious 
obstacle at present because only three simple allays are processed, as shown in the 

Alloy Compos ition, per cent 



Quarter 10 90 

Half dollar 10 90 

Each of the three alloys is relatively easy to melt and cast into rectangular ingots in 
the Mints' melt shops. The alloys are also easy to roll, and require no hot rolling. 

between cold-rolling operations are available, however. Because the cast metal slab 
are relatively ^mall, no heavy breakdown rolls are used. 



be equipped with modern hlgh-capacit] 
not be ready for operation for several years. If Congress authorlEes a substitute Coin- 
age material during 1965, the new coins would necessarily liave to be made in the 
present Mints. The Mints could, of course, buy strip from outside vendors if the new 
alloy were difficult to melt and roll, but the material would still have to go through the 



Counterfeiting. Ulegal Duplic 






Digitized byGOOgIC 



COINAGE ACT OF 1906 



Bfined as the clandeatine manufacture of replicaa or reproductiona of United Stat< 
gn, but in lowei cost metala. That counterfeiting and illegal duplication have n 

little profit potential for the effort expended in 

(Z) Duplicating of Che silver coins (dimee, quarters, and 
half dollars) is made unprofiUble because oi the high 
intrinsic value of their silver content. The color. 



le metal or base-metal alloy is selected as a Bi 
;e, the incentive for illegal duplication will incr 
■fill be much greater than the market value of il 






Digitized byGOOgIC 



COINAOE ACT OF 1965 



e World War 11, world conaumplion of ailvcr has exceeded pioduction, the 
ing been drawn from atocks. Most recently, the depletion of chii atocfc hi 



Mul two-thirdi of the : 



in 1 deficit of Z09 millio 
Iver production for that 

of allver i* centered in 



of Troy Ounce » 








Deficit (1 


ZtZ^^U. 


(IBf 
in) 







(: 


13) 


(209) 




(i» Noi.1 


M. .11 -««.«. 


1- nitmd » m UU. 


npon in m 




c«. 








Dataeho 


w that Che 


Free World d. 


elicit in ■ 


ilve 


rii 


1 1964 wa 


■ J41 millioTi 




















«ilv. 


r inU. S. 




M^hich wa. 102 


I million 1 






in 1964, 1 




















therefore wi 


equal 


to the 21 


5 million I 


<uncei of .ilv. 


■.T produc< 


fdii 




.e Free W 


orld for that 




Iti 1964, 


ae in prev 


iou. yean ir 


»»l of thi 


■ F' 


mr 


World d* 


ficil wsi m» 


wilhd 


rawal. fr 


om the U. 


S. Treajury , 


■lock of n 




lUi 


■y lilver." Thi. ii i 



Du,iiz=db,Google 



COINAQE ACT OF 19«S 



Total Free World deficit (19t4) 

Withdrawal) from U, S. Tieatur' 
Sub.idiary Coins B« 
Hademptiona of Silver Certilical 
Net Change 



ToUl Stock of Silver, U. S, Treasury, 

December 31, 1963 'l, 584 

ToUl Stock of Silver, U. 5. Treaaury, 

December 31, 1964 l.ZZO 

Net Change (364) 

The nee withdrawal from the Trenury tor 1964, therefore, wai 364 million ouncea, 

Thi* forecait then aervea a* a baaia for evaluating alternative* for alleviating th* 
projected acareity of the metal. 

In Appendix B a projection is made of the life expectancy of the Treasury itock 
of silver baaed upon total Free World supply and demand for lUver in future years. 

Thia foreciHl combines conditions of high Free World productivity (higher than the 
average over the past 15 years) of silver with only moderate increases in demand [2 per 

the Free World, together with decreasing coinage in other Free World countries.* The 
uncerUinty of the forecast of future demands for U. S. coinage is reduced through the 

mand. Table 1 is a sumnuiry of the results of this forecast. 

The table shows that should the present demand for coinage peralat, the U.S. 

change in the present 90 silver- 10 copper alloy. U the silver content of U. 5. coins 

1975, even under Che tcwesi level of expected coinage demand. However, tb* life of the 
Treasury stock could p«Bsibly be extended to 1979 by reducing the silver content of coins 
to 15 per cent.** Eliminating silver from U.S. coinage altogether might extend this 
stock through 1983. 



Digitized byGOOgIC 



COINAGB ACT OF 1A6A 



285 



TABLE 1. SUMMARY SHOWING YEAR IN WHICH U.S. MONETAJIY STOCK OF 
SILVER WOULD BE EXHAUSTED, DEPENDING ON THE SILVER 
CONTENT OF THE COINAGE AND THE DEMAND FOR COINS 







All. 


"!' 


. SU.., Q.»,.nl 
0,1... ,., ..».!•) 


L«v«l of Coln»Ke D.nand 


90 


50 




JO IS 



196^ 1971 i974('') l???!*") 



1969 1971 1973 1976 1980 



lU. Low Leve 



d beglnniag eitly 



1973 1975 1977 1979 1983 









Digitized byGOOgIC 



COINAGE ACT OF 19011 



AVAILABIUTY AND COST OF VARIOUS METAl^ 

CONSIDERED AS ALTERNATIVES TO 

SILVER IN COINAGE 



1957 in tbe manufBcturc oi U.S. coin*. The increxe tn demand for capper and tilver 

lelacively smail proportion ol thn tolil production »nd cansumption of the metal in Che 
U.S., while the conaumption of «ilver in U.S. coinage alone equal* total world praduc- 

■ elcction of an illernative materisl for coinasr U Ihe cuirenUy available and potential 

ti>in>, il is palntles* lo uee such a metal regardless of its technically desirable 



ZZ.b for osmium. Conceivably, high-denalty elements could be used a* alloying ele- 
nientfi to adjuBl the density of some possible low-densily metal lo about the desired 
value. Some of the elements are rather pointedly inappTopriate for coinage. For ex- 

earCb metals were not conbidered because oJ their extremely limited availability. 
Radioactivity, present in the uranium and transuranium elements, even in harmless 
amounts, would undoubtedly be a reason for low public acceptability of these metals aa 

metals mainly because they do not meet the criterion of availability. Other pertinent 
reasons for rejection are also mentioned in the text, 

has considerable strategic value. II is obtained mostly as a 
by-product of line production. The United Slates meets much 
of its requirements by importing. 

Coba lt. Practically all of the supply oi this metal is outside of 
the United States. For e^tample, a large proportion comes from 
the Congo. In the event of a prolonged emergency, the supply could 



Digitized byGOOgIC 



COmAGB ACT OF 196S 



287 




suoi IJOMS 0001 



Digitized byGOOgIC 



COINAOB ACT OF 1965 



TABLE 2. METALUC 



CONSIDERED 



Palladium 

FlatlBuin 
Rhenium 




db,Google 



COTNAOE ACT OF 1D6S 



Hafnium . Hainium lua a very high melting point {3900 F) and 
if produced *.( • by-product In th« preparation of tirconium metal 
lor nuclear- reactor purpoiea. The melallurgY la auch that the coat 
of aheet and bar material ia about S13S per pound. The bulk of the 
limited production of hafnium ia allocated to nuclear -reactor uae. 
It can be uaed only aa an allaying addition. 

Indiun 



eaium . Thia metal ia very plentiful in the ocean, tt i(, howi 
mcly low In denaity (1. T grama per cubic centimeter). The 

int, auch aa magnedum in contact with copper. Ita reaiatanc 
ia low and it cannot be recoininended for coin purpoaea. 



Palladium . The price of palladium la higher than that of gold, and 
the quantltlei are very limited. 

Other Precioua Metala; Platinum, Rhenium. Rhodium. Ruthenium. 



Tantalum . About 99 per cent of the tantalum orea proceaaad in the 
U.S. are imported from the Eaatern Karalaphere. The reaervea are 
quite limited. The coat of aheet ia currently about S50-$T5 per pound. 
Its deniity ii greater than that of lead. 

Vanadium . Thia metal ia difficult to prepare in high purity and ha* a 
high melting point (3435 F). b ia uaed moatly aa ferrovanadium (an 
iron-vanadium alloy) which la the principal aource of vanadium for 
alloy Bteela, It baa practically no-uae aa the metal or a« a baac for 
alloying. The United SUtea ia a major world producer of thia element 
but the coat of the metal in (heet and bar forma ia preaenUy about $40 
per pound. 

The metala remaining aa capdidate poaaibilitiea for coinage require more 
snaive appraiaal from the aUndpoint of all important criteria. Certain of theae 
ala may be conaidered very improbable if uaed alone, but they might be uaed aa 
itiona to alloya made up of two or more clemcnta. Thia poaaibUlty ia diacuaaed 



Digitized byGOOgIC 



COINAOE ACT OF 196S 



Chromium . Mod of the *vailsblc chromium or* It In the Mitecn 
hemliphere. The metal 1> generally cUiilfied ai a strategic or 
critical material in the United Sutel. The pure metal ii diiflcult 
to prepare and !■ little used except ■■ a thin-plating material. 
However, the availability of chromium ai an alloying element 
appear! firm enough to allow italnleie ateel to be definitely 



mbium . Columbium metal, exce 
ibalt alloyi and tt«ela hat, until 
Lately it hat 



metal for high-ti 

ore it found outtide the North American coi 

of low-grade ore occur in Canada (now bein 

the United Statea. Very large low-grade depoaila exiit in South 

America, but much ai the present production it from Africa. The 

production oi the metal in 1964 waa only about 25 to 30 lont. However, 

induatry repreienUtivei eatimate that the present production capacity 

The metal haa tome good qualltica for coinage, luch at excellent corro- 
sion resistance, good coinability, and relatively high density (8.6 grain* 
per cubic centimeter). Itt color it gray but not unpleasant. The currant 
price of columbium sheet and strip ia higher than that of silver but this 
could hf reduced at a higher rate of production reduced the cost. In 
tplte of the price and present supply picture, the metal has a potential 



The United States is believed to be i elf- tuff ic lent in thit 

leeable future needs. The present price it about 



$10-15 per pound for theel. Most of this metal is now being used la 

The foregoing gcreening proceat indlcatet that the metalt chromium, cotumblum, 
and poaiibly zirconium deserve further conaideration either as minor alloying elements 
or for ute in esientiglly the unalloyed condition for coinage. The metallic alaments 

Aluminum Molybdenum 

Columbium TiUnium 

Copper Tungsten 



Of thete mecala, chromium, manganese, sine, molybdenum, and tungsten are 
idered mainly as alloying elements. For example, the present one-cent coin con- 
> an alloy addition of S per cent linc. This quantity of ainc it small compared to 
otal supply and compared to the total amount consumed in the United Sutsa. 

An appraisal of the aupply and demand for each of these metalt (with the exceptioi 
on) is contained in Appendix A. Thit appendix includes data on the requiretnentt 
ivailablllty of each metal, covering the period from I960 to the year 2000. 



Digitized byGOOgIC 



OOINAGB ACT OF 1966 



PHYSICAL, CHEMICAL. AND MECHANICAL PROPERTIES 

A aurvey of the remaining 12 elemenCH discusHCd in the foregoing lectlon (luiwad 
thai, for the foreseeable future, the elemenH silver, chromium, manganeee, molyb- 

coinage. The elements iron, copper, nickel, aluminum, columbium, titanium, 
ilrconium, and varioui naturally occurring tubttancea used ia ceramicB and plaitlo, 
ihould be given further consideralion for use as the major comtituent. in United Statei 
coinage. ♦ From those candidate raw materials, tlien, must be lelecled the alloy, pure 
meul, combination of metals, or nnnmetallic materials which will serve as a subslituU 
for the present 90 silver- 10 copper alloy. 

Before proceeding with the examiaatloD of possible substitute materials, it would 
be well to discuss certain properties of the present coin'Sllver alloy as well as the 
implications of these properties relative to the choice of a coinage material. This 
alloy, which has been standard in the United States for so many years , has a pleasing 
white color, is nonmagnetic, has a low electrical resistivity, and is relatively heavy. 
The original basis for the U. S. choice of silver for a coinage alloy seems natural 
enough in view of the long history of silver as a coinage metal and such desirable prop- 
erties as ease of melting, roUing, and coining. That it is low in electrical coelstlvlty 

distinguishing this alloy from many other alloys that could be used to operate coin- 
actuated mechanisms. It is also interesting that the combination of white color, high 
density, low electrical resistivity, and absence of magnetism is unique to the silver- 
copper alloy system. Moreover, the alloys are easy lo process in the Mint*. No other 
element or alloy has this particular combination of properties. 

erties Needed in Coinage for 



Coia-Operated Mechanisn 

With coinage unchanged in size and alloy over so many years, Induttrlet based 
on coin-operated mechanisms have had a chance to develop and grow,** Important to 

the basis of electrical conductivity, density, size, and magnetic characteristics. 

coins and slugs according lo a property represented by the product of electrical 
resistivity and density. This product, for the coin-silver alloy, is about 21.6 microhm- 
g/square centimeter, while for the 5-cent piece it is about 286. The eddy-cunent 

many of its alloys, including brasses such as the 90- 10 copper-iinc alloy. 

the pdiysical properties of a substitute material must be specified in such a way as to 
make the behavior of the new material identical with present coinage in coin-operated 



Q ilmm udUmiied tnxunti f»m the ocun tui u eUmlDired hum ccacldenilee si s cotugs mkio- 
IK li^QKii sad poor c<no«loa rulfUnce. 



Du,iiz=db,Google 



COINAOE ACT OF 1965 



ilor for U. S, coins|e ii largely ■ muttsr of public accepLajice. 
S- BubAidiary coinage has been lilvery- white. Sugge#tfld alloyi 
Croni tH* itandpoiiit. 

■ been astocUted wicli (ubiiditry coiiuLge, copper- i*d liaa been 
coini both here »nd abroad. Accordingly, it would aeem inad- 



In Che long- range picture, in which plastici 
distinctive colors could be deliberately chosen ai 
a possibility must be considered quite drastic, h 



A subetanCiftl number of metals and alloys cui be 
pOBile", hi» been considered. Appendix C, Coin-Oper 



When certain desirable properties cannot be reaJiied with a homogeneous male- 
rial, they can often he met in composite systems. In conposite systems two or more 
materials, each unable lo satisfy all the Fequiremenls, are combined in such • way that 
the over-all behavior of the composite is sadafactory. One such composite is called a 
"multilayer material", wherein tlie components are bonded together in sandwich fashion 
in iuch combinations as to obtain the properties needed. NoUble examples of multi- 
layer metal systems are the bimetallic thermostat alloys, the stainless- clad copper 
pots and pans, and precious-metal-clad place for watch cases. Similarly, a multilayer 
system for coinage material c^n be assembled as Uluscratsd in Figurs Z. With the 

Some of the composite or mulCilayer systems considered for coinage purposes are tbe 
following: 

• Cupronickel (75 Cu-^S Ni) aad over pore copper 

e Silver-copper alloys clad over cupronickel 

e Silver-copper alloys clad over modified copper* 

• High silver-capper alloys clad over low silver-copper alloys. 



Digitized byGOOgIC 



COINAGE ACT OF 1905 




FIGURE 2. MULTILAYER COMPOSITE COIN BLANK 



Each of tho compDaiCemaCerli 
a white color. Thus, it on ba leei 
that can aaCiafy both the public-acc< 

product of alaetrlcal rsaiitlvitr x d 



tail and alloya that might aatlafy Che 
It be compatibte with pretent coinage in 
3up of metals eoten the picture if the 



Tabla 3 Uata a 


number 


r of < 


candidate material 


[a. The 


arranj 


emei 




ind claa.lfiea- 


tlon of the ma 








1 are deaigned to i 




andei, 


l.ph», 




E the cbolcea 


with regard Ec 


. the cr 


[teria of co) 


lor (public acceplahllity) a 


nd uaabllity 


In 


coin- ope rated 






:rangan 












;tlng require- 






alloy - 




aallafy. For exar 


nple, if 


a white 


cole 




a de tired 


ragardl«a> of 


the re. 


iativlty 




tmlty product on 


nagnetii 




rliea 


. tl 


lieo a rather 


large number 


of poia 








er hand. 














■tlvity 




naity product latli 




for col 






ted device a, 


there are only a few 


poaaibi 


liUe, 


.. Laatly, ifaredi 


liah colo 






:pt. 


.bl8, a numbei 


of oopper-ba. 
device.. 


e alloyi 




.alia 


ble which could al 


iobemi 


•do to. 


.orkln 


coin-operated 




cua««a 


the ' 


«riou. c«,did,te. 


1 from the view 


point 


•P 


re.ented In 


Table 3. If it 


ladaalredfoi 


■ coil 


n- ope rated devicei 


1 to cont 




oper 


■atlon without 


modlficatioaa 


, and if 


a whit. 


! col 


or la required for 


public . 


.ccepta 




the following lw« 



db,Google 



COINAGE ACT OF 196S 



R=qmr 


Changes 


n Coir,- Operated Devices 


Opera 


eif£ang'.s,inCom- 












R=»i«. 


Vi.y X D=n 


itK Too High ar Too Low 


Resistivity x D 




MsglBtic 


».™.,...u 1 


Nickel 
Chromium 


itainleii 


Resistivity X Deniity 
Too High 


Modified silver 
Silver-copper 




C^iper modified 
-by the .ddlilon 
oi nickel, .Ific 


C a pro nickels 

Nickel silvers 

(copper- nickel-fine lUoys) 


iron. 




Columblum 


"t^po^ite. 










Nickel-5 silicon 


Pla«d copper. 










CHromium- nickel 
• talnlBS* Steele 


alloys'") 


- 


aofP-.W 






Nickel-chromic 












Monel 












Titanium 






^M»B> 






Zirooniun, 




imHHj 






Ceramics 




^^^^^1 






Pla.Uc. 




m 


Resistivity X Densily 








Alnrx^inun, 




P^F^ 







Most sluminum alloys 







Du,iiz=db,Google 



CODTAOE ACT OF 1966 295 



Silver-copper alloy* (depezbding on the lilver supply picture} 

Varioua multilayer compoiitei such aa cup ronickel- clad copper. 

modification of present coio-operated device! ie permissible, a wide variety of 
lis is available lo cboose from. Nevertbeless, tba nonnutgnetic materials would 
:rabU to the magnetic ones, in order to minimize the disrupIioD in the use of 
erated devices. Lightweight materials such as aluminum alloys, plastics, and 
::s would cause more disruption In the use of coin-operated macbices than would 



Conaideration of Mechanical and Chemical Properties 
The mechanical pioperties of the candidate* mus 

must be high enough lo inaure good appearance over a 1 

For the candidates listed in Table 3, the modifiei 
permit their use, though if nickel, sine, aluminum or i 
possible to obtain aatlstactory atceuglb and hardness, 
(with respect to shattering) needa further study. The c 
riaJa is very limited; notable in this respect are most i 
titanium. Those aapects are discussed in the section t 
Rclatioaahlp to Alternative Coinage Materiala . 



!K eludes aluminum a! 



db,Google 



COINAGE ACT OF 1965 



Any m>»rial taking Ihe place of the current lilver coinage alloy muat be capable 
ot being handled by the Minla. It i> eaaential that the material b« adaptable to th* pres- 
ent Mint racilitiee, eapacially with regard to coinabilily. Other conaiderationa include 
upaetting (edge rolling), atrip rolling, and melting. A di*cu**ion of the United Statea 
Mini fiLilitiet ii gtven in Appendix D. 



Coinability refers to the ability of Ihe coinage material to take ■ aharp, clear Im- 
■ aion, of the proper depth and deaign, when the preformed blank ia preaaed between 
diea. ti ia alio important that the material poaaeaa good coinability under condi-' 
* of high-apecd coining, without exceaaive die pretaurea. 





ceptabl 
! exper 

fa) 


e, with little or no change in 
Cupronickel (TSCu-25Ni) 




(b) 
(c) 


Puru nickel 
Columbium 




(d) 
(•) 


Multilayer or compoaite mat 
Silver-copper alloya in all p 




(f) 


Nickel-5 ailicon alloy (requi 




M 


<ae mital* and alloyi Judged t 




(b) 


Zirconium 
Titanium 




(d) 




•A, 


>1.U>1»><. 





d on experience and actual Mint triala of a 
the following material* are Judged to be 
ling methoda. Appendix D (ummarlxea 



binaliona of cupronickel. 



inge in annealing procedure). 

wer coinability than Ihe above group 

ight-chromium lypca and auatcnitic chromium- 



db,Google 



COINAOE ACT OP 1965 297 



cai> change, such ■■ the addition of an annaaling treatmenl, or • changg in dctign 
coining diSB, mighl permit tome o< th* quastionable material! to be aucceaafiilly 
i. However, a die deatgn change ii not alwBya dealrable fiom Iha point of view of 
erleiiing and illegal duplication, which arc di*cu*aed latet. 



exist with cerlain maleriali during thia proceaaing itep. For example, the nickel-S 
silicon alloy and the atsinlels ■teela work hardenad to an appreciable extent during 
edge rolling. The aurfacas of the coin blanka near the edge tended to become hardened. 
Thia, in turn, led to difficulty when the blanka were coined. The cold-worked area* 
adjacent to the rim did not flow aufficiently in the coining die, and the lettering at thia 
location did not fill out properly. In a case such as this, the annealing treatment ordi- 
narily given the blanka before upsetting could be given instead to the upaet blanks, 

layer compoaite materlali because of the softness of the core. Possibly, some Bdjust- 
menta in the blank annealing treatment would be necessary to overcome these difficulties 
or, aa suggested in the preceding paragraph, the annealing operation could be deferred 



RoUin, and Annealing 

Eiaentialty, the Minta are preaently limited in rolling capabilities to thoae of a 

annealing in controlled- atmosphere [arnacca. Except for such metals aa eirconium, 

cold roll moat of the other poaslble lubatilute alloya such as monel, stainless ateel, and 

copper, or copper-base alloys, additional annealing facilltiea would be required. Roll- 
ing of the 50 Bilver-50 copper alloy may require more annealing than wilt th* ')0 silver- 
10 copper alloy. 

To handle the rolling of such metals sa columbium, titanium, and eirconium, the 
Mints would require high- temperature vacuum- annealing equipment. It would probably 
be necessary to hot roll (ISOO-ZOOO F) columbium to break down the ingot structure. 
This, in turn, would require conditioning to remove the contaminated aurface layers 



Digitized byGOOgIC 



COINAGE ACT OF ISeS 



Z4 

lilar mdtalB, a change in iiDiiigB for th« indactifm-meltlDg aqulpmeDt would 
id. The melting procadurt and probably th« catting technique would alio n 
I Id handle tbeae metala and aUoya properly. The melting of metala auch i 
ium, (irconjum, and tllanium requirea apecial conaiimable-aic melting eqi 

■ upply and control!. Columbium, which deaervea apecial cone i deration bsi 
I vary well, would, for the preaent, have to be melted and rolled by an out! 
Br and be eupplied to the Mlnca In colli for blanking and coining. 



color by dipping in i 
dipping in ■ mixture 
for Inch procateae. 



n, Tbul, for example, the 50 aUvcr-SO copper alloy ukea on a 
i procaoing. The coin blank can be brigblanad to a eilvery-white 
nitric acid aolution. Similarly, lirconium can be brightened by 
>f hydrofluoric and nitric aclda. The Mlnta are not now aquippad 



total Mint facilillea from melting tt 



r-50 copper alloy 



Mckel, nickel-5 aiUcc 
Multilayer eompoaite i 



I apply: 
Bvolvad, tb« 



d by the Mlnta, the fallowing 



■ [.ee»l«o(2)»bove] 



■dbyGOOgIC 



COINAGE ACT OF 1065 



299 



chromium alloy 



(PAGE 30 FOLLOWS) 



Digitized byGOOgIC 



COINAGE ACT OF 19flS 



I varloii* criteila h«.v« bean applied to th« pots 

found th*t no linglB mateTlal latiifiai Ul of th* cilterla. S«v*iU of 
ttialt poaiei* cerUin daalraUe charactariatlc* oot poaaaaaad by 
□thera. Specifically, the following materiala have been aelacted bacauaa they have car- 
taln adviiiita.g«a over each of the others. Thay are dlacusaed further in the paragrapha 
that follow: 



Silver-coppar alloya, particularly $0 ailver-SO copper. 
Cupronickela, particularly 75 coppei-Z5 nickel- 
Copper -nlckal-alac alloya (nickel (liver*). 
Columbium and alrconium. 



•; 


hlgh.i 


-coppe 
ilvot-( 
-coppe 


ralU 
:oppe 


c alloy, 
<ye on . 


:opper 

1 on low ailver-( 

:uproBick*l and ' 


6. Nickel and high- 


nick* 


1 aUoyi 




Tb,.e»a,.. 


rlali are 


diacui 


laad further 


below. 










Silver 


■Copper Alloy. 



■liver-copper alloya are Chat such alloya have 



The moit aerioua disadvantage of any ailver-copper alloya la that (hey do not 
aatiefy the criterion of aupply and price. Aa ahown in Appendix B, any plan for long- 
term uae of ellver [or coinage muel be conaidered ■> queitionable: the aupply and price 
ia aaaured only aa long as the Treasury stocks are able to supply sliver for thi« purpoa* 
Nevertbelees, If sentiment and tradition are considered to be compelling reaeona for 
using a silver-copper alloy, then it would seem prudent to linilt the sUvsr content to 
SO per cent, and to use the alloy for only one denominallon of coin. In this way the over' 
■11 conaumptlon of silver would be about I6-IT per cent of the normal consumption and 
might permit the Treasury stock* to last for perhaps 10 to 15 yeara, depending on the 
coinage demand and apeculation. 



db,Google 



COINAGE ACT OF IflSB 



301 



10 ailvar-lO copper alloy. An acid dip would bg required to give the coin a good appear 
ancB when newly mlntad, although it would tamish in use. A lolution to the tamiah 
problem can be achieved bv ueing a eandwich-type of material with a high ailver alloy 
for the outer layera and a low silver alloy ai Ihc core. Theae poialbilitles are dia- 
cuiaed below, in the section MultiUyer Compoaitea. 



The term "cupronicker' applies to a serias of aUoys of copper and nickel in which 

copper ia the major element. Became of the Mint's familiarity with the 75 copper-25 
nickel compoiillon, however, thii particular alloy haa been singled Out for special 
attention. The chief advantaga in uaing the 75 copper-ZS nickel alloy for lubiidiary 
coinage would be Ihat the Mints could make the conversion with Little or no diiruptlon in 

alloy. 

Among the objection* to tha alloy is that it is low in cost and would invite Illegal 
duplication and slugging. However, the main difficulty is that a large proportion of the 
coin-operated machines would require changeover to be able to accept both the preaent 

The color of the 7S copper-ZS nickel alloy is plaaaing, though not ai white aa coin 
silver. Copper-nickel alloys containing about 45 per cast nickel are much whiter than 
■he T5-Z5 alloy. However, because of higher mailing and annealing tonperaluree, some 
change in Mint procedures would be necessary. Thus, the chief advanUge to cupro- 
nlckels would be logl, without a significant reduction In the disadvantages. Therefore, 
it is judged that If a cupronickel is choaen it should be the 75 eopper-Z5 nickel alloy. 

Copper -Nickel -Zinc Alloya [Nickel Silvers) 

Because copper-nickel -zinc alloys can be made with only minor adjuatmenca in 
Mint processing, the white alloys [typified by the 65 copper-IB nickal-17 sine composi- 
tion) may be considered aa alternatives to Che cupronickel*. In general, the advantagea 
and disadvantages are the same as for the 75 copper-Z5 nickel alloy. However, Che coal 

hand, this cost advantage would be offset In pad by the need lor somewhat more corn- 
nickel preference over the nickel silvers for subsidiary coinage. However, if the sub- 
sidiary coinage is changed to cupronickel, the alloy for the five-cent coin might well 
be changed to a coppar-nickel-iinc alloy so as to dlstlngaish between low- and high- 
value coins. If the ditficulClea of Mint changeover are nol regarded as decisive, nickel 
silver could be used for subsidiary coinage. 

Columbium and Zirconium 

The metallic elementa columbium and zirconium are worthy ol consideration be- 
cause they have the advantage of being difficult (Chough not Impassible) to counterfeit, 
and so high in price as lo virtually eliminate illegal duplication. 



Du,iiz=db,Google 



3(KJ COINAOE ACT OF 1905 



jld require lOnie modification in die deaign or coining methoda in order to yield 
iafactory coina. The aomewhat poorer coinability of circonium ii partially com- 
laated (or by a good ore aopply picture, although metal -production capacity would 



Proceaaingof columi 
Adoption o[ columbiu 



nickel, cDlumblum, or iirconium ahculd be compared. This comparison ahowi that the 
incrcaaed cost ol adopting either columbium or zirconium would be in the order of 
$100, 000, 000 annually, baied on a comiumption of 10, 000, DQD poundi per year. Tbi* 
aeema to be a high price to pay for preventing counterfeiting or Ulsgal duplication. 

Neither columbium nor zirconium have prestige value, in the senae that silver 

price, attractive name, and application in the atomic energy industry - that lend thera- 
aelvea to the creation of a desirable "public image*'. A vigorous public relations cam- 
paign would be needed Co achieve thi» end. 

In balance, however, the advantages seem overweighed by the disadvantages. 



Multilayer Composites 

The multilayer composites (also called "clad melats" or "sandwich metals") have 
received attention as materials which can be used to produce a coin with almost the 

silver. The uniqueneas of multilayer compositea would discourage both counterfeiting 
and illegal duplication, while, at the same time, the cost of production would be 

Processing, for a bme, would be outside of the Mints' capabilities. However, 

believed thai Mint processes could be adapted to the manufacture of multilayer com- 
posllea without serious diflicullies. The Mint could purchaae Blrip or re-roll bar 
from outside suppliers until its own skills have been developed. While the characteria- 

lamalnl lo be delermined. Furthermore, it would be necessary for the Mint to have 
'■■■ured aouccas of supply until it developed its own capability to produce any multi- 
layer that might be chosen aa a coinage material. 



Digitized byGOOgIC 



COINAGE ACT OF 1965 



f low cost and good acnp value, in addltlao 10 the leneral advantftge* pre- 
:ed for cupronickel. Scrap masi be IsJcen into account becauae nbaut 30 per 
atrip remaina aa a ak«lftCon after Che coin blank* have been punched out. 
1 the cupronickel -copper combination, since it conalsta only of copper and 

Ltare of this combination ia that the expoe«d edge of the coin ie copper colored 
ie advsnUge of being difficult to counterfeit or duplicate. On Ihe other haod, 
ance would be distincUy different from traditional U. S. coini and might 
e problema relative to public acceptance. 



High Silver-Copper Alloy on Copyer 

A eandwidh contiating of a eilvsr-eopper alloy on copper has Che ai 
providing a coin close in oppekrsnee, except for the copper rim, to the p 

it would have higher Intrinsic value than the cupronickel -copper compoaii 



Sc, 


■ap could b 


,e r,cla> 


imed 


by uamg 1. 


^tom 


Th, 
ie Ihst cc 


s primary 
inlinued us 


disadva 
>e in coi 


nage 


, aa point! 
would be 1 


idout 


High Silv 




■ Alloyi 


on 








=r-Copper 









•ilver-copper alloy cladding. 



a li objectionable, it can be elimi- 
'e. Tot cnunple, a potslble com- 
ide layers and 30 lilver-VO copper 

cloBe in appearance to present coini. Though the 

erable to the copper color. 

lalp obstacle to adoption of such s combination. 



Another means of obuining • "while -on -white" combination is by cl»i 
ickel with, lay, an 80 silver-ZO copper alloy. The principal disadvantage 
ination is thai the ecrap would have to be reclaimed by separation of the e. 
athec than by remeltlng, becauae it would conaist of copper, nickel, «nd s 



Du,iiz=db,Google 



COmAQE ACT OF 1B«6 



34 

Furtharmoia, *.* Iha bigh-cooductivity *llvar-coppar alloy wore ait tba ii.cai, the 

laaponae of Cha coin to tha eddy-curranl coin aelector* would Changs mtrkedly. Tbs 
ravartc combination, eupronickel on » allver-copper klloy, would not be auacaptibla 

il would not hava tba cloae raaamblaoca to tha praaant 
' on eupronickel would have. 

Thara aaem to ba aufficieni daficiendea In Ihia appioacb to drop It In favar o£ thi 

otbar multilayara diacuaaed above. 



Nickel and High-Nickel AUoya 

Nickel h** anjoyad con«ldsr«ble ueage In other countTiaa aa coinage. It la coo- 
aldered bare becauae of ita relatively good appearance, corroeion reeletance, and 

colnablllty. 

Became nickel la magnetic, however, almoet every type of coln-opaiatsd device 
would have to be altered ii It were adapted (or coinage. For thia isaaon alone, it can- 
not remain aa a alrong candidate for U. S. coinage. 

Other material*, chough not praeenily acceptable, would require certain chai.gs* 
to be made In moat machlnea, but not In all. Cupronickel haa been diacuaaed in tbla 
light. Other auch poaalbUltiaa are nickel -baae alloya containing alloying agent* that 
caiua tha magnatiam of nickel to diaappear. Nickel-5 ailicon, developed by the Iittai- 
nationaJ Nickel Company, 1* an eiiample of luch an alloy. 

The main advantage* advanced for theae type* of alloy* i* that Ihay are a* highly 
regarded aa nickel, which ia accepted in many cQuctrle*. It cannot be argued, bawevsr, 
that their high regard ig in any way comparable to the regard for allver. Compared to 
the copronickele, they are Bomewhat brighter in appearance, but their coet i* higher 
and the amenability !□ Mint proceBaing i* lower. Therefore, it ie judged that the high 
nickel alloya ehould be dropped from further co n* id e ration. 

Attention is alao called lo a nickel-5 lilicon alloy with a magnet material In the 
center of the coine. This compoaite, discusaed in Appendix C, waa developed by the 
tnternailoiial Nickel Company as a meana of operating tba preaent coin aaltetor* la 
coin-operated devicea. The reasons for dropping thia composite from further conelder- 



if the Chief Adva 



other* for one or 



Digitized byGOOgIC 



COINAGE ACT OF 1»S6 



• 50 aUver-SO copper allay 



• KlaiDUini ti 

• AccepUbli : 



Main LimiUtlon* 

■ liTnited by th« lupply of 

lUvsr 
• Much lowar Urniah ra- 



• Practically no e£fee 
proceaaai 

a Good wear qualitic* 

a Acceptable in praae 

CO in -ope rated devi 
a Difficult In counlerf 



a Not acceptable in prei 

coin-operated deWcei 
• Potential for illegal 
duplication 

material until Mint 



80 aUver-ZO ct 



• Sams as BQ a 



• Same ai i 
limited I 
aupply 



Digitized byGOOgIC 



comAQE ACT OF ives 



1b term* of th« criteria for coliuiga, tha abova ^rrcy of the 
material euggeata that weigbta muat be aeelgned to the Impiortanc 
tradition of ailver in the coinage, effect on Mint proceaaea, and acceptability lo coin- 
operated deuicei. 

The imparlance of tradition muat be balanced agalnat the (liver aupply, «4lich will 
determine how much total ailver can be uaed. The problem of changeover by the vend- 
ing machine induttry, multilayer compoaitea, and Mint proceaaai ahould be conaidared 

are dlacuaacd from the viewpoint of the over-all conaequencea of variciua changea. 



(CI, competing with Induatry for what it 
'cntually, the praaaurea of Important 
pel the Government to abandon ailver 
led legialatioD regarding the compoaltion 
■ liver should not be Included in the 



ution to the coinage problem, public 
■ than total abandonment of ailver at 



If the public could be aaaured that there would I 
to come, there would be la«a likelihood that the preae 

What muat the silver content of the coina be to a 
Table I, a silver content of 15 per cent in all coins w^ 
the price of silver for a period of perhapa IQ to 15 ye> 

stocks to lero by the yeara 1971-1977, depending on t 



'reaau 


ry a 


tocka help prevent the 


rreaau 


ry. 


itocka to be cffecilv 




Id be ■ 


,olc 


iw that there 






ng in anticipation 




year.' 


liU 


1 for the 




t no pi 


■ice 


rise for a long timi 








would be withdrawn 




'^aTr 


the'] 


'e\Ttc'^!u"'c,T. 




rand'l 


or" 


:oina more readu'y. 




chieve 


thi. 


lend? According t" 




uldpe 




; the atocka to main 




r. dep 


■endi 


ing on the level of c 




[ 30 pe 










.age 


demand. Psradoxi 


cally. 



Du,iiz=db,Google 



COINAGE ACT OF 1906 



demand were high, it is likely that high demand would be created by the incentive f 
speculative hoarding. Thuq, the adoption of as much ag 30 pei cent silver in the c 
ags Bystem might make it dltficult to keep the present coinage in circulation. Mar 
over, Mint capacity would not he so high as to be able to cope with the ensuing shoi 

11 thus seems that the upper limit of silver in the total coinage compoeition 
should be 15 per cent. As indicated earlier, this over-all percentage can be achie 

in choosing the 15 per cent silver level, because, as Table B-10 (Appendix B) shoK 
high industrial demand could cause depletion of the Treasury stocks by 1971. 



Du,iiz=db,Google 



COINAGE ACT OF 1BS5 



In the pravioui acction, it w>i indicated that th* total umual coniumptuiB of 
■ilvei for coinage (hould bt llmltad to an amount that vrould ba aqutvalant to that con- 
tumad if an alloy containiag 15 par cant allver were uaad in all lubaidiary co1d>. 
Since an alloy containing IS pat cent allver it not advUabla, bacauaa of unattiactlva 
color and low tarnlah reaiatance, other waya of achieving thla conaumptioD rate have 

For anample, if only one coin were made of a (liver alloy, the alloy could be 
quite high In ailver content and yet not exceed the aupply llmltatloDa. Since allver i( 
being conaideced chiefly on the baaia of tradition and the preatlge It leada to the coloage 

The alloy aelected for the half-dollar coin would depend on the nvimber of half 
dollara minted. Thua, If 30 per cent of all aubaidiary colna ware half dolUra (on a face- 
value baaia), the ailver content of the colna could be 50 per cent. If the half-dollar were 
to make up only 18. T per cent of the face value of all aubaldiary coina minted, th* aUvac 
content of the coin! could be aa high aa BO par cent. 

Becauae the tamiah reaiatance of the SO ailver-50 copper alloy la low, the BO per 
cant alloy would be preferred. Thla would neceaaltate fixing the number of haU-dolUra 
coined each year. In the past, the percentage of half-dollara minted haa not been con- 
atant from year to year. In 196Z, 1963, and 1964, about Z4, 31, and 36 per cent, 
reapectively, of the value of aU aubsidiary coina waa in half dollaia. The median valu* 
alnce 1950 waa 23 per cent. Therefore, production would have to be limited If a high 
allver alloy were adapted for the half dollar. 

Another poaaibllitv would be to apread the available amount of aUver evenly 
through all the aubaldiary denomlnatlona . Thia could be done with a multilayer com- 
poaile. For example. If the outer layera of the compoHlte contained 40 per cant allver, 
and the core were eaaenlially copper, the over-all ailve 

in could be uaed In aU 

ilvei conaumptlon. 

U Che outer layera of the compnaite conflated of a 
cent ailver, the tamiah reaintance would again create a 

and nickel. Though nut nearly ao good aa preient coin silver in thla reapect, the alloy 
might poaalbly meet minimum iCandarda of acceptable appearance. Appendix C polnta 
out that an alloy conalating of 40 lilver-SO copper-S nlckel-S zinc la uaed for coinage in 
The CDiiiidEillion <if lUiijn fix Ihe Ultet doUu Li njulde the icnpe nf ihc pcaent iluily. Hmcvci, II li bcUcml dial, m* 



Du,iiz=db,Google 



COINAGE ACT OF ig«d 



Sweden, but that iti electrical resiitivity is too high to nuke it acceptable in eddy- 
current coin aalectora. However, ii the core of the compoaite true copper, the cot 
binatian would have an acceptable reiiativity x density product. Though the alloy 
would not be aa eaaily procesaed to atrip (prior to cladding) aa ia the 90 ailver-10 
copper alloy, ita proceaiing ahould not repreaent a great departure from preaent 
practice. More detail* cegarding this multilayer compoBiIe are given in Appendix C 



In the compariaon of materials from varioua pointa of view, it is seen that Che 
cupronlckel alloy haa the advantage of being able Co fit into the preaent Mint operations 
with a minimum of diiruption. A changeover to euproniekel could be handled quickly and 
smoothly. On the other hand, to modify coin-operated device* to accept cupronickel 
would probably require aeveral years to complete. Industry estimates have ranged from 

The composite materials, on the other hand, would cause no disruption to the 
industriea concerned with coin-operated devices. However, because the manufacture 
of composite strip ia presently outaide of the Mints' capabilities, the strip would have 
to be purchased. 

The cost* of converalon of th* coin-operated device* and Increasad loans due to 
slugging should be compared with the premium paid for multilayer compoaitaa. It ia 
dlfftcuU to estimate the coat of conversion, becauae ihsre are three element* Involved, 
The rir*t element i* the direct expenditure of fund* by the operators of the machlsaa to 
replace or modify the mechanlams. Gstimatea of the cost have ranged from 

of business resulting from the inability of the new coins to operate a vending machine 
that has not been changed over. There have been no data obtained that can provide a 

indicate slightly higher than 4 per cent profit on gross sales. Thus, a 5 per cent loss 
of businsss per year during Che changeover would amount Co a loss of $8,000,000 in 
profit annually. Even higher losses would be expected if the present coinage did not 

probable increase in losses due to slugging as long aa the illver coins had to be 
accepted. No estimate of this increase can be made at preae&C, 

It i* eatimatad that the additional coat to the Mint of purchaaing the multilayer 
strip would be between 40 and 70 cents per pound. In normal years, thia would amount 
to about $5,000,000 per year. At current production rate it would amount to a* much 
as $10,000,000. 

In the over-all weighing of the coats, it should be noted that the changeover costs 
would tie temporary, while the loaie* due to slugging and the costs of purchasing atrip 



Du,iiz=db,Google 



310 



COINAQE ACT OF 196S 



'com the point of view of the Mint, on inunediBte chuigeover could be made, Ir 
!, by returning to the manufacture of atrip for 1-ccnt and S-cent coin* (which i 
rchaaed) and purchsiing material for the I0-, 25-, and SO-cent coina (which ii 



n Adopting Multilaynr ComTiorttea 



clad thickness 



• ddy-eurrent type eelectora. 
coining proceaa at the highes 
amount of wear. Figure 3 111 



era, and five-cent plecea now in eiiculation indi- 
the coin before the core would ihow through, the 
0. 0075 inch on the dime in either the cupronickel 

remain and atill permit thg coin to function in th« 
touily, the clad thiclineai Increaaa* during the 
if the coin, which would be lubject to the greatait 
■ thla fact. It Bhowa the croag aectton of an «xp«r- 
:uproiiIckel on a copper core. 



MAGNIFIED CROSS SECTION OF DIME (TOP) AND QUARTER (BOTTOM) 
MADE FROM CUPRONICKEIy- COPPER- CUP RONICKEI^ MUl^TIlxAYER 
COMPOSITE 



e greateat amount of wear i 



e will affect the e] 
■hould be made li 
ceptable limit a th: 



lent change In the proport 



Several methods are available lor industrl 

have been eucceisful. The Mini* could be adapt 
though time muet be allowed for the developmeni 



y skiUa. Th) 



■thods that 
Rnthods, 
iiQiloaiv* 



db,Google 



COINAOE ACT OF 1065 



still to be eHtabliahed are the fna.nul>cturing to]ei*DCBa for tha eompoaita. ' 
production rung by the Minta ahould be made to reveal any diiflcultlea that might a 
in Che production of the atrip/ 



The weight of the new dime made froTn either a cupronickel on copper combina- 
ir the 40 p«r cent allver alloy on copper compoBitn would be between 2, lb and Z. Z3 
ig, compared with 2, 50 grami for the weight of the preient dime. In order to 
'e properly in all coin-operated devicel, the weight of the dime ahould be a mini- 

of Z. Z gramg throughout itg lifetime. Apparently, therefore, aome dealgn 
jee, auch as a thickened border, would be neceaaary in the dime in order to 
^aae ita total weight, A thickened edge would alao be beneficial in that tha amount 
•At (in terma of thickneaa reduction) would be reduced. 



of the acrap from the ailver alloy on copper compoalte would ba 16. SZ p 
78. 55 per cent copper, 2. 65 per cent zinc, B.nd 2. 07 per cent nickel. The outer layera 
alone would contain 20. 65 per cent copper. Cslculaliona baaed on the copper diatribu- 
tion In the outer layer and in the cote ahow that up to 26 per cent acrap could be 
remelted to make all the alloy needed for the outaide layer*. Any excegg gcrap would 
have CO be refined, rather than remelted. 

While thig will legult in a conaiderable amount of additional handling, the in- 
creaaed coat would not be great. Recovery of the. metal, valued at alightly more than 
S3 per pound, ahould not be difficult for thig compogition. The caata of procegaing to 

gcrap could be remelted or not. 

The acrap problem with the cupronickel- copper combination la minimal. If the 

scrap could be ujed to prepare the material for the outer layera of cbm compoaile. The 
excegg could algo be uaed for making the cupronickel allu^ for the five-cent coin. 



a copper-cored compoeite would be noticeably 
icuaeed earlier, the dialinctlve red-appearing 
and illegal dupllcataa could be eagily recog- 
rlher enhanced, according to a auggeatlon 
:opper edge with a apecial deaign during the 



Digitized byGOOgIC 



312 COINAOE ACT OP I»6fi 



!■ Other hand, departura from the praaant appearanca might ba eonildirad ■ 
idvantage. Morcovar, axpoiing tfaa functional ftature* of tha cols might 

xpandva mateclali capable of acceptanca In praaant- 

Both tha advantage! and dlaadvantagea muat be conaldared. While tha advaotagai 
may balance the dlaadvantagea. It might be pxaferable to avoid tha problem altogether 

by devising a mcani of obtaining an all white edge. Accordingly, tha Mint ahould give 
con aide ration to the poaalbllily of redeaigning ica upaatting toola to shape the outer 
adge of the blank in auch a way that Ihe coining operation covera the core material with 
the outaide layera. Figure 4 ihowa the auggeated procedure. Other waya ara no doubt 
poaalbl* and ahould be atudiad. 



POSSIBLE ECONOMIC CONSEQUENCES OF A CHANGE 
IN COINAGE tilATERIAL 



The principal problem to tie faced la tha poaalbility that the preaant coinaga might 
be withdrawn by the public. In order 10 aliminate the economic incentive for the public'! 
withdrawing the present ailver coina, the Treaiury alocka can ba uaed to raaiataln tha 
price of ailver below the point at which withdrawal and meltdown would be atfonomic. 

At a minimum thii will be neceisary throughout the period of traniitlon whila large 

Withdrawal of the present ailver coinage for sentimental reaaona i* much more 

for not calling in the preaent coinage, i 
created, publicity releases could give 

(1) The present coinage will not be withdrawn by the Government. 

(2) The silver price will not be permitted to rise for a considerable time. 

(3) A change of the coinage alloy will in no way affect the purchaalDg 

|4) The silver supply and demand situation haa been reconciled and no 
crisis will occur. 

Conversely, legiaUtlon prohibiting melt down of ailver coina and prohibiting 
export of Silver would create a climate auggeatlng that a problem exist*. The conse- 
quences of such a climate would be to encourage hoarding of coins for both sentimental 
and speculative reasons. 

Since the above suggestions are outside the scope of the preaent atudy, thay are 



db,Google 



COINAQE ACI OF 1065 



313 



Uting Present Method o 
MuEtiloyar Compmlte 



Modrflad Method on 
Mulllloyar Compoiite 





Sheered Blonk 







A SDOCESTED UXAN5 FOB OBTAININO A WHITE EDGE ON A 
MULTILAYER COUPOSTTE COIN CONTAINIHG A COPPER 
CORS 



■dbyGOOgIC 



COINAGB ACT OF IBSS 



CONCLUSIONS AND RECOMMENDAT IONS 



Iteria (or U. S. coinage mUeriBls, Battelle 
iting oi cupromckel (or, conceivably, nickel 



fnrt on the new coins. Ther 
Htepg are required in order 



bilily of making large aniouon of coins of •atiitac 

2. In the eveni thai some unforeseen problem ahouid disquaUfy the cupronickel 
compoBite material for uce by the Mint, it ia recommended that the new coins be made 

■coeplBble, alloy would be the 65 copper- 18 nickel- 17 sine nickel silver. In any event, 
the Mint may wish to consider Ihe eventufti use ol a homogeneous base alloy after a 
multilayer composite has provided the tin:ie needed for gradual adaptation of vending 
machines to accept both old and new coins. 

3. The retention of some silver in the coinage is deairabte on the basit.of 
tradition and prestige if this can be accomplished without compromising the achieve- 

atlon suggested that no more than IS per cent of projected subsidiary coinage require- 
that even at this reduced rate of use, silver might have to be removed from our coinage 
altogether within 10 ta )S years. However, within these limitations, it may b* adjudged 
desirable to continue some silver in the coinage. In such an event, and ignoring the 
special case of the silver dollar, there would appear to be two general options! 

(a) Use the 15 per cent, or bo, oI silver in the 50-cent piece. In the interest of 
clad on a lower content silver* coppe r core. 

(b) Spread the 15 p 

tent silver-copper core. 

Legislation establiahing either of these materials could include speciflcal 
material containing no silver. A cupronickel (7 5- i5)- copper (silver bearing) , 

posite shown above could be authorimed ss a replacement lor the silver alloy ci 
posite when the silver stocks dropped to any level decided upon, or at any give 
It is suggested that the dale for the second changeover be set at July 1, 1975, j 
earlier changeover be permitted if the Treasury's silver slock ehould drop bol 



Digitized byGOOgIC 



COINAGE ACT OF 1«65 315 



a Utar date. It would atct 



■dbyGOOgIC 



316 COINAQE ACT OF 190S 



APPENDIX A 



D STATES COINAGE 



Columbium 
Copper . , 



Molybdenuin . 
Nickel , , . 



■dbyGOOgIC 



COINAGE ACT OP 1965 317 



APPENDIX A 

OUTLOOK FOR SELECTED METALS 



CONSIDERED ALTERNATIVES TO SILVER IN UNITED STATES COINAGE 






Columbium 

Copper 

Maoganeia 

Zircon 


Titanium 
ToBgateB 
Zinc 
ium 




The supply relationihip* preaented In this analyaia are baaed foi 
in data publiahed by the Bureau of MInea. Of particular value la thi 
jlicalion Bulletin 586*. 


r the most part 
! Buraau of Mines 


Theae daU on availability are auinini 
» on ailver availabUity are alio ahown f 
ity repretenta reacrvea of metali in the 
:a«ur<d, indicated, or reaaonably inferr 
laent economies. In contra. t, resource 


iriied for the above metals 

I are considered >• the mel 
if (Ufficlent grade to repres 


in Table A- 1. The 

itancea, avalta- 
ital contsnt of 
,ble in terms of 
:a1 content of 


luced through other scarcity. 


•nt potential 
higher prices 


i through the end of the year ZOOO are al 
I baaed partly upon projections by Lands 


so Bummariaed in Table A- 

■berg, etal.", in Resource. 


> through 1980 
■ in America's 



nand. 

For the United Sutes, scarcity of a metat resource might result either through 
a of foreign sources of raw-matsrial aupply upon which this country is dependent^ or 
ough Che world industrial denkAnd for tha commodity exceeding production capacity 
1/or resource limit*. In cither case, scarcity i* accompanied by rising price level* 
ich for a coinage metal could result in the melting or hoarding of currency for its 
tal content. Thia is the situation this country now faces in the use of silver as a 
nage metal. 



Digitized byGOOgIC 



318 COINAGE ACT OF 1965 



meUl mu.l re.t upon definite economic criteria, Fir.t, Free World 
■ ervcB and potential reaources of the metal ehould be sufficient to meet 
World demand*, preferably through the year ZOOO, whether or not the 

ei or potential reiourcee must be anured under prolonged emergency 

:ity, per ge. Alao, industrial users of the metal should have the 
ichnological alternative of turning to more plentiful substitutes in the 

r coinage and industrial uaes. 



The outlook for aluminum metal, both from the viewpoint of demand and supply, 

smand have been accompanied by successful exploration efforts for bauxite, the 
erred ore of aluminum. The expectation for continued discovery of high-grade 



id for aluminum metal in Che United States flirough 
per annum through 1980 and a rate of 4. 3 per cent 

match those of the United SUtes, cumulative Free World consumption of aluminum 
metal would equal 500 million Cons by the year ZOQO. This medium projection would 
utilize only two-thirds of Ihe indicated Free World reserves of the metal. On the other 
hand, if consumption of aluminum in other non-Communist countries eventuaUy eiceedi 

consumption in other countries, Chen total Free World cumulative consumption would 

because exploration could at least double present reserves of aluminum ore in the next 
four decades. 



Digitized byGOOgIC 



COINAGE ACT OF 1966 319 



in the United Stales ii derived from Jimaica and from Surinam ore. Ai ihown in 
Table A-1, Uieie reaerves of aluminum metal contained in bauxite, plus our own 

to supplement these reserves are most tilcely to be made in Australia and in Africa. 
It is only in the relatively well-mapped nontrdpical xreas, such as the United States, 

aluminum as candidate metal for U. S. coinage. Compared with total consumption, 
coinage requiremenla of even BOOO toti« would have negligible e£!ect upon supply-demand 
relationships. The excess Government metal stockpile is also more than adequate for 

resources could supply this country's requirement, for Ihe meUI, with little likelihood 



World production of chromium ore has doubted on the average- of every 10 years 
in recent decades as a result of fast-growing metallurgical refractory uses. However, 
nothing in the foreseeable future is likely to change this country's total reliance upon 
overseas sources lor its needs. 

Available reserves of chromium conuined in chromile ores in the United Sutes, 
shown in Table A-1 , are in Ihe order of I. 7 million tons. These reserves are low in 
Cr203 content, are difficult and costly to concentrate, and are therefore undesirable 

Western Hemisphere. 

Projection of demand for chromium in the United States (shown in Table A-1) are 
tied to projections of steel demand, especially the specialty steels. As shown, the 
medium cumulative demand in all us-ea is estimated at 30 million ton* of chromium by 
the year 2000. Added to this is an estimated 110 million tons of other Free World con- 
sumption, which results in an average total Free World cumulative demand of about 
140 million tons of chromium in the 40-year period. 

States would be faced with serious transportation problems during wartime. Emergency 
only through stockpiling. 

more than 20 per cent of the alloy. Kence, stockpiling to permit uninterrupted use 
during emergencies would be within the range of feasibility. However, emergency 



Digitized byGOOgIC 



COINAGE ACT OF 1965 



Columbium 



Tht first commercial ul* (or coliimbl 
lerroklloy uied in making illDyin^ addititiTia 
uacd iD the metMl form in nuclear reactori. 
high-lemperaturr alloy, for aircraft and miMalliH. 

For many year*, ciaentiallY all the calumbium uied u> the UnlUd SUtel ma de- 
rived from Af[ici.n concentrate* of Che mineril columbite. During the Korean War, 

pyrochlore, were diacovered. Thrae are located mainly in Braail, Africa, and Cuiada. 

In 19SS the known Free World rcaource* of colunibium maUl were estimated by 
the Bureau of Mine* to be about 10 million toni*. Tbeae resources were predominaatlr 
located in South America (T. 9 million tons}, most of which was in a single deposit in 
Brazil. North America accounted for 1 million ton* of columbium, of which 250. OOO 
tons wan in the United Slalea and 'he rest in Canada. 

The largest use of columbium haa been in lerrocoliunbium. which ii Deed as an 

for columbium metal, either in high-temperature aUoy* or nuclear application!. 

There was no domestic mine production of columbium concentrate In 1962, al- 

ium were consumed in the United States in 1962. 

hat present mine and mill ore -concentrate 
antained columbium metal in Canada and 2, SOO 
tons in South America. It ia estimated thai within 2 years Free World mining capacity 
:ould be expanded to produce additional ore containing 5, 000 tons of the meUl annually 
x meet demand* for coinage if thi* metal were choaen for such service. Interim d«- 
-nand could be met from Government stockpile* of raw material*, which contain an 
!*timated 5,000 tons of columbium metal. 

Present extraction capacity in the U. S. ia thought to be about 1,400 tons annually, 

■ emus of industry is that capacity for the reduction of 5, 000 tons of columbium per 

idequate for any projected demands for the metal. However, annealing of columbloixi 
requires special high- temperature vacuum furnaces. Presently, the toUl U. S. capacity 
[or this type of annealing is only 500-750 ton* per year. Sufficient tmnealitig capacity 
;ould be made available in 1-1/Z years. 

Columbium is quoted at about (50 a pound, although going market prices are 



iiilrKd Cli,05 (ronulnlng 19 



though 


64 1. 


ras 


1 of CO 


lur 


nbi 


umn 
















Ol this 
capaci 


., IJ5 


trj 


r cent 

■ repr. 
ted at 


ab 


o"" 


700 



Du,iiz=db,Google 



COINAGE ACT OF 19«« 



A- 5 

It ii axpected dut Ihe pries of columblum will dacreaac In (bm futura •■ volum* 
production increaaea. Induatry repraaentativaa contacted ballava tbat, with a market 
I 5, 000 ton* or mora of flia mstal, tht price of ahcot or atrip product would ultimately 
' in the range of S12-$13 per pound, Tlic value of r*v«rl icrap, it la eatimated, 
luld probably range from $1 to (3 per pound. 

Future demand for columbium dependa partly upon the outcome ol technological 

iment which might entend ita application. Therefore, any projection of future demand 
diia atage would be subject to a high degree of uncertainty. All tiiat can be aaid ii 
at coniiderably more columbium is available in known reiourcea than will be required 



Foreign suppliea of columbium ara vulnerable to political and emergency un- 
ainty. In view of thia riak, one muat give apecial emphaaia to the North Americae 



The United Statea haa long been the largeat copper" producing and conaumlng 
Ltry In the World. However, aince World War II thia production baa been inauf- 



ea baied upon Bureau of Mines Btatiatica puUlahed in the 1960 
■At and Problema place United SUtea reaervea of copper at 32. 5 
erg, et B.1, , luggejt that U. S, reaervea of copper, taking Into 
.a1 ores not included in the Bureau of Mlnea eatimate, may be on 
Tiillion Ions. A further reliable reaerve ii to be found in the 
:ona of recoverable copper- in-liae in the United Statea. 

of new copper include about 66 million tone in the Weatem 
le along accounting for 46 million tone. Total Free World re- 
e United Statea are eatinuited to be 153 million tana of copper. 
ion tona of Inferred ore ia alio Aougbt to exiat in Chile and in 



Medium projectlona of cumulative copper consumption in the 
1960-17S0 period are ealimated by Landiberg to be 42 million tone 
tons for the 1960-ZOOO period. To this should he added foreign den 





jf a grade higher tl 


«n that mined in the 


today. Additionally, new discove 


.riea, or tfie aubati 


tutlon of aluminum to 


1 make up the deficit. The figurei 


I do indicate, how* 


ver, thai the United 


sly increasingly upon foreign sour 


cea to meet projec 


ted dome a tic demand ■ 



db,Google 



COINAGE ACT OF 1BS« 



A-6 

Aa an allov lubititut* for ailvcr in Unitrd SUtca eoltugc, it ■sema unlikely that 
the metal value ol copper would ever eiiceed the moDetiry value, at leaat in colna of 
larger denomination, (Table A-Z, at the end of Ihia Appendix, ahowa the price of copper 
relative to (ilver. ) Then, too, the amount of copper required for coinage 1* quite in- 
aigniflcant in relation to overall copper demand. However, war-induced scarcity wonld 
poaaibly require that an adequate atockpile oE copper be maintained for Golnafe purpoaes. 



Although mangan 






of the ore in the U. S. ate limited. Because of this. Ih* United 


States ia faced with Ihi 


i problem of finding an economical means of utiliiing large low- 


grade reaourcea for e. 


nergency purpose!. 


In the 1960 editi. 






manganese ore are in the order of 1 billion tons. Two-thirda of 


thi. ia in the Communi 


at eountriea with the remainder in India, Braail, Union ol South 


Africa, and Gabon. 




A .ummary of in 




depoaita ia .hown in T 






.n tons, with leas than 1 million lona available domeatlcaUy. The 


manganese content of 1 


ow-grade manganese reaourcea available in thia country, how- 


ever, ia eatimated to 1 


le on the order of 77 million tool. 


The projectiona 








cumulative demand for 


contained manganese in manganeae orea through the year 2D0D ia 


T3 million tons. Aasu 


ming that steel production Increaaea at a rate of 5 per cent 


anoually in other Free 




be required in the four 




aupply could likely be 


accommodated by .lightly lower grade resources and improved 




IS. Ocean-floor deposits and new diacovery possibilities also 


offer promise of reiie' 


zing the long-term aupply situation. 



From the foregoing it is evident that high-grade manganeae ores for production of 
metal for coinage are strategically in ihort supply in the United States. Stockpiling of 

emergency-induced shorUgea of the meUl. However, low-grade reiource* could 
likely alleviate any prolonged ahortage of the metal for defeaae a> well as coinage needs. 

Molybdenum 
exploration baa greatly improved the aupply outlook for the metal lately. 



Digitized byGOOgIC 



COINAGE ACT OF 1985 



Most of (be wDTld'a aupply ol molybdsnum ia r*Bl[icled to the Wcatern Hemiapherc 
Tbia combined reierve ia cooaidered to be in excel* of 2 million tona, of which over 
half ia in the aingle Cliniax Molybdemun deposit in Colorulo. Moat of the renuining 

ChUe. 

Projection! of demand for molybdenum, ahown in Tikble A-1, are related to riainB 
oeodl. Allowing for both domeitic conaumption 
ree World ia dependent, medium cumulative 
a of molybdenum by the year 2000. 

problem could develop in the latter part of the century. Adequacy, therefore, »rtU 

from copper ores might hIid alleviate the long-term supply aituation. 

Molybdenum ranks high on the Hat of candidate metula for coinage in terms of 
aconomic potential. Because the Weitern Hemiaphere is weU endowed with the metal, 
source* of the metal would be available during emergency period*. However, with 
one-third of future supply expected to be obtained la a by-product of copper mining, 
major fluctuations m copper production could create aapply problema. Alio, coinage 
would constitute one of (he single largest markets for a metal such as molybdenum. 
It is likely that production could not easily accommodate thi* added demand, especially 
during peak period* of economic activity. 



enough nickel to meet requirements seems satisfactory. With the enception of Cuba, 
the world's largest known reserve* of nickel are located in Canada in the provinces of 
Ontario and Manitoba. Of the 6 million ton* of Canadian nickel reserves shown in 
Table A-1, the International Nickel Company controls * million tons. Other importani 
Free World reserves are in New Caledonia, the Philippines, and in Puerto Rico. 

Reserves in the United States, located in Oregon and Alaska, ace estimated to 
contain about 500, OOD tons of nickel. These deposits, however, have supplied only abi 
15 per cent of United States requirements in recent years, almost entirely for defense 
stockpile*. It is considered unlikely that economic incentives would add measurably U 
these United SUIes reserves. 

United Sutes nickel consumption, irtiich was 124 thauaand tons in 1963, is 



These requirements are three times the present known reservaa listed in Table 
but are about equal to resources plus reserves. It is likely, tiiercfore, that a 
sition to lower grade ores in tbe future will be necessary. DevalopOMBt of the 



Du,iiz=db,Google 



324 COINAGE ACT OF IVflft 



Then is, of course, the •xpecUtion of addlUoiul dlicovsriei of ntckal (uUldc orsa in 
Cvutda of the Sudbury type *■ wall ka the asteDiion of r<«*rv«« of known depo«ita in 
Cuads. The outlook for nickel aufftclency la therefore >l le>«t aa |Ood or better than 
for moat of the other caadidat* coinage metal*. 



The titanium metal- producing Induatry wsa initiated In the early IfSO'a in reaponae 
to GoveTunent itimulatioii to meet military Dead*, llieae follonred a period of rapid 
growth in which world production of titanium aponge meUl reached 17,000 tone by I95T. 
Subaequantly, with aa abrupt change in defenie effort away from use of titanium metal 
in maimed aircraft, production (lumped to leii than one-fourth of production capacity. 

In the 196Q'*, new una for titanium la aircraft and miialle* began to develop, 
and applicatlona in new fields were establiahad through research and development. 
Accordingly, world production of titanium sponge had risen to a level of nearly 10,000 
tons ia 1^63 in response to a market that ahowa promise of continued growth. 

The mineral generally used for making titamum iponge la rutile, although 
ilmanitc and altered ilmanite might be conaldered auitable under coDditlona of scarcity. 
Rutile is the preferred ore for aponge production because of its high titanium content 
{•)i per cent TiO,), its lack of iron, and the fact that It tends itself to direct chlorlna- 



lon of production is limited at praaent. The 
lis to aupplcment domeatic production of rutile. 

■enture for the recovery of rutile ia that of Sherbto Minerals Ltd. , located 
ne. Early estimates suggest that these reserves are on the order of 10 
)f high-grade rutile, a figure which exceed* all other comparable reeerva* 

This depoiit alone ia capable of supplying the world's demand for 
il ores for an indefinite period*. 

m metal production capacity tn the United Statea 1* thought capable of 



In the< 


Bvent of loi 


IB of foreign 




1 of rutile, domestic suppliers of ttie metal 


juld be for. 


ced to turn 


to ilmenite o 


.t high- 






ce exhaust. 


ed. The inco 




ce of using these resource* might reault In 


creaaed m. 


Btal costa. 


However, d 


omestit 


: reaourcea are adequate for foreaeeable 



db,Google 



COINAGE ACT OF 19S5 325 



Having the high, 



highest melting poin 


.1 o£ .U 


du.tri.l .pplic.tton. 


where 


{ether with inereiiin 








lougb domcalic resei 


rves of 


»diqu.cv i. in lORU 


■ doubt. 


ource. d tung .ten ir 


1 the Ud 


about 71,000 toni ol 


: tungaM 


ilof the.edomeitie i 


reicrvc 



IB are estimated by the Bureau of 
Except where lecovared a* a 

by-producl, mo»l o! Iheae domeitie teicrvca are lubmarginal. 

Total Free World reserves of tungsten are estimated to contain about 320,000 tons 
of tungsten metal. Although these reserves are widespread, the United States is 
probably belter endowed Chan soy other Free World country. In comparison, reserves 
of tungsten in China, North Korea, and the U.S. S. R. may be three to four times as 
great as the combined Free World reserve. 

Projections of cumulative demand for tungsten by Landsberg, et al. , shown in 
Table A-1, are based upon unchanged relative use of tungsten per ton of steel produced 
and constant use in relation to industrial machinery output. The medium projection of 
U. 5. demand through the year ZOOO exceed* Free World reserves by about 35 par cent. 
Assuming that Free World demand rises at the same rale as that of the United SUtes, 
cumulative demand for the non-Communist countries, inclusive of the United States, 
might total 1 million tons, equal to about three tinws regerves. 

This projected scarcity of tungsten may ha alleviated somewhat by new discoveries 
especially in less- thoroughly- explored areaa than the United States. Improvements In 
tecbnolegy may also permit exploitation of lower grade deposit*, the enlension of known 

points out, discoveries of large deposiU of tungsten, or substitution of other metals for 
tungsten, will be necessary by I9B0 if cost increases and reduced use of tungsten are 
to be avoided. 

The outlook under emergency conditions is less encouraging. Because it is es- 

Btrategic mineral for stockpiling under Public Laws 520 and 774. 

chase program, 1951-1956, 4 years were required before peak production was attained. 
Also, melall that might substitute for tungsten in an emergency, such as molybdenum, 
might also be in light supply. It is apparent, therefore, that in an extended period of 
emergency, use of the metal for coinage might contribute to a shortage of tungsten tor 
strategic and more critical needs. Small amounts used for alloying might be permla- 



Du,iiz=db,Google 



326 COINAGE ACT OF 1066 



A' 10 
Zinc 

Since World Wtir U, the United S'Ue* bat telle') 'i:>i>n foreign aourcei of eIdc to 
supplement domeilic produi^'ioa to meet vKpanding iaduetriel and militery demftnde, t 
■ i-end that ha.a been accentuated by the drctine in domeitlc mine production of (hi: metal. 

Zinc 18 widespread in occurrence, with important Free World production coming 
from the United Statei, Canada, Mexico, Argentina, Peru, FiBland, Weat Germany, 
Italy, Spain, Sweden, Japan, Ivlorocco, the Congo, Rhode.ia, «nd Australia. ToUl 
ted ore in theie and other Free World countries 1* 

figure for tine. 

Cumulative projections of demand by Landsberg, shown in Table A-l, indicate 
that United States requirements for line in the four decades, 1460-2000, of 69 million 
tone alone equals or exceeds total Free World reserves of recoverable cine in mea- 
sured, indicated, and inferred Qrei. When other Free World needs for sine are taken 
into account (which are at least 50 million tons in the next 40 years at present levels ol 
consumption), Che data suggest that a serious deficiency in zinc wilt result. 

The seriousness of this supply-demand situation is mitigated somewhat by the 
probability that the inferred reserve estimates are on the low aide. Improved recovery 
techniques might also relieve the supply situation somewlut. Nevertheless, the outlook 
for sufficiency of zinc to meet world demands through the year ZDOO is in doubt. 

From the standpoint of self-sufficiency for monetary needs in periods of emer- 

the meUl. It should also be noted that the U. S. Covernment has eliminated cine from 
its stockpile objectives. As a result, the stockpile has an excess of 1.5 million tons In 



The source of this metal is the mineral zircon. Most of « 

in which zircon is a minor constituent. Over one-half of U. S. i 
with Florida ilmenile reserves and production. 

As shown in Table A-l, reserves of lirconium in zircon, 
and in the Free World, are quite large. The Bureau of Mines et 



Digitized byGOOgIC 





Ove 


T oni 


f-h.U 1 


3f the 50, 


.000 


to 


minei 


rail. 




The 








alloy, 


1, ai 


id CO 




la. Mog 


t of Iht 






















. alloy. 


.. In rc< 




y« 


1,00c 


iton 




Lually. 










Ava 


■ ilabi 


lity of 


lirconiiu 




r, 


needl 


1 >hc 


mldt 


hia me 


tal be ae 


lecM 


id 



COINAGE ACT OF 1966 327 



e lirconiujn mvtat produced ig for use in cladding of. 
.Ithough ■ amsll quantity finda application in ferroaa 
l*ra, total demand for the metal has been leii than 



Digitized byGOOgIC 



COINAQE ACT OF IBflfi 



s 

i 
s 


j 

j 

1 

i 

1 


si .1 35 1 

-S ,E SS 
SS 1 8 SS 
SS 1 1 

do d 






s:: 'sss %ss s 



M llhiislii! 

Hi J -" " ll 



\\ 

Ij! 
III! 

jii! 

I'lIlM 

iililll 



db,Google 



COINAOE ACT OF 1966 




■dbyGoogIc 



330 COINAOB ACT OF I96ft 



APPENDIX B 



SILVER SUPPLY AND DEMAND 



CONTENTS 



r Requir«i 
:ca of SilvB 



■dbyGOOgIC 



COINAGE ACT OF 1965 





APPENDIX B 










SILVER SUPPLY AND Dl 


EMAND 


yean 


1. Dui 




led and 


sought for (ome 5 oi 


r b thousand 


ring thi. 


the arti 


1 uid ■■ ■ m>diim> ol 


exchange. 


In re. 




mea, the 


le in ind 


u.tiy, ud il Lpp»T 




J play 


aninc 


reaaingly 


c« »g. > 


nd in nsttoDul d<fen. 


e in the yea 


rs ab( 


ad. 




, world 


-on.umptlon of >ilve 


r has excet 


dedp. 


■oducti 


on, the 




hock.. Moit recnlly, the deple 










adu •trial OB «d» »eco 


m-^anied by 






coinage 


cd Slitdi 




,upled with i 




:ic production 


srve., h 


a* precipitated an in 




supply 




1 demands 



About two-thirds ol the silver consumed in the Free World has been for induat 
uses (arts and indmiry). The rest is utiliied in coinage. As shown below, conauni 
by the arts and industry in the 1 963 calendar year waa nearly balanced by productioi 
However, use of silver in coinage contributed to a Free World deficit of about 210 n 






419. Z 

uoa. 7) 



Silver Requirements 

Silver is one of the noble metals, a designation technically referring only to ita 
superior corrosion resistance. However, silver has other qualities that make it deatr- 
able and useful both in industry and in coinage, namely, high nisUeabillty and ductility 
and attractive color and finish. Its properties of high thermal and electrical conduc- 
tivity account for much of the growing industrial demand (or the metal, while the largest 
industrial demand has long been in photogrsphy. where silver compounds are used be- 



s of silver and its compounds and the s 



Du,iiz=db,Google 



COINAQB ACT OF 1005 





Silver ore 




By-product 
and line m 


lead 

ning 




U. S, Treasury 












i 






1 1 








v«r coBc*ntr«l 


^^ 




t 




t 










Bullion backing 




Uncirculated 


















































RcpToccated 






(Se 


Note) 1 






>»d m.liLl. 








(See 


Note) 
























Coining 




^_^„_— — 


■"■^^^ 




by the 






j~ " 


^^ 




Mini 








1 






1 
















































Federal Reserve System 






I 






1 














Photogcaphy 




Sterling flilwire 








Chemicul reagcnci 




and h<.Uo«.ce 
















Note: Silver for coinlni oi tndiu- 




Silvering of mirror. 




Electrical contac 




trlal conaumptloB 1* obtained by 
















CatalyXs 












C.r^ic. 




Bearings and bug 
Rocket motor no 


hinga 
r,l«ii 


■ilver from the slock of bullion 








Dental fillingi 




tha 


backs 




e certlfic 




. 





Digitized byGOOgIC 



COmAOE ACT OF lOflS 



nivailabla. However, naaoiuble ealiniBtea baaed upon i»r- 
d in Table B-1. 



ludual 


rial Appli 


Photogr 


aphic pro. 


Soldera 


and braii 


Electrk 


:al contaci 



23. 0l»l 

la.oC) 



Silver tyanide for plating 2. 2. ot'"* 

Starlingware and other 25.4 22. ? ">> 



The Bureau of Mjnai aatimatea that inhiitrial conaamptloB of allver in the U. S. 
in 1963 was 110 million ouncsa, unchUfcd from the ptevioua year.* New allvcr lued 

did silver uaetl in brasiiig alloya for metal joining. A moderate decline in the uac of 
(ilver in gterling ailverwara wa* regiitered, bowevar. Increaaed efforta to develop 
new aubstitutaa and to uaa illvcr mor* economically in many spplicMlona has contrib- 
uted, at leait temporarily, to the levelini off of Induatrial ailver demanda in thia 



Iver include dental alloya, glaaa coatlngi for 
r de-aalting Vila, and ailver-plated bearings. 



Du,iiz=db,Google 



334 



COINAGE ACT OF IftSS 



































































































































































■■ 






























































1 
































/ 
































/ 


,^^ 






























1 ^ 




























-^ 


-^ 




'- 






















^ 


„--' 






J. 














































r 






_^ 












■■'■ 














/ 






/v 












UJ 




















/ 


"■Totol Free world 






■'■ 














" 


















UL 










^ 






















■ 


T 








■--..J 






















J. 


^ 
















Free World exceot U£ /_ 


Jl 


■ 




\ 


















1 






/ 


lu 
























\. 




— 




JJ 
































■■- 














"I 


.— - 






• '■ 








^' 


llu 








y 












■ '" 




_,^ 


-r 












■^ 




N 


y ■■ 




s. 


/ 






/ 




— 


J, 




















' 




■'' 










* 






















iL 










'' 


























,^' 


^, 


y 
























J- 


r 


• 




















1 





52 S3 54 



ez 63 64 



ESTIMATED QUANTITY OF SILVER USED IN INDUSTRY A 
ARTS IN THE UNITED STATES AND IN THE FREE WOBLI 
DURING THE CALENDAR YEARS 19S0-19M 



■dbyGOOgIC 



COINAGE ACT OF 1B0S 



D QUANTITY OF SILVER USED IN INDUSTRY 
AND THE ARTS IN THE UNITED STATES AND IN THE 
FREE WORLD DURING THE CALENDAR YEARS 



1960 


102.0 


19il 


10S.5 


196: 


110.4 


1963 


110.0 


1964 


123.0 




db,Google 



COINAQE ACT OP 1960 



■ (hown, lotAl Free World aic of ailvar In Induatry uid Id the «rt* h» riieu from 
Dout ISO million ouncei in 1950 to 2«0 million ounce* in 1963, u averkge rats of mht 

:counled lor by countriaa other thin the U. 5. In contraat, conaumption of induatrla 



Expectaliona are that Induatrial demand for ailvar in th« Tree World will canIlDU« 
to inercaae in the future deapite the recenc price riae in the metal to $1. Z9Z9 (ui ounce) 
from SO. 929 in 19bl. Daaplte the fact that the uae of nonallver light-ianallive materi«]( 

ailver chemicala in ^otography la not threatened. Space-age applicationa and new de- 
velopnenta offer aignificant potential for Increaaed uae of ailver which ahould offaet 
declinea attributable to aubatitution or to reduced retail aalea.* Therefore, a Z percent 
minimum annual Increue in future Free World ailver conaumption la conaidered raa- 

Uie of Silver lor Monetary Purpoael 

Since paaiage of the Gold Rraerva Act Id 1900, ailvar haa played a aecondary, 
though important, role in out monetary •yalem. The metal hi>a been uaed in aubaidlary 
colDf (dimea, quartera, and half-dollara) and in ailver dollara, and aervei ai backing 
for lame 1.2 billion dollara worth of ailver certilicatei in circulatian. Altogether, 
however, illver »ccounti tor leia than 3 per cent of the U, S. atocli ot money. " 

Figure B-3 and Table B-3 ahow the conaumption of ailver for coinage in th« 
United Slalei and in the Free World for the period 19Sa through 1963. The data ahow 
that in 1963 the United Statea accounted lor 65 per cent of totil Free World coln^a aa 

coinage in the reat of Ih* Free World haa declined ilnce 1961, although the trend until 
1961 wal upward. *** In conlraat, ailver minted in United Statea coinage in 1963 in- 
creaaed 34 million ouncei from 196Z, a gain ol 45 per bent. A further gkln of 90 mlUloa 

The trend toward demonetliation of aUver in other Free World countrica la con- 
tinuing. **** For eattmation purpoaea It ia aaaumed that the amount of (liver u«*d tor 
coinage in the rest of the Free World will decline to about 30 or 40 million ounce* by 
1970 from the present level of 60 million ounce*. 

Proiectiona by the U. S. Treaiury indicate that. If the preaent icarcity of coin* 
peraiati, the amount of illver required for United State* coinage in calendar year 1965 
will be about Z90 million ounce*,****' up from ZOl million ouncea in 1964, Should 



fllm lad orfni UgliEi i> 



CDjipsi •[[oy. [nlhrlongnii 



Digitized byGOOgIC 



COINAOE ACT OF t»eS 



coinnge demand continue to increaae in thie country, the United State* Mlnle, working 
at capacity, might continue production at Ihe 196S Uvel into 1U7, when production 
could be increaaed further aa the new Philadelphin Mint begina operation. The rate of 
increase in coinage demand is ippronimalely the aame for both lilver- containing and 
non-eilver-containing coins (aee Figure B-4 and Table B-4), Thia auggeita that much 

fi«d by above-normal inlereit by apeculator. and coin coUeetora, It ia poaaible, 
therefore, that ehort-run coinage demand could follow a cyclical pattern aa it ha* hi«- 
torically. Thus, it ia poaeible that a down-turn in demand for lubaidiary coin* could 



Source* of SUver 



World production of ailver in 1960 wai edimaled a* Z49. 5 mlUion troy ouncea. 
Of this, some 39 million ounce* waa produced in Communiat counttiea. Of the remain 
ing 210 million ouncea, which repreaent Free World production, 53 per cent wa* minei 
in North America, 22 per cent in South America, 8 per cent in Europe, 3 per cent in 
Africa, 9 per cent in Oceania, and about 5 per cent in Aaia. 

Mexico, which ha> long been the leading producer of ailver, accounted for 
4Z. 8 million ouncea of eilver in 1963. The eecond largeat producer waa Peru with 
36.4 million ouBcea. The United Slate* wa* third with 35. million ouncea, followed 
by Canada with 30. T million ounces of newly mined ailver. 

The silver mined in the Free World i* commonly produced a* a by-product or 
co-product of copper, lead, and tine. Two-thirda of the dcxneatic alLver mined is 
recovered aa a by-product of theae orea. Virtually all of the remainder cornea from 

mining. 

Figure B-5 and Table B- 5 .bow the 
and in the Free World aince 1950. Aa *h 
haa declined in the 14-year period at an a 
COntra.l, total Free World ailver producl 
from 170 million ounce, in 1950 to 210 m 
average rate of increase of I. 5 per cent each year. 

Beeauae moat of the ailver produced in the Free World ia derived from baae-metal 



Silver producera eat 
be produced by 1968. For 
World production of ailver will inctcaie 48 milliea ounce* 



Du,iiz=db,Google 



COINAOE ACT OF 1968 











- " 3 


4 — ,--J -I 




:::>;:;::^.,_-J -J 


1^ I - ■,^i-. 


i,^ ^:.,__^r ,„__ 1 


, , 


j_-" ^ \ 's 


-i , '' ^ s 


:: ^ ■^- 


,L^^ 


,.Cc:-l 


, - ^— 


,' f 


::::::::. .:^^_J,._._: 


^:: = _::^__8 




|s ai 8 ssssi 8 i 



s 

I 
i 

si 



U 
ii 

63 



Du,iiz=db,Google 



COINAGE ACT OF 196S 



TABLE B-3. QUANTITY OF SILVER USED IN COINAGE IN THE 
UNITED STATES AND FREE WORLD COUNTRIES 
DURING THE CALENDAR YEAHS 1950-1964 




■dbyGOOgIC 



340 



COINAQE ACT OP 19«S 



















































































































































































































7^ 
























^ 


Csnt»~ 


J 












, 






/ 


^ 


\ 


/ 














y- 
























































































* 








V 


1 












"-■-• 


"-> 


'/ 


1 ■ 








' 


' 










Dimes -!^_^^^ 




' 


4 ' 
























^ 




/ 


S 




,-■ 


'^^ 


— 






,-* 


^ 




'' y 


-^ 






f 


1 

100, 


/ 


^ 


-''' 




\ 




/ 


^ 


V" 


Ou 


Driers 




*- 


i 




^ 




— 


■ — 


rr 








nr: 







— 




• 


a 


^ 


1— 


, 


, 


L^ 


u 













_ 







' 






V^ 





LV 


-h 


— 











^ 




— 




/ 




\ 


/ 


\ \ 


1 












/ 








/ 








y, 




/ 




\ 


/ 


r^ 








10 


( 








^ 


y 


V 

















61 S2 63 64 



FIGURE B-*. ANNUAL COINAGE OF CENTS, NICKELS, DIMES, QUARTERS, AND 

HALVXS IN THE UNITED STATES FOR THE CALENDAR YCARS 
1950-I9M 



Digitized byGOOgIC 



COINAGE ACT OF 196S 



, ANNUAL COINAGE OF CENTS, NICKELS, DIMES, QUARTERS, 
AND HALVES IN THE UNITED STATES, FOR THE 
CALENDAR YEARS 1950-19M 



■dbyGOOgIC 



342 



COINAGE ACT OF 1905 



\ ::;::::::::::: ::::::: 


^ J 


J X- 


1 1 


""t4 


"'' ^ t-i 


" 5 i V - 


:^i.4 -P I— 


'1 i P" i 


*'"$" II \ 


/ 


) \ ■ 




V 1 




T._ _- 


% \ s 


i 'v .-' 







H 

ss 

si 
el 



db,Google 



COINAGE ACT OF 1965 



343 



TABLE B-5. PRIMARY SILVER PRODUCED IN THE UNITED STATES 
AND IN THE FREE WORLD DURING THE 
CALENDAR YEARS 1950-1963 



Year 


U. 


S. P 


oductt™ Tit. 


Fr„ World 


1950 








173.0 










167.7 










182.3 










187,7 










178.0 
189.0 










191.2 










195.4 










202.1 










186.8 
204.5 
199.9 
202.4 


196* 








210.0 

215 



258 million ounce!, from 210 milUon ounces in 1963. Beyond 1968 it i> aaiumed thi 
production increaaes will gradually aisume pait ratea of change, with Free World p 
duction rialBg to 2S6 million ouncea of ailver by 1975. 



The Bureau o 



1 that in 1944 total world illver raiervea were abo 
it (about 170,000 tona). Of thia, about 763 million' 
r in the United Statea (about 26,000 tODi). Since 



litsd Statea elimlnBted ailver from coinage by the end of 1965, it !■ eat: 
cumulative demand for ailver for all other Free World ule* would be 
on ouncea <Z4D, ODD tona) by 1980. ThiB demand ia about equal to total 
a of ailver plua nonproductive aourcea including the U. S. Traaaury at> 



■dbyGOOgIC 



344 COINAOE ACT OF 1905 



foT induitry knd othat Free World coinsga. However, ahould lbs United StkUl r 
rate of new lilver will be iwceliary in the next decade than hat been the caae in 



productive lourcei of (ilver. The aourcea include atocka held by the U. S. Government 
and foretingDvernmcDta, including thoae of the Commuaiat-bloc countriea, lilvar a* 



U. S. Monetary Silver . The moal important of theaa ■loclii li the U. S. Treaaury 
aupply of monelary lilver. A> ahown in Table B-6, thii alock conaiata of ailvar bullion 
and ailver doUara, which aerve to back lilver certificatea In circulation and provide the 
raw material for manufacturing lubaidiary coinage. Silver not needed for backlnf of 
ailver certificate! ia termed "free lilver" and ia made available to the Mint /or aub- 
■Idiary coinage aa needed or to private induatry. Table B-6 ahow* that the (tack of 
ailver dollara, which waa at a level of 242 million ounces in 1950, has been almoll en- 
tirely depleted. Silver bullion baching ailver certificate! la eatimated to be at a laval 
of 1, 190 million ouncea at the end of the calendar year 1964. Inventoriaa of (ubaldlkiy 



Table B- b .howa al*o that the total itock of monetary lUver held In the Treasury 
roae from about 1,9B0 million ouncea in I9B0 to a peak of aomawhat leii than 2 , 1 1 mil- 
lion ouncea in 1958. In each year alnce 195S, outflow haa exceeded Inflow, ao that, by 
the and e( the 1964 calendar year, the remaining ailver atocka atood at a level of about 
1,200 million ouncea. Had it not been for Lend-Leaie returna, outflow would hay* nc- 
ceeded Inflow during every year alnce 19$1. 

Silver in Circulation . In addition to monetary ailver held in the Treasury, the 
United Statea monelary ailver included 1, TOD million ouncei of lilver In circulation as 
of December, 1963. An analyala of coin-loaa ratea, however, luggeala that only 65 par 

Aaauming that ailver dollara are no longer in circulation, thia loaa rata auggests that 
the total amount of silver in coina in circulation at the end of 1963 waa B36 million 
ouncea, or approximately one-half that shown in Table B-6. 



■Ia From U. S. Treaaury Stocki . Table B-7 Itemisea thi 
.live to the Treasury stock during the fiacal years 1950 tc 






Digitized byGOOgIC 



COINAGE ACT OF 1965 



i5"'5|i 

p I " s 5 
i t " § S 

= s "" g I 
s e »' £8 

i S " 5S 

ii^ili 



iM 



1^ 



i.llil. t tilL 
iijilil! i !i|p 



Du,iiz=db,Google 



COmAOE ACT OF 1000 



I ' 



d = a -i :j 



11 = = 
'■IF 



db,Google 



COINAOE ACT OF 106S 347 



In the pk«t 14 yc*r«, th* prlocipiJ sourcai of dapoiit* have been: 
Worn eoiu retlrod from circulation 
Return of Lend-Leue lilver 



The aecond item, return of Lend-Leaee Bilver, added lufaetantially lo the atocfc* between 
t9SS and 1962. However, little more lilvar can be expected from tbl* louccc. In the 
1964 fiical year, total depoiita into the Treaaury atocki from all lourcei eqaatled only 



..t of Ihe withdrawal, from atock have been f 


or coinage. Thcae withdrawale, a 


Table B-T, ranged from 11 to 60 mlUloo ™ 


ace* during the period from flecal 






d 144 million in Hical 1964. Silver-dollar « 


'ithdrawali roie from 9 milUon 


1 fi.cal 1950 to 50. 6 miUlon ounce, in flecal 


1963. At preaent, 3 million 


emsin of the itocli of lilver doUara, Some i 




agenciee [1 lo 6 million ouncee per year), •< 


jme of which ie returnable. 




'. or eachu«ea for .il.er certifi- 



catei have alio contributed lo thia deficit. Normally, theae withdrawal* could be ea- 
pecttd to be between IS and 65 milUan ouncea of ailver a year from ihe Treaaury. 
However, lince September, I9M, due to a peculation, ledemptlona have ranged from 
Zl lo 44 million ounces of ailver per month, bringing [he total for the calendar year 
1964 to 141 million ouncea. Thia cedemplion rate might be slowed in the future if the 
proccdurea for redemption were changed.** 

Other Free World Stocka . In 1963, imporlanl i 
the Unlled Statea am 
and coin a> follow*: 

MilHona of Ouncea of Sil' 



■ liver wa* held by Canada, followed by Japan and 



Projected Change* In United Stati 



can be jedeeved Pi«e1r tqr pp 
< imlflcnei ice ikpoUied nil 



Du,iiz=db,Google 



COINAGE ACT OF 1985 



expectuicy of thU itock ia Ucking. Baiora propoili^ * ■olutlos to tU* iltBatton, tlura- 
(ote, it ii Important to eatabllah juat how adequkl* thia atock 1* to nuka up th* deficit 
batwean projeciBd FrcB World praductloa uid projected Fraa World raqulranuDta of 
(ilver. Thia lorecaat then lervea ■■ ■ foundotloD for avaluKtlng alt«rii»tlv*a for allevl- 

For thia forackit, U. 5. production, cooaumptlon, utd itocki of ailvet cumol be 
divorced from Ihoae of the other Free World countriaa. Bacauae the factera of iupply 
and demand that affect the life axpactascy of theae atocka ara variable, it I* alio necea- 
aary to prepare ■ number of foreceati haeed upon varying aeaumptlona of aun>lir and 
demand. In thia way the riik of an erroneoue conclualon in the projected ad«quacy of 

factore affecting theae itocka, thus auggaitiDg poaaible aolutioo* to the iilver problem. 



Table B-B* le a projection of the life expectancy of the U. S. monetary atock of 
er bsaed on alternative levele In the allver content of U. S. colna. Tbta foracaat 

;he metal in induitry ami in the arta, together with decreaeing Free World Bilver 
age in countriea other than the United Statee.** The uncertainty of projectl^ iiituM 
ed Statee coinage ratea for thia act of poeeiblc condltioaa la reduced by preparl^ 
ecCiona for three eituationa: high, medium, and low rete* of coinage demand. 

A. Free World allver production: increaie of 48 million ounce* per year 
by l9tS (4. 3 par cent annual increiae, 19&3 to 1963, veraua 1.5 par 
cent annual incresae, 1SS0-19(>3) ind Z8 million additional ouneea per 
year of production by 1975 lannuil increaae of 1.6 per cent from 196B 
to 1975) for a total of 76 million ouneea increaae per year b> 1975 
(compared with an increaae in production of only 40 million ouneea 
per year in 1963 over 1950) 

B. Conaumptlon in the ar 
at an average annual r 
through 1975 leompar. 






:eB through 1975 
of coinage demand 



at level of 1964 production 
d( pnWliLe cDDdiaaii ud l> w HcmuLIr ibt ami UMjr ixHlMUiy. 



Digitized byGOOgIC 



COINAQ& ACT OF 1965 



ition HI. Low Coinnge R»te - Cyclic down-lurn in coiuse demand 
beginoing in early 19bB; demand dtapa from 208 million 
ounces in 1964 to 77 millian ounce* in 1966: demand in- 
creaiei from 1966 through 1975 at the projected rate of 



le ■ilualion* are graphed in Figure B-6. In the 
tal Free World deficit, excluding U. S. coinage 
through silver certificate redemption!. Thi* p 
average rates of redemption or sales of Treasi 



transfer of silver to other Government agencies is excluded from the calculations. Al- 
though these deposit* aad withdrawals may affect year-to-year changes in redemptions 
of silver certificates, the total amounl of sUver involved is deemed insufficient to (ub- 
stantially change the outcome of these projections. 

No provision i* made in these projections (or redemption of aUver certlficale* for 
speculative reasons beyond 1964. Should redemptions continue at the above-average 
September-December, 1964, rate (due to speculation), the projected life of U. S. 
Treasury monetary silver would be aubstantlally reduced. It i* usumed, however, 



a Life ol U. S. Monetary Stock ot Silver 

i foregoing assumptions nt>w serve as a framework for projecting the changes 
S. monetary slock of silver from 1963 through 1975 as a basis for evaluating 
'e coinage possibilities. The alternatives considered in Table B-B and sum- 
In Table B-9 for high, medium, and low coinage demand are 



(2) 


Reduction of the sUver content of coins to 50 per cent 


(3) 


Reduction of the silver content of coins to 30 per cent 


(4) 


Reduction of the silver content of coin* to 1 5 per cent 


(5) 


Complete elimination of silver in U. S, coinage. 


natives Z, 3, 4, and 5 assume no change in the present coinage system prior to 
[nber 31, 1965.** Also, no provision is made for the minting of silver dolUia in 


:hTgC 


t pr^jincd Lme-mn Dtod or demind (« lUvB-coiulnliig wkUllur cHU. 
coLia be mide bj tune 31. IMi, Iht Tieuny OKtu «rauM bi muidul liy sboil 3 y«i. U Hl«i «It Mlltly 



4 liAn coinAge, uoder d* 



Du,iiz=db,Google 



350 



CWmAGE ACT OF 19SS 



:<" 



^mi 



'± 



!=;;;;.: 



5S 






n 



n 



p 



sHSSSixSSIH^^^^^^^-i'*^^'^^'^- 



DigitizcdbyGOOglC 



O0IKAO£ ACT OF 1965 351 



life ol Ihe U. 5. r 



TABLE B-9. SUMMARY SHOWING YEAR IN WHICH U. S. MONETARY STOCK 
OF SILVER WOULD BE EXHAUSTED, DEPENDING ON THE 
SILVER CONTENT OF THE COINAGE AND THE 
DEMAND FOR COINS 





. „t Com.g 


t Demuid 




Alternatlv* Silvi 
of U. 5. Coins, 


.r Content 


Level 









High Level - Coinage production 1?68 llbl 1971 1974f»' 197?'*' 



300 millio 



ZOO million o 



1969 1971 1973 1976 1980 



1973 1975 1977 1979 



Digitized byGOOgIC 



352 COmAGE ACT OF IQSS 



APPENDIX C 



COIN- OPERA TED DEVICES 



CONTENTS 



Kiodi of Device! . . . . 

EUtct of Coinage Alloy on 
Coln-Opgrstad Divlcas 

Ba.*la of OpcrMloo of Coin- 
Selecting Mechuiiima . , 



Phyiical Praperllei of the Preie&t 
Silver Coinage Alloy 

Behavior of Candidate Material* in 
Preient Coin- Selecting Devlcei . 

Alleroative Solutioni Relative to 
Coin-Operated Device* .... 

Evaluation of Proposed Solutioiw, . 



■dbyGOOgIC 



OOINAOE ACT OF 19«5 

C-1 
APPENDIX C 

COtN-OPERATED DEVICES 

KInda of Devlcaa 



Coin-operated device* diapenalng a variety of gooda and aervlcea have bacon 
onplBce in the United Statea. Two major catagoriia of coin-opaiated dvvlcai 
eat, namely, me rchandiae- vending machlnca and tnachloaa parfoimlng a aei 



8 rchandiae- Vending Macbioaa 



The merchandia 
drink*, food, pocket ( 
auch macbinea. ThI* 

machlnea alone will ai 

with $Z billion in 1957 


e-vendlng machin< 
iotnba, tea cube*, 

erchandialng Aaao 
mount to about $3. 


ea, fam 

clgare 
y. Ace 
elation, 

B billic 


Liliar to aU, diapenae auch i 
ttet, and amall change for c 
ording to atatUtlc* pr***nt< 
, the aale* from merchandli 
« In the 1964 calendar year, 


ipa rating otha 
ad by the 

,e.v.nding 


cept penny gum machina* and th* like; ■ 
aluga and prevent! all but a few of them 
Theae devlcea are manufactured by thr< 
order): 


contain 
from* 
lemajo 


a device that detect* varlou* type* of 
.ctivatlng the dlapensing mechaniam. 
r companiei, namely (in alphabatical 








Coin Act 
National 
Raed Bit 


:eptora. Inc. 
Rejactora, Inc. 








All the 

imporUnt to 
give an optin 


device* i 
point out 

.um degr, 


jperate 
that thi 
ee of pr 


on the lame ptinclplaa, irtiicb af* diacuased betow. It la 
laa devlcea aubject the coin to a aerlea oif taata designed to 
otactlon Bgalnat aluga while accepting aU or moat of the 
in the machine. 


Service-Vending Machine* 















ipenaed by automatic machlnea include a number of well-ea 
telephonea and a number of newer onea auch aa automatic c 
tomatic waahlng machlnea and dryara, dry cleaning, Juka h 
la Ipin-bal) machines) are additional cxampla* of machine* 
klao Included in thla category are the aeU-ierva collection ' 
Lie toll roada and bridge*. 



■dbyGOOgIC 



COIKAOE ACT OF 1995 



Cola Beltetion. Many of th« machine! that perform aeivicef do not contain the 
■amc highly (ophidlcatcd coin- (election devices ■■ aie used in the nuchine* which 
diapenee merchanidae. Moat ol theae machine* (an estimated 800, 000), however, hav* 
■imple devicea which will prevent magnetic materials and overeised aluga from enMrini 
the coin ban. 

The trend ia toward increasingly more selective coia-diacriminatlng devices In 
service -dispensing machines. Th* pay telephones operated by Bell Telephone Coinpan;r*> 
tor axample, have up to the present time accepted all diak-ahaped plecea of metal that 
were not too large noi too small. Soon, however, Bell will Install selectors capable 
of rejecting over 90 per cent of the sluga now accepted. An estimated 1, 000, 000 g^j 
telephone a will be altered. 

Effect of Coinage Alloy on Coln-Opetatad Devlcas 

From thia brief deacrlptlon of the wide-spread uB* of coin-operated devicea In the 
United Statea, it ia evident that conalderation must be given to the effect that any change 
In the coinage alloy will have on the lodustTiea involved. 

Although the entire buaineaa of theae induatriea i* conducted with coins, a change 
to a coinage that cannot be accepted along with preaent coina will not prevent theae in- 
dustrica from conducting their bualneaa. The principal conaequence of such a change 

a loaa of revenue to the operBtora of "aervice" machtnea, and loaaea in gooda by the 
The magnitude of theae potential loaaee cannot be eetlmated with any degrae of 



To a vending -machine operator, a alug l> anything that can be aaed Inatead of a 
genuine U. S. coin in the operation of bia machine, Thua, aluga may be braaa waahera, 
steel disk., play money, foreign coina, altered U. S. coins (such aa a cut-down one- 
cent coin), or counterfeit U. S. coins. 

Siae. Several kinds of mechaniama are used to detect and reject sluga. The 
•tmpleat of these ia a ailing alot on the outaide of the machinea, preventing the inaeitlon 
of slugs that are either thicker or larger in diameter than genuine coina. Cutouta in the 
coin rail inalde the machine can he deaigned in auch a way that underalsed coina will 
fall through before reaching the actuating mechanism. Underslaed coins are also 
checked In the weighing cradle (see below). 

Magnetic Attraction . Another teat which the coin muat pass Is that It not be at- 
tracted to a magnet. Any material that Is attracted to a magnet Is not a ganuln* U. S. 
coin since neither copper-iinc alloys (pennies), cupronickel (five-cent coin), nor allver- 
copper alloys (subsidiary coins) are magnetic. 



Digitized byGOOgIC 



COINAGE ACT OP ISSS 



Weight . A coin that hag been (uccEiafully Inierted in the machine drops into ■ 
"cradle". The cradle performa * second teat for correct diameter by catching the coin 

When the cola haa lodged properly in the cradle, it cornea to reit momentarily ai 
the cradle, pivoted inan off-center poiltion, is tipped by the weight of the coin. It i> 
here that the coin ia weighed. A small counterweight, carefully deaigned to permit 
rotation of the cradle by the relaiivety heavy silver-copper coins, will prevent rotation 
by coins made Irom light metals, auch as aluminum. The coin is thsn cleared from the 
machine by various mechanical fingers. 

Washer Catchers . At the instant the coin falls into the weighing and siaing cradle, 
a small wire probe pokes al the center of the coin. If the coin is a washer, the wire 



iductor. In ■ dislt-ahaped con- 
field. The net result is that the disk la slowed down as it passes through the magnetic 
field. 

The degree of retardation in the magnetic field wiU depend on the product of the 
density and the electrical resistivity* of the coin. When the rate of retardation is 
measured, it is possible to separate the genuine U. S. silver alloys from cuprooickels, 
brasses, broniea, stainless steels, copper, linc, and many other metals which might 
liave pBiaed the test* for sise, weight, magnetic attraction, and absence ol center holes. 

Kinds of Coin-Selecting Mechanisms 



Some, or all, of the above~descrihed principles of operation of a lug- rejecting 



With very (ew exceptions, every coin-operated device will reject slugs that 
ted by a magnet. Often, those machines which perform services will depen 
ng slot and a magnet as the only rejection devices. 



The eddy-current type rejec 



Du,iiz=db,Google 



COINAGE ACT OF I96S 



,- INCLINED TRACK 




■KEEPER' 
(CONClNTRATES MAGNETIC 
Pin.D) 



rinURE C-1, EDDY-CORRENT TYPE OF SELECTOR (SCHEMATIC) 



Digitized byGOOgIC 



CODfAGB ACT OF 19SS 



Phy»lc«l PiopTti«i of th« Pr«»«nt Stlyr Coto««« AIIot 

Sinca present coin- ■ electing devlcea •itn to aepaiate ganuin* O. S, coinage fro 
;i, it would be well U thli point to leviaw the phyeical propartiea of the 90 ailvar 
:oppeT alloy now uaed for aubaidlacy coinage and the relationihip of thaae propurt 
otn- selector operation. 

Thus, we find that the alloy haa the following cbaracteiiaticai 

lU Highdenalty 

Denaity • 10. 3 grama/cabic centimeter 
Weight of dime ■ Z. 5 grama 

Weight of quarter = 6. Z5 gram* 
Walght of half-doltai = IZ. 50 grama 

(£) Low electrical rciiativity 

Reaiatlvity = approximately Z, 1 microhm-cm 

(3) Low realativity x denaity 

Reaiativlty x denaity - Z. ! » 10. 3 = 21. 6 ™'°^°^"' 

aquare centimeter 

(4) Magnetic attraction 



Nonmagnetic: will n 



Behavior of Candidate Mate riala in Preaent Coin-Selecting Devicea 

Lightweight Meula and Alloy 

Alloya of aluminum, oiagnaslum, and titanium, known aa tba light tnetali, would 
not be compatible with preaent coinage in today'* coin- (electing device*. They are too 
light to permit the cradle to revolve when the coin reata in It. Probably adjuatmanti 
could be made in the cradle counterweight to permit u*a of llgbtwolgbt coin*. A niore 
aerioua difficulty, however, ariaea in the actuating mechanlama tripped by the coina 
after they have left the (elector. Moat mectiaai(m( require a weigh) of 2, 1 lo Z, Z grami 

dimee would weigh only 0. 66 gram. Even aluminum 25'cent piece* would be too light 

A further difficulty with lightweight coinage might be encountered by motorUta 
attempting to toaa their coin* Into a toll highway baaket-type counter on a windy day. 
Much havoc could reault. 

In general, therefore, light coina would eaua* coodderable Inconvenience in tka 
coin-operated mechaniama. Alloying of the light metala with very baavy matala, aoch 
as tantalum or tungaten, would be required to make tliem acceptable. 



Du,iiz=db,Google 



COmAOE ACT OF 1«68 



Mȣnetic Mettli Mid AUoy j 

Magnetic matarlsti, that i>, materlkla attiacted to ■ magnet, would b« r*J*ct*d 
by all addir-cur rant-type (elector*, all "alide-type" unlta found on many of th* ••rvlci- 
parformlng machines, and all toll highway aelf-aeEva collection baakata. 

Some of the common claaaca of mater Lala that would be attracted by a magaM an: 

Nickel and many of lla alloya 

Particularly important to note Is that the 40O-aerie> atainleaa iteela, which are prla- 
cipally iron- chromium alloya, are magnetic. Moreover, cartain of the SOO-eariea 
atainleaa ateela, noubly Type* 301, 30Z, and 304, become slightly magnetic when 
coined, thereby making them unacceptable In many vending machines. On the otter 
hand, very alight magnetic attraction might be uaed aa a meana of retarding the coin aa 
It passes the magnets in the eddy-current section of the ■•lector. Thl* principle I* 
the baala of a recent development by the Inlernational Nickel Company. Further dla- 
cuaaion of this idea la presented below. 



Metals and Alloys HavinH High Electrical Resistivity 

s materials, almost all have higher electrical resistivity 
[ product of electrical resiativity and dentlty tl *« Im- 

• the coin-selector operation, it would be well to compare the candidate mate- 

n this viewpoint. Table C-1 shows this comparison. 






Du,iiz=db,Google 



COINAGE ACT OF 1966 



.■!■ and alloy* U*t*d tn Tabic C-1 hava beai 



The matala and allor* littad id Tabic C-1 hava bean acrangad In aacandtng order 
of the resiitivily x dansity product. PreienI lelectora in vaiullng machines can be ad- 
justed to accept coin silver (resistivity x density = 2t. 6) and reject pure copper 
(resistivity X density = 15.4] on the low side and copper-5 eIbc on the high side 
(resistivity x density ■ 27). Is practice, the adJustmaDt limits may vary somevfaat. 

The important coacluston that can be drawn from Table C-1 Is: 

Of the mataiials with elactrical conductivity higher than that of 
coin silver, only two basic type* are likely to pa»> the addy- 

These two basic types are represented by aluminum alloy XZOZO and tho copper.-5 sine 
alloy. Any aluminum alloys with resistivities of about 8 to 8. 5 mlcrobm-cm would 
probably be accepUble, though there are few commercial alleys that would fit into this 
class. Various alloys could be compounded, however. The copper-5 Einc alloy is rep" 

as phosphorus, cadmium, sine, nickel, and mangancie. In principle, then, the ac- 
ceptable range of resistivity x density can be obtained by judicial alloying of either 
aluminum or copper to increase their resistivities, because both are lower in density 
than silver. 

A further discussion of modified low-reaistlvily alloya follows. 

Metala and Alloys Having Low Electrical Re»i»tivlty 

Except for copper, aluminum, and gold, no metals approach the electrical resis- 
tivity of coin ailver. Zinc, nickel, iron, columbium, and sirconium have many time* 
higher resietivKy than com silver. Because of this. It is not passible to match the 
reiiativity ■ density product of coin silver with any alloy except one based en meMis 
lighter than sliver. Evta gold (if it were a candidate) would not be acceptable because 
of its very high density. Of the relatively light meUls, only aluminum has a low enough 
resistivity to permit matching coin silver, with respect to eddy-current response. 

lus section, the modified coppeta may ba suitable. 
imercial ones aie ahowa below. 

Chemical Resietivity, 

DeoxidUed copper Cu-0. D2P 2. 03 

Zirconium copper Cu-0. 15Zr 1,99 

Cadmium copper Cd-0. 9Cd Z. 03 

of additions to copper, which would give alloya having resistivities of 



db,Google 



COINAQE ACT OP 19«A 



Wat^ht P«r Cant 
Chromium 0. 09 

Mftngnnsas 0. 11 



Ickcl (0. 5%) might ■••o b« ua*d U 



SilTT-CoypT Alloy . Tha clan o/ alloya rapreaentad b; tha ptaiant coin allnr 
(90 ailvar-lO copper) can be made In any comblnattoD of lilver and coppec fcom 90 
•Uvec-10 copper to about 95 copper-5 lilvec and itUt have tha reilitlvlty of coin ailTir. 
Therefore, the eddy-currant reaponae among a broad range of allvar-copper compoai- 
tioni would be accepUble, 

It (hould be noted that varioua atlver-copper alloya have baan u««d ta odtar 
countriea, Howavar, when the almpla 50 coppar-50 ailver alloya have bean adopted, It 
ha* bean found that diacoloiatlon waa a problem. Solution* to thl* problem have In- 
volvad additional allDying with sine or nickel, iiWch not only tanprova tha corroaion 
raaialance but alao obecure aome of the pink or yellow coloration due to the copper. 
Below are aeveral example! of copper-atlver alloya that at one time or another hava 
bean adapted by foreign government*: 

Country AUoy 



None of the above alloya have realatlvltlea low enough to permit their uaa in tha 
■ ent-day coin aelectora baaed on eddy-current reaponae. Eeientially, the Increaaa 
eaiativity produced by ihc addition of nickel or nine to the coppar-gllver cooiblna- 
B la tha aame aa that produced when theae additlona are made to copper alone. 

In lum, only the following claiaCB of alloya would be aatiafaetory In their eddy- 



db,Google 



COINAGE ACT OF 19fl« 



Pll>< 


itlc. «ad cer 


amici 


ibothfaa' 


In pre.ent 




edde 










^r la the 


i poislbUi 


ity ol mrtlDg 






r plaitic mai 






devlopm. 


int( would ra 


qulp. 


a conaic 


Sumrnxn 


AccepMbl* 


MaU 


rlala 



DfUtlDg of low-ratlitlvity meUUic 
It orarcomB *OIna of thaae problam 
rabla amount of reaeaTch to bring t1 



ght me tall 


1 - aiumini 








n - would not t>« ace 


optabl. 






: metal* o: 


r aUoy* wc 


mid not be 


«:cepUble 


llatlvitym 


etal aUoya 


would not 


: be aci 


:eptable 


aandplaa 


tlci would 


not be ac< 


:eptabl 




e.e re.tn, 


:tloaa, the 


only acca 


ptable 


alloya < 


a Modlflad coppata 








> SUvar- 


■coppoi alloya. 







ttvei. Public acceptability la one criterion. Would a copper -colored coin be acceptable 
at a dime, quarter, or half-dollar? Becauae of th« past aaaoclation of copper-red 

muat be voiced that auch alloy* would be acceptable a* hlgb-value U. S. coinage. 

Wltb the copper Uloyi, the Incentive for illegal duplication i* high. Moraover, an 
Increaie in *lug making 1* po**lb)a beeauia of the Inccaaaad public knowledge that 
modified copper* will actuate coin-oparated device*. 

Silver-copper alloy* pre*ent other difficultlea, ■(*oclated with th* *upply of *llveT. 
If the coin muat be whlte-colorsd ■■ well a* corrosion rOBlitant, It It eitcamely doubt- 
ful that any coin vltb lex than SO per cent allvar can be a aucceaaful aubatltuta for 
pretent coin (liver, Sub*tltijtloa of a 50 *llvBr-50 capper alloy for coin allver In all 
denomination* of coin* will not be po*Bibls on Dthar than a temporary baala. * Condd- 
eration mutt be given, therefore, to the poaalbillty of *ub*tltutlDg 50 *Uvac-50 copper 
for only one of the denomloatloDi. If thli war* faaalble, the problem of aubatttute alloya 
for the other two denomination* atUl would remain. 

Poetlble alternative aolutiona are dl*cu*aed below. 



■dbyGOOgIC 



COZNAQE ACT OF 1905 



AlternaUve SoloH^i RtUttva to Coto-Op«r«t«d D 







[oachei are pi 


aiiible. Eithei 






t . complete r 


lew deiign work 




U. Tha., 1 


,ta.pU.dju,bT 


lenti, k> prog 








■nd cupronlckel 


loi 


le lome of Ita Kileetlvlty i 


tad woold .leo < 




i.ibly other 




kUoyl. Eitlnij 


of 


■ enaitivlty i 


■ beyond tbs ■ 


.cop. of tbta iti 




The lecc 


.nd .ppro.ch, 


th»t of m»klng 


modification tt 




etura of the dev 



AttTMttve 1. Modify Coin Selector. 

Can the nuuuifsctucer* of th* vsrlou* typaa of coin ■■lectori modify thnn to tc- 
cept oHur coinage? Undoubtedly, the answer would be yea if only n»w-colfiAg« ailoya 
were under con aide ration. Preiently, for example, the eddy-cuTTent typaa of aelactara 
can dlatlDgulah between genuine U. S, five-cent piecea and varioua typea of *luga. In 
Japan, a pure nickel coin ia dlatlngulahed on the baaia of tta unique magnetic ck&arac« 
tariatlca. But the problem of deaignlng a coin aelector that would accgpt both tha 

e modification would be mad* by a 
Both of tluae approache* have pit- 
prahended, could indeed be nude to 
kel; but, if thia were done, tha device would 
aise*, line, nickel allvera, and 
itlmallng the riaancisl loaaea cauaed by thla lack 
t ia clear that aoma loaa would 



, the poaalble dlaturbance to the Industry cauaed by tha 
E more aerloui than the direct coat. Immediate cbanga- 



;annot be aolved by uaing a alngle metal 

or more metalj in Juch a way that each 
CTant function, while tba compoaite meet* 
nple 1b copper -bottomed ataLnleaa ateel 
cry realitant to corroaioo by food and 
Therefore, in atalnlea* ateel cookwara. 
Copper, a good conductor, 1* applied to 
the bottom, which cauaea the heat to aptead evenly and preventa acoiching, 

Thia principle can be applied to the coinage problem. We are confronted with the 
problem that the only alloya with low realitivity (beaide* the ■ liver -copper aUoya) ar* 
either too light or ate red colored. The aolutlon is then to make the light alloya 
heavy by combining them with a heavy metal, or to make the red alloya white by cov- 
eltng them with a white metal or alloy. 

The poaaibilitiea of combining aluminum alloya with heavy elemant* ara vary 

in North America. Another heavy element, apent uranium, ia rulei 
emotional effecta it might have on the public. Accordingly, compoi 
aluminum are ruled out. 





An 


englnea 


rinl 




irlala 


proUem tl 




iloyi 


la often 




roHchi 


=dbY 






nt of the 






tion pr 




the 




■all requ 


ilrei 




. An 


everyday , 


poti 


1 and 


pane for 




[Jking. 












good. 


condu. 


:tor of heai 


hot 


apota 


might deve 


lop and ,co 


rch the foo 



db,Google 



COINAGE ACT OF 1966 



Varloui ways o/ maklni capper appeal wlilta ata kaowii. It can b< plated with 
nickal, «llvar, or a Dumber of altoyi, Silver-platad coppai alloyi could be made to 
look like pretent coinage and act like present collude In the vending machine*. 

Aaolher way ol making a white -looking capper alloy la to make a imiltilayei ahaet 
from which blanka would be cut foir coining. The multilayer would conalal of a while 
metal covering on both aldei of copper or a copper alloy. In principle, the copper, 
having low r**l(tlvtty, would provide the eddy-curreat reiponae, while the outer layer 
would provide the white •ppea.ranca. Actually, the eddy-current reaponae depend* on 
the particular combination of metala and their relative proportioni. A cuproolck*! 
(TS copper-25 nickel) clad on copper in the proportions ihown in Figure C-2 has been 
found to behave aatl (factor Uy In the •ddv-cucrent type of coin lelectoca. 




FIGURE C-Z. MULTIt-AYER BLANK, Z5-CENT SIZE 



90 aUver-10 copper 
75 C6ppeE-Z5 nickel 
70Copper-iO ellver 



98 Copp«r-Z line 

Various illver-copper alloy* 

7S Copper.-Z5 nickel 



It compoalte would behave the eame a* the prc*a 
Ion* of clad and core. The lait two would con*e 
outer edge rather than red, aa ahown in Figure 



coinage, regardless of the 
e silver but would have a white 
-Z, which would be the case 



The disadvantages associated with thia approach ai 
if the mantafacturtng varlaUe* has nM been made and (Z) the Mint ii 
nanufactuM such a material, so industrial sources mus 



compute inveatigation 



db,Google 



COINAGE ACT 07 19«S 



C-12 

A third appruch, twaad on tha philofophy of compoalM*, !■ a p 
■natallurglc*! on*. It might b« poidbl* to maks a mimurs of powden 
In a whita-znatal Tnatriji auch aa cupronickal. If apeclal procaduraa 4 
caraful choice of matrln material* made, the rcault would b* a compoaita conaiatln| 
ci a diaparalon of low-raalativity metal la a white matrix, Figaie C-3 la a ■chomatlc 
diagram of a powder-metallurgical compoalte. 

The feailbUlty of thla approach hai recently been damonatrated by the Kaweckl 
Chemical Compasy, ual&g a columblum matrix. Several mootha of develDprnant work 
would be needed to eatabliah nujiufacturing parameteia. Mint production of coin blaAka 
by compacting and alntaring would be a vaat departure from preaent proceaaaa, but 
thaae proceaaea could be Incorporated In the new Mint. In tha Intailm period, the Mint 
would have to purchaae blanki from industrial auppliera, though the lead time required 
for the production ratea needed will bci on the order of 6 to IS montha, A complete coal 
or technical evaluation of Chii approach hai not been made at thla time, but Indicatlona 
are that (he coet of the blended powder would be about $15 per pound, and blanka per- 
hapa $20 per pound. 




Alt 


rnative 3. SliRhtly M-Bnellc Male 


rial. 


bas 


A third alternative haa been pro 

eddy-current aection of a 
to the magnet, Ai the fac 
the resulting frtqilonal dr 
been retarded by the eddy 


oaed by the Int 

Din rollB paal ti 
oin selectar, tli 
of the coin rub 
B slows up the 



nonmagnetic material (95 Blckel-5 silicon) that hai been clad to 
(80 niGkel-16 lron-4 molybdenum). The magnetism of Permallo 
very cloiely. Only 1. 5 per cent of the thickneia of the £5-ceDt < 



il Company. The 



refully controlled da- 
Ite conalallng of a 
. Permalloy core 



■dbyGOOgIC 



COnfAGE ACT OF 106« 



365 



Permaltoy,' which i* lufficient to produce the effect dailied. The Inter national KIchal 
Campnny hx propoted thai • piece of epecial tap* b« applied to the magnet polea of the 

tent to the eddy-cnrrent retardation. 

Became tbla method depend* on friction, th* rim* of the coin* would have to be 
redeeigned to give a uniform rubbing *urface. Oth*rwl*e, wear would progreialvcly 
alter the action of the coin In a coin aelector. 

This compoilte wa« developed a* a temporary coinage material that would be 
acceptable in coin-operated devlcea along with preaent colne. After the operator* 
of coin-operated devtcea have had a chance to adapt their device* to accept colna with 
either high or low leiiatlvity, the magnetic core could be eliminated. The nlckcl- 
S alllcon alloy would then be accepUble to all coin-operated device*. 

An advantage of thia proposal !• that the compoaite la an all-white combination with 
■ good appearance. The core makea up only 1. 5 per cent of the croii-iectlonal area, 
and could Oierefoie, be abollahed (at the appropriate time) without any change in 



:oin-operated dcvlcei. Becauae the principle of operation 
!her than eddy-current retardation, more problem* can bi 
Lpoalte than from the muttllayera, whose operation ia bast 
Pioblemi with wear of the coin, magnetic field variation, 
lent devicaa, which would be minimal with the multllayera 
T, would be troubleaom* to the nichel-S a U icon- magna tic 
ir, the Mint would be required to purcbaee the composite, 
o make It. 



Evaluation of Propo«ed SolntloB* 



would not be well ri 



I Silver-so copper alloy 

ultllayer materials con*l*ting of •ilher cupronlckel on copper, or 
iricnii other combinations of ailver-copper alloya, copper, modified 
ippers, and cupronlckel. 

case of the 50 ailver-SO copper alloy, *ome difficulties can be expected In 
sing. Basically, however, the manufacture of this alloy should be within 
capabilitie* if minor change* in equipment are made. 

ultllayer material* described are preferable to the composite Involving a 
re. It would seem that if a compoaite is to be made at all. It ahould be 
eddy-current principle rather than othere. On the other hand, if the vlalbl 
lntc'*<-abl* in the fltM caae and combinations of white alloys are not feaalbl 



db,Google 



COINAOB ACT OF 1»«S 



The principle problem* yet to be fully etUbUtbed lalmtive to the other multUayet 

(1) SouTcae ot aupply of multUayer mMerlala 

(2) Manufacturing tolerancas by auppliera 

(3) Quality control Id the Mini 

Some e0ort ha* been devoted to thaae problema, but more work ahonld be telle 
before a change-over to multilayer material* 1* undertaken. 

One solution which would ua* a limited amount of ailver i* to clad copper wltli the 
Swedish alloy (50 copper-40 gilver-5 nickel-5 zinc). Thii ailver alloy woold ba 
preferred to the 50 gilver-SO c(q>per alloy becauae of somewhat improved tarnlah 

Before daclding on copper aa the core compoaltion, anothat factor to conildar ii 
that the aonealing temperature of thla metal la much lower than that of die clad. Thai* 
temperatuiei ibould be a* close together a* posaible. The addition of ZS to 30 troy 
ounces of silver per ton of copper^ or 0, 1 per cent airconium, will raise the hot 
working and anoealing tvmperati 
tlon of about I per cent line wil 
discrimination of the coin selec 

Accordingly, the foUowinf 
all denominatioi 

{11 Chemical Compoi 

Outside layers: ' 



irlng copper (£5-30 oa/ton), containing 1 per cent alnc 



mlnatton 



Over -All Strip Thickness of Thickness of 

Thicknesa, Outaide Layeia, Core, 

inch inch Inch 

0.0134 0.0402 

0.0104 0.0312 

0. 0078 0, 0234 



Digitized byGOOgIC 



COXNAOE ACT OF 1965 367 



idC-16 

: cent by weight of the < 



Tbi( combliutioB could ba cluiigad to euproi 
cbajiglsg th* thickn****!. If the t per c«nl cine ii 
change In bahavLoi In coin ■•lactoti will occur. 



db,Google 



COINAOE ACT OF 19SA 



APPENDIX D 
MINT OPERATIONS 



crlption of Mint Operationa 
ilts of Coin Striking TrUla 



■dbyGOOgIC 



COINAOE ACT OF 1906 



MINT OPERATIONS 



An important criterion which must bs uied In rating a poi*lblc alternative it 
teriol for the current coinage alloys la the abUlty oC fbt Mlnti to mske calm from 
material. 

Congreai ha* recently authoriiad a new Mint, to be located in ch« city of 
Philadelphia. The new facility will Incorporate modem melting, rolling, annealini 
coining machinery capable of handling a number of the alternative materials that n 
selected for new coinage. However, the new Mint is not expected to go into produi 
for several years. As a result, the present Mint facilities must handle the produc 
of coins from the new material until the new Mint is ready. 



The Mint has for years been an integrated opera 
control of all aspects of coinage f 
including final inspection, count in 

These aUoyi are processed through the Mint as shown in Figure D-1. Each 

the PhiUdelphia branch of the Mint, but the Denver branch has essentially t) 



In the Mint melt shop, the required amount* of metal for the alloy* usei 
[hed out and charged cold into 750- pound- capacity high-frequency inductii 
a. Each unit has an available power supply of ZOO kw. Clay graphite fun 
generally preferred, particularly for the current silver alloy. During re 
ration, the melting and casting facilities have been devoted exclusively ■□ 
er-IO copper alloy. There is not enough capacity to handle the melting < 
.age alloy* at thi. Umo. The result 1* that coiled alloy strip, required foi 

Molten silver coinage metal is cast into rectangular slab* in water-coo] 
d "book" mold*, yielding on ingot 1-1/2 inches by 9-3/S inches* x 5 feet 1 
about 31S pounds. This slab ingot require* no *urface preparation, other 
>hing, and goes directly to the rolling mills for a cold reduction pass. 



■dbyGOOgIC 



370 



COINAOE ACT OF 19«B 



<9S% Cu-5*Zn) 



(75ftCu-i5% N 



1 M.l. 1 


1 


1 c. 1 




1 Rol tSAnMUl 




1 BU.» 1 


1 


1 cle>n 1 




1 Riddle 1 


1 


1 o-!" 1 


1 


1 C.1, 1 




FIGURE D-1. BASIC MINT COIN PROCESSINC 



Digitized byGOOgIC 



OOINAQE ACT OF 1965 371 



D-3 

The Introduction of klterutlve maula a&d alloya luch >■ nickel, nickel- 
chromium, or itainlega ileel* would require a chAage in melting praclice »nd diffsrenl 

ment to ■■fely and efficiently handle the higher- melting- point materiali. A much more 
draatlc change would be nece((a.ry were the Mint required to melt and caic the ao- 
called refractory or reactive meUIa auch aa titanium, siTCDDium, or columbium, 

by gaaea luch a* oxygen and nitrogen muat be kept at a minimum becauae auch con- 
tamination, even in amall amounta, ahaiply increaacs the hardness and decreaaea the 

workability of these metala. 

Of the metala and alloya already auggeated as poaalble alternAtivei for 90 sllver- 
10 copper, the ouprooickel, nickel ailver, and various ailver-copper alloy modification i 
arc the only white alloya that could be handled in the preaent melting equipment. Moat 
copper-baae alloya could also be handled. The melting and caaUng of the preaent silver 
aUoya at the Mint haa reached a high degree of perfection and efficiency, and the 
product ia conaiatently of the highest quality aa is evidenced by the excellent coins that 
are made from the ingots. 



The Mint ia preaently capable of cold rolling such alloys as cupronickel, 90 

heating ingots or slabs to hot roll them. A furnace for annealing between cold reduction 
passei ii available. For example, the current high-silver alloy i> rolled Co size with 
two intermediate anneale with about a id per cent cold reduction of the cast slab before 
the first anneal. The cold rolling to final sise prepares the strip [or blanking, which 

diCCiculty. However, alternative alloy*, sur 
alloys including nickel-5 silicon, CiUnium, 
techniques and equipment not now available 

sirconiurn, protection from gaseous contamination would be required during annealing- 
Columbiurn, on the other hand, docs not work harden rapidly during cold rolling and it 
could perhaps be reduced without intermediate annealing. However, it ia probable that at 

or alloy were chosen. 

In connection with rolling operations, a smooth, clean surface is required to pro- 
duce high-quality coins. With the present alloya, a good surface li maintained without 
any special descaling or pickling steps. Some of the alternative metals and alloya might 
poae a problem in this respect unless the Mints bought the material from ouleide ven- 
dors rolled to the final finish and siie desired. It is doubtful, that tbe Mint's rather 
old rolling equipment could properly handle most of the alloys which have been auggeated 
aa poaaihle alternatives to the current ailver alloy. 



!d by cold rolling 


; and annealing with ni 


aa the stainless 


ateela, the high-niek« 


id Eirconium wo 


uld require rolling 


the Mint. Specii 


il annealing equipmen 



Du,iiz=db,Google 



372 COINAfiE ACT OF 19S5 



Attec the colD meul i* rolled to the proper thickiwiB, it la lent through the coiii 
bUnkini machinsi, which puDch oul the coin blanki or plucheta. With the proaant 
alloya, thia ia done with the atilp in the cold-iolled condition, aa tUi r«aulla in the 
blank having a clean and aharp iheared edge. If annealed before blankiBg, the puitch 
draga the metal and leavea an unaaCiifactory burred edge. Although the blanking step 
preientt no particulkr problemg, aoma of the poaalble alternAtive metala may be mora 
difficult to punch, with Ih» reault that die life would be ahortened. 

The blanking aperatlan produces about 30 per cent acrap, the inevitable reault of 

blanking acrap preaenia no problema. Scrap from each of Iba alloya ia <or cao ba) 
readily reverted into the melting cycle. However, with certain alternative matarlala 
auch aa a coRipoaite made by claddlag cupronickel to a SO allver-fiO copper cora, the 
blanking acrap could not be limply ramalied. In a caaa of thia type, it would be nacaa- 

Tbe aeparation of theae metali, however, la not difficult. The monaUry value of the 

chargeap On the other hand, scrap from a compoaite of cupronickel clad oil copper 
could be reverted directly for production of the preaent 5-cent coin or for pToduction 

acrap would have to be carefully segregated ajid ralurned to tba outalda euppllar for 
remelting and reproceeaing. The reproceialng coata would be relatively high for theae 
metala, perhapa aa much aa 75 per cent of the original coat of the rolled product* 



ling operation, the coin blanke or plancheta are paaaed between rolla 
the rim of the blank. The rim thickneaa ia greater than that of any 
:oin, providing tome protection againat wear of the central porUona of 
e long aa tbe rim i« thu* ralaed the coini will "stack" properly. 



}ining process is a critically important part of the total Mint operationl it 
'ery real teat of any material auggeated for uae in coinage. During the 
'ation, the coin blank is pressed aimultanenusly between obverse and revere 
I (he complete design, including the milled edge ("reeding") when the latter 

pair of dies, so thai one stroke of the press produces two coins. Coinage 
rate at about 140 strokes a minute, so that each press can produce about 
, nickels, or dimes per minute. The quarter dollar and balf-dolUr, being 
ea, require more pressure for coining and only one coin ia produced for 



id limited in capacity. 
essea i* 150 tone. 
of, their rated load. 



■dbyGOOgIC 



COINAGE ACT OF 1986 373 



The Introduction of new coinage alloyt of higher (trenglh and hardness than the present 
alloys could impose a severe strain on the prisaes, even for the sRiall-aiie coin*. 
This might mean Ihat only single-coin dies could be used instead of dual onea, «ith • 
resultant lowering of production rate. Larger coins such as the half-dollar may be vei 
difficult or even impossible (o coin from high- strength material on the present equip- 
ment. For example, difficulty was eiperlencei) when the Mint made coins for Coau 



slve wear and possibly cracking would be the result of using harder < 
t materials that require high coining pressures. This would cause i 
ot only ai the result of higher stresses imposed on the old preaiea, 
of the need lo replace dies more frequently. 



mlts of Coin Striking 



A number of Che possible candidate materials were s 
Philadelphia Mini in the form of rolled strip to determine ] 
blanked, upset, and coined. Table D- 1 lists the materials 
resulli. The rolled strip material, in (he proper Ihicknes 
desired, was first blanked and upset as in normal Mint pn 

step, special dies were prepared by the Mint designers and engravers, which would 
duplicate as nearly as possible both the obverse and reverse design features of a typical 

much lower than that In the "knuckle" presses normally used for coining, which might 

The materials chosen for the Mint tests were representative of the classes of 
materials listed in Table i in Ihe main body of this report. Some of the metals, 

coinable. Cupronickel, for example, was familiar lo the Mint as the alloy used in the 

and half-dollar sizes. The various silve 
resented dilute silver alloys that are w 

under certain qualified conditions, were considered as possible candidate materials. 
The nickel- base alloys were represented by Monel and a special nickel-5 per cent 
silicon alloy containing a Permalloy core. Austenitic stainless steels were represen 
by Types )01 and 30Z. 

The data in Table D- 1 show that there was no difficulty in blanking any of the 
materials. However, coin blanks of some of the materials did not upset properly 
during the edge-rolling operation. For example, two of the composite materials, the 
silver- clad copper and the cupronickel- clad copper tended lo buckle during the edge- 
rolling operation. The problem was more pronounced with the quarter- dollar-sire 
blanks than with the 10 cent size blanks. Photomicrographs, Figures D-Z and D-3, 
show that the bond between the outside layers and the copper successfully withstood 
the blanking and upsetting operation*. The cauae of buckling may have been 



lected and taken 


to the 




[>w well they could be 




md observations 


on the 




for the particuU 


ir coin 




;Uce. For the at 


:toal CI 


lining 



Du,iiz=db,Google 



374 



COINAGE ACT OF 199B 



11! 



r f » II -s u 
i n I* ?» -I ' 

h i i n \\ 



I I 



ill 



1 

1 1 



iiiiiiiM 

I li ^i li I' ' "1 li 

! 1- H ¥ I' I H 1' 



fflifli 

r r E f t r 

I I I I I ^ 

2 3 a d 4 ^ 



t S 

i i 
s i 



I 



nil !M 



II fi 



I t 



ill 
lij 

If- 

V.l 



I 
* 1 



t i 



1 i If n 



V 

ll 

ill 



I jl 

I 



U 
Ifl 



db,Google 



COraAGE ACT OF 1868 





COINAGE ACT OF 19SS 



rected eaaily by proper ■■lection of Ihe annealing condiliona. It waa alao noted tlut the 
edge-rolling operatloD cold worked the edge of the blank to • great*! depth thui antic- 
ipated. During the auh^equeDt cotnlng operation, tbia condition appeared to cau^e 
trouble in getting a full development of the lettering In the deaign that 1* adjacent to Uie 
rim ol Ihe blank. Thli condition wai particularly aevere In the auitenltlc atalnlei^ 
■taeli and the nickel-5 lUlcon alloy. To alleviate thii would require an extra — — -n-g 
traatmaat after upiettlng or edge rolling to aoften the rim of the coin. To prevent 
buckling of the blanka during upiettiag, it would protiably be better to uuiekl following 
the upsetting, rathsr than before. Thie would al^o aoften the material in the outer 
portion of the blank. Thii procedure wai actually tried with another aet of the nickel' 



Figures D-4. D- 


5, and D~6 ihow the reaulta of coiit-itrUdng wtperinuBt*. The 










thealteruilivB materia 


Icwa^ eatabllihed by trial* with the current aUver-bai* alloy >• 


• ■tandard. A* a re>u 


It. some ol the »llernaav=. might have ahown up more favorably 


If higher preisurea hai 


) been employed during coining. However, aa Indicated earlier, 


the cold work introduci 


ed into the rim area of the coin during edge rolling remlu in a 


low capacity for plastii 


: flow in this region during coining. Thi. deficiency ml^ be 


mitigated by annealing 


the upset blank before coining, aa waa done with the nlcksl-S 



In general, it may be concluded that the atainleaa Steele, whether they are the 

auatenitic or the straight- chromium types, would be difficult to coin with the present 
equipment. On the other hand, a stalaleas steel has recently been developed by 
Republic Steel Corporation, which promises to have higher colnahility than the other 
stainlesi steels. The alloy has not been tested in Mint coining dies, however. Nickel- 
chromium alloys and Monel also lack coinability. However, the lack of coinaUllty of 
moat af thr.e alloys would b= only one part o( the Mint's problem. Aa mentioned 
earlier, these materials also require dllferent melting procedures than used with 
present alloys, and they require hot-rolling equipment. Furthermore, annealing of the 
austenitic stainlegs iteeia requires fairly high temperatures (about 1900-2000 F), 
followed by a water quench. Such facililiea are not now available. Nickel, nickel 
•ilvera, and the nlckel-B silicon alloy are not aa difficult to handle as are the stainless 
steels but, with the possible exception of nickel-silver alloys, the Minte are not now 
equipped to handle their melting and rolling. 

n was found to be questionable, and further experlmen- 
m was not tried al the Mint, its properties indicate 

^n well established by the Canadian Mint, which nnr 
' nickel. Thus, from the standpoint of colnahility, the 
kel, cupranickel, columbium, the eilver-copper alloys 
posites consisting of cupronickel clad on copper and 



db,Google 




75 Coppor - 35 Nickel 

Cupconicltal - Copper Multllayor CooipoaiM 

SOSilvsi ■ 50 Coppar 

Co!d Silver - Copper Multilayer CompaBiCe 



378 



COINAGE ACT OF IBSS 




101: CDhunbium, Vaadorl 

110: Colomblum, Vandoi n 

lOT: Zirconium 

105: MebbI 



Digitized byGOOgIC 



COINAGE ACT OF 1965 




I08C; Nlcket-5 Slllcoa with magnetic core (bright annealed after 
upieuing] 
G; Type 301 SUinlei* Steel, Vender I 
106: Type 301 Stalnleii Steel, Vendor II 
109; Type 302 SUlnled Steel 



48-988 O— «■ 



Digitized byGOOgIC 



CODJAQE ACT OF 1985 



The resuLtft of the blanking, upsetling, and coiidng experiment*, considered In 
inction mth the other Mint proceiaea, lead to tk* |eiMral rating of altomatlve 
rial* ahown in Table D-Z. 



7S Coftpcf-U nLdHL (cupreakliel) 









Digitized byGOOgIC 



PllOTOGRAI'in IN TIIR ECONOMY 




v^^ 



^^i^ 



THE S ILVER i»«i '"'''■■ ^''^'" '"'•'*'' 



^^v< 



^/m. 



:^ ^ ^% -<p^ 






Du,iiz=db,Googlc 



382 



COIKAOE »0r Of ..» 




„,„„ » *" '""" "-"" "'"•" '"■ . 

■-«:::;;::»«■'•'•'-•"•■" 



■dbyGOOgIC 



COINAGE ACT OF 1965 



The Silver Image 

PHOTOGRAPHY 



MiiKi iiiAN 52 nitlli»n Aniccituns tupiurcd [he smiJe^ of iheir chiltlren. 
ri'iiviJixl ihcir tatjlions. unniti-rsurios jtul wcildingN. logelher with a hosi 
(it uihtT pcrMHul remi-'nibcruncct by luking moii: Ihiin 2'-3 billion piciures in 
IVti4 

[)urin^ ihul \uine yuiir. Ihc mcdiLul und denlul prufeuion pnices^d aboul 
iuif J hiilion X-rjys as pjn <iF ihc diiigniMis und irciiimcnt of itlneu and 
JIH.-UW. ihu> cuniribulin^ iimwiisui^bly 1o Ihc bciillb and longeviiy trf the 

Thi- ciminiiin dcnoniinaliir in hmli is ihc use of [he photographic procesi — 
Ihu uniquo uhilily of a silver salt to record an image »hcn exposed to li^t. 

TiHiay phiiiugraphy aflccu the life of evciy individual io ihis couniry in 
many uuys. II nol Ihrnugh "niudiiinc" or "picture laking". then because of 
the rule it plays in our national defense elTorl or as i( works for industry to 
assure i[s Luniinuing ahili[y [o keep pace with Icclinology. A photograph 
speaks a universal language and is. therefore, indispensable in cooununicB- 
tions. eijuiaiion and culcitainmenl. 



The photographic industry is entirely dependent upon systems for image 
reproduL'tiiHi that utilize silver-basetl salts. There are no satisfactory alternates 
or substitutes for silver in the photographic process and. despite extensive 
icv.'aich, there are n» technological changes id non-silver systems anticipated. 

ILVliRY VHtft OF THIS INDLSTRVS PRODUCTS. AS WELL AS 
RVERV MEMBEK OH IHK FNDLISTRY ITSELK. IS. THEREFORE, 
roNrEKNEo WITH insi;rinu that the supply of silver 
F(1H THIS VITAL INDUSTKJAI. USE IS MAINTAINED. 



■dbyGOOgIC 



COINAGE ACT OF lUOft 



^hul lias MapiKDcJ to Silver? 

-*• I'll ph-M>WHt4i|i xlllUiait Urn 



COHtUMPTIOM 




COINAGE ACT OT 11168 




How Important is Photography? 



T« Noilonvl D«fBn*« 



pcn>KlJciill> to dececi <iittK> una 



ihe nxlnt In Tiita iinJ i" matuiK * ' mniinnoMc itslmng fttou h-v. 
Ihetf dc|K« !•* rWiHnwi, .» «« >l«< »«™ pnMuwd lor wc l^i »c Awm* 

aoi) ha* the &ivisi •inMgic orAu «< i ' nv futi In ony Klniiuutian wul 
•inillai mit'ltn n ^-niy«il mue Ivr.^i* 



Digitized byGOOgIC 



COINAGE ACT OF 19 



Ta Spac* Expleraliofi 

J - Hi.Eh-iK'L-d Loli>r Mm-, urc um-iI in 
in'.ininii.-nt ri,v»rding uiiil phoiu dixu- 
-iirnlati™. 


■.i-ttj\ cipi-nJiiup.'- *cre on cducalinnal 


2 -In •^ili.-lliw flighls. mjl» .>f -en- 
■-ilirai pa[Kr arc wai tii rvcocd 
.-™;illogri.ph» «hi«h shim technical 
inform mil >n. en- Icniperalurc. prts- 
>Lre. icjiiciLv. iicccicraiiun and vihni- 


niunilv groups >pi-nl S40 million on 
^mlio...sujl BjiiipmL-nl md >uppli» 
in IW.3. 
4 • R.ivnt advances in programmed 



3 ■ -X-tuy film* arc uvcil lo find Haws 
in nclJed teami ol rockets and uiiel- 
litcs and also lo inspect solid luvl and 
tiM ciccltical cumpiincnis nf riKkeu. 

4 • PhouvM'nutivc plates arc used in 
the pnihiL-tlon of inicgraiol circuili 

5 • Hvcry ustronaul has carrivd cant- 
crat for Mill and mi>vic pictures whidi 
have contained tpcciul films designed 
spccilieatly for use in tpacc llightt. 

To th« HMllh of Our CIiImm 

I ■ Over ■«),(KJ(1 pcnoni arc cmpluyed 



X-ray diagnosis 

3 -In the last ]< 

of X-ray film ha' 

4 • Photography 

record surgical procedures and 

photo-tBological examination as well 

at other laboratory work. 

To Iha Education of 
Ovr Children and Adwit* 

1 • Over 340.000 still and movie pro- 



n Ihe 



To tha Printing and 
Publiihing lndustrio* 

1 ■ There jrc over y.OOO lot 
and «cekl) newspapers 
United Stales, employing approiimale- 
ly IJ.MIO press photograpltcts. owning 
17 .(KH) cameras and publishing 9 mil- 
liim pictures per year. 

2 ■ The prlniioK and publishing indiu- 
try is dependent on photography. In 
l<>63. this industry employed 919.000. 
people and had a value of output of 
iW.f !oS16 billion. 



t in hospitals, Radi- 




componcnt in diag- 


as photo-typesetting are finding in- 




irciising usage. 


of people receiving 


4 ■ Graphic arts, encompassing all 


doubles every eight 


form^ of pietorial pHniing is based on 




phtitography. 


yean, per capita use 




doubled. 


To 5ct«nM and liMlwitry 


, inereaiingly u>ed to 


1 • Ten thousand industrial and buri- 



3 ■ Pholograiriiy is 



db,Google 



COINAQE ACT OF IftCS 



387 



B Snunl]! ii}»Kini ua kept in Itic liinn Kf 


,.J^ 


■" rnKtoMm 




1 5 - Vlilwlly lU uf Die U.UMI OHnmei- 


appear duiiiig piime viewing hooi> an 


1 i.'ul bMik< in Ihc IJiUttd SUtei bk 


leviKiIci] on nim. That pni|piutu ire 


H nikroAtm >yMim> <n iheir oprralixru. 




H A ■ Many bimnoi. bmccin>. ilcpul- 


Hitd »n lieiwl by Amtrimrw iin 


B men! .iwe^ irnuf.nco cnrnpunict, li- 


el.lXW.OOO nccncn Many ptnani 


■ Imnc*. cK., depend on phwofmph.c 


in the TV Jndudry trt ilepciukni on 


lytMBB lo( record >lorB|c end rcMcval 


phM«..|Ay. 








)-f«[y->u million pohhu uIIcimI 


Ta ttt* lacrMtron and 


I7.H0O U !i. moUon piciure thuteit 


Cntwrtainmant al Owr 


aeh mti- Thnc iheilw employ 




n 1.000 p.„pb 


1 ■ lli«>- u.c 43 niiUiofl .nil u..ncBi 


4 • Thrft m (Mm :;d.<KK) cnoien 


unJ 7 -...ai..n moy^ c,L,i.»-a^ ,n u« by 


cliito in iht Uniled Siuir>- ^^H 


The Photographic Industry 


■ 


as a Factor in the Economy 


l-Ow. 530 i*<«(-(ijphiL- m^nulK- 


unit iiijuli::;inlly tu ihe llflllcJ Suiei 




halanw iil pnynienw >>lu!ilion. 


pcoplc *nd pty Ihcm oxt S'') Wlllon 


4 ■ ItKie ICC Kvenl ihouiinlt |rt)ota- 




nni<hln( bbotaicKiek in Ihc V. !>. which 


hut thrpmcnli o( mrt tl.M MDcio it 


cmpluy :0.000 people. 


mnufxciutcr'i piitti 

; • There ur over 200.(KK> rcUll fni- 


'•llief* lira more ihin 150.000 




kli wnuh kII ow SIM bIJUiiti of 


i.ifriphy in Ibt UniieJ Slain. Thl> 






phiMogtnphk pr.KlucK ii tmULUmw 


jiudio.. wnh an annuil hu.inctK uf 


liurthnc miue 


t4oo mllllan. employing in cicew m 


J ■ In l'»n4, niiiny people were l(i«o!wd 


11(1.000 people 


m iiponing S180 miltloo d pluno- 


ft-Suiy ihowflnd periom »rc cr- 


gnphk g.«yl. un<t hnpon.nf Slid 




nrilllon of ibstc prodgni. Tile pittilo- 




tnphiL' Indu^ln tiinltibatn (jvonhlv 


inc-liid>ri£ didK lor lue In televlilon. 


^ 


^ 


^^ 


^i^i^H 



db,Google 



COINAGE ACT OF 1965 




;iij in i'Dnlinuing ihc 



NATIONAL ASSOCIATION OF PHOTOGRAPHIC MANUFACTURERS, INC. 

10 Rotktlello PiDia - New York.N.Y. 10020 



Du,iiz=db,Google 




THE 

SILVER 
MARKET 

m 

1964 

49th Annual Review cemplled by HANDY ( HARMAN 



Du,iiz=db,Google 



COINAGE ACT OF 1966 



HIGHLIGHTS OF THE 

Tliere hare beea few years when sDrer has commaiided as 
much public interest as during 1964. 

The unprecedented rise in the amounts of silver being 
used by the United States Mints to meet the chronic coin 
shortage in this country has directed world-wide atten- 
tion to the fundamental problem of future availability 
of silver. It is becoming more and more apparent that 
in the long run there will not be enough silver to satisfy 
the current rate of industrial and coinage needs com- 
bined. 
In spite of intense worid-wide qvecnlatire interest in sOrer, 
flie price for prompt delivery io New York daring 1964 
enjoyed a degree of stability not experienced since 1960. 
The quotation of 129.3^ per troy ounce, which was 
first reached on September 9, 1963, remained unchanged 
throughout the year. The reason for tins, of course, 
was the availabihty of Treasury silver through the 
redemption of silver certificates, which established an 
effective price ceiUng. 
We estimate that the amount of silver consnmed in the United 
States for industrial purposes daring 1964 amoonted to 
about 123,000,000 ounces, an increase of about 11% over 
1963. 

Increases in the use of silver in the United States 
occurred in all major industrial categories. The most 
significant increase took place in the use of silver for 
sterling silverware. Continued growth in the electrical 
and electronic industries accounted for more silver being . 
consumed in this category as well. 



■dbyGOOgIC 



COINAGE ACT OF I9»6 



SILVER MARKET IN 1964 

Total Treasury sOver stocks, includiiig bullion and sDm 
dollars, declined by 364^00,000 ounces during 1964, a 
drop of about 23%. 

Most of this decline was accounted for by use of 
203,000,000 ounces in coining half-dollars, quarters and 
dimes. Another important factor was the withdrawal 
of 141,000,000 ounces through the redemption of silver 
certificates by the pubUc. 

We believe that conthmed stability in flie New Ynk pnl>< 
lished price for sflver can be reasonably expected tfaroDgbont 
1965. 

In order to discourage hoarding and to keep our 
present silver subsidiary coin in circulation, the Treas- 
ury will be most interested in preventing an increase 
in the price of silver. Even after Congressional action 
is taken on coinage, it will probably take some time to 
effect a changeover, during which period the Treasury 
will need to continue protecting existing coin. 

We bdieve ttiat the United States will ultimalely have to 
adopt a non-sUver subsidiary coin. 

An analysis of available statistical evidence seems 
to us to point inevitably to the abandonment of silver 
for coinage. The fundamental question is whether it 
will be done sooner or later. Prompt authorization of 
a non-silver subsidiary coin would accomplish the double 
purpose of providing for an adequate coinage supply in 
the future and of preserving our valuable Treasury stocks 
for more essential uses. 



■dbyGOOgIC 



COINAGE ACT OF 19(15 



TABLE OP CONTENTS 



Highlights of the Silver Market in 1964... 

The New York Market 

Industrial Consumption of Silver in the United States.... 

United States Imports and Exports 

Treasury Silver 

Review of Other Markets 

The Outlook 



Statistical Tables... 
Api^ndix 



10 
11 
16 
19 
23 



■dbyGOOgIC 



COINAGE ACT OF 1066 



REVIEW OF THE 
SILVER MARKET FOR 1964 

There have been few years when silver has commanded 
as much public interest as during 1964. The unprecedented 
rise in the amounts of silver being used by the United States 
Mints to meet the chronic coin shortage in this country has 
directed world-wide attention to the fundamental problem 
of future availability of silver. It is becoming more and more 
apparent that in the long run there will not be enough 
silver to satisfy the current rate of industrial and coinage 
needs combined. United States Treasury stocks are still 
very large, but the rapid decline in these stocks during 1964 
created a widespread belief throughout world markets that 
higher prices were imminent. Buying for speculation and for 
inventories resulted, and such buying was particularly heavy 
during the last four months of the year. 



THE HEW YORK MARKET 

In spite of intense world-wide speculative interest In 
silver, the price for prompt delivery in New York during 
1964 enjoyed a degree of stability not experienced since 1960. 
The quotation of 129.3* per troy ounce, which was first 
reached on September 9, 1963, remained unchanged through- 
out the year. The reason for this, of course, was the avail- 
ability of Treasury silver through the redemption of silver 
certificates, which established an effective price ceiling. 
A condensed long range price chart, together with brief 
explanatory notes, is included in this Review. 



■dbyGOOgIC 



COINAGE ACT OF 19fl6 



In contrast to the stability in the pric« for prompt deliv- 
ery, prices on the Commodity Exchange for future delivery 
reached new highs. Nearly 104,000,000 omices were traded 
during the year at prices ranging from a low of 128.5^ per 
troy ounce to a high of 138.5^. Open interest cm the Exchange 
increased from about 10,000.000 ounces to about 30.000,000 
ounces. Actual physical stocks on deposit at approved 
Commodity Exch^ge warehouses at the end of 1964 amounted 
to about 2,500,000 ounces as against 450,000 ounces at the 
beginning of the year. 

Several bills relating to silver and silver coinage were 
introduced in Congress during 1964. These bills, while pur- 
porting to solve the coinage problem, would have had the 
effect of increasing the price of silver. On April 1st and 2nd 
hearings on one of these bills (S. 2671) were held before 
the Senate Banking and Currency Committee, and on August 
13th hearings on several others (H. R. 10534 and related 
bills) were held before the House Banking and Currency 
Committee. No action was taken by either of these Com- 
mittees or by Congress, but much of the testimony presented 
suggested an early possibility of higher silver prices, and the 
publicity this testimony received added impetus to specu- 
lative buying, particularly abroad. 



■dbyGOOgIC 



COINAGB ACT OF 1»«6 



I- 
11 




Digitized byGOOgIC 



COINAGE ACT OF 19SS 



INDUSTRIAL CONSUMPTION OF SILVER 
IN THE UNITED STATES 

We estimate that the amount of silver consumed in the 
United States for industrial purposes during 1964 amounted 
to about 123,000,000 ounces, an increase of 11% over 1963. 
A ten-year summary in chart form of industrial consumption 
of silver in the United States appears on page 7. 

Increases in the use of silver in the United States occtirred 
in all major industrial categories. The most significant 
increase took place in the use of silver for sterling silverware. 
Early m 1963, prices for sterling silver articles at the retail 
level went up as the result of the rapid rise in the market price 
of silver which had taken place during 1961 and 1962. Higher 
prices created some buyer resistance which in turn resulted in 
a reduction in the number of items sold. This resistance 
proved temporary, however, and recovery in sterling silver- 
ware during 1964 was substantial, even exceeding expecta- 
tions. Continued growth in the electrical and electronic 
industries accounted for more silver being consumed in this 
category as well. Somewhat smaller rates of increase took 
place in the use of silver in brazing alloys for metal joining 
and in silver nitrate for photographic purposes. 

UNITED STATES IMPORTS AND EXPORTS 

For the first time since the lend-lease shipments of World 
War II the United States was a net exporter of silver. Total 
exports amounted to 99,000,000 ounces, more than triple the 
1963 figure, while imports declined to 54,000,000 ounces from 
64,000,000 ounces in the previous year. 

The only major producing country from which imports 
increased was Canada which supplied some 20,500,000 c 



■dbyGOOgIC 



COINAGE ACT OF 19flS 



about 10% over 1963. Imports from Mexico, which included 
about 3,000,000 ounces of demonetized silver coins, amounted 
to about 11,000,000 ounces, a drop of nearly 40% from the pre- 
vious year. Peru shipped 10,500,000 ounces, a decline of more 
than 30%, and about 9,000,000 ounces were received from all 
other Western Hemisphere countries combined. From outside 
the Western Hemisphere a total of 3,000,000 ounces were 
imported, of which Australia was the major contributor with 
shipments of about 1,700,000 ounces. 



Silver Imports — Exports 

In Millions of Ounces 




^ IMPORTS 



Exports to most countries were substantially ahead of 1963. 
The United Kingdom received 46,000,000 ounces, nearly six 
times as much as in 1963. Shipments to France totaled about 



■dbyGOOgIC 



COINAGE ACT OF 19SS 



14,000,000 ounces, about twice the previous srear; and to 
Western Germany, 10,000,000 ounces, almost five times the 
1963 figure. Other exports included 4,500,000 ounces to Italy; 
7,000,000 ounces to Japan; 5,000,000 ounces to Canada; 
7,500,000 ounces to Switzerland; 1,600,000 ounces to Belgium; 
and 1,000,000 ounces to The Netherlands. The balance of 
400,000 ounces was accounted for by a number of small ship- 
ments. 

TREASURY SILVER 

Total Treasury silver stocks, including bullion and coin, 
declined by 364,500,000 ounces during 1964, a drop of about 
23%. Most of this decline was accounted for by silver used 
for coining half-dollars, quarters and dimes. The Treasury 
obtained authority from Congress for an additional 45,000,000 
silver dollars, but none were actually minted. About 
203,000,000 ounces of silver were used for subsidiary coin in 
1964, compared to the 1963 figure of 111,500,000 ounces. As 
recently as 1960 coinage in this country consumed only 
46,000,000 ounces, yet in spite of this extraordinary increase in 
consumption of silver, a coin shortage still persists. It seems 
probable that at least part of the problem has resulted from 
mass hoarding of coins, and this is certainly true in the case of 
Kennedy half-dollars. During 1964 about 201,000,000 of these 
half-dollars were minted, using about 72,700,000 ounces of 
silver, or nearly 36% of all the silver used for subsidiary coin 
in the United States. Virtually all have gone into collectors' 
hands or into hoarding and are not performing their intended 
function as a circulating medium. 

Another important factor in the decline in Treasury stocks 
was the withdrawal of 141,000,000 ounces of silver through the 
redemption of silver certificates by the public. For the first 
eight months of the year, the average monthly withdrawal 



■dbyGOOgIC 



COINAGE ACT OF IflflS 



rate amounted to less than 5,000,000 ounces. This was in line 
with projections made earUer in the year, but starting in 
September the rate jumped sharply. During the last four 
months of 1964 a total of over 100,000,000 ounces, or an average 
of 25,000,000 ounces a month, were withdrawn. In addition 
to withdrawals through redemption of silver certificates, the 
Treasury also sold approximately 10,000,000 ounces to other 
government agencies for defense purposes. 

For the past several years there has been an increasing 
demand for silver dollars, which up until 1964 were obtainable 
by presenting silver certificates. On March 25, 1964 the 
Treasury announced that the supply was virtually exhausted 
and that no more silver dollars would be released. This did 
not affect the redemption of silver certificates for silver 
bullion. Only the silver dollar as a coin was involved. There 
were about 3,000,000 silver dollars remaining in the Treasury 
on December 31, 1964 compared to about 28,500,000 at the 
beginning of the year. 

World War II lend-lease silver accounts have now been 
virtually settled. The only remaining items are nominal 
amounts still open with India and Pakistan. We understand 
that settlement of these amounts is awaiting final determina- 
tions of the silver content of materials already delivered. 

REVIEW OF OTHER MARKETS 

Consumption of silver for industrial purposes outside the 
United States, excluding Communist dominated areas, during 
1964 amounted to about 162,900,000 ounces, an increase of 15% 
over 1963. Consumption for coinage, excluding the United 
States, also increased, in this case by 11%. This increase in 
coinage was not general, however, but was due to a special 



■dbyGOOgIC 



COINAGE ACT OF ISftC 



coinage program in Japan to commemorate the 1964 Olympics. 
Without this factor coinage consumption outside of the United 
States would in fact have declined somewhat. Developments 
in individual centers are summarized below. 

LONDON — Prices for prompt silver in London ranged from 
a low of lll^d on May 21st to a record high of 112J4d on 
September 17th. These price changes were largely attribut- 
able to fluctuations in the exchange rates and were equivalent 
to 130.2U and 130.16< an ounce, respectively. 

Consumption of silver in the United Kingdom for indus- 
trial purposes amounted to about 23,000,000 ounces, an 
increase of 15% over 1963. Total imports into the United 
Kingdom during the first eleven months of 1964 amounted 
to about 54,000,000 ounces. The United States was the 
principal source having shipped 40,300,000 ounces. About 
5,100,000 ounces were received from Australia and about 
9,000,000 ounces from all other countries combined. Silver 
exported during the first eleven months of 1964 totaled 
18,700,000 ounces. Italy was the largest overseas buyer, 
taking 4,900,000 ounces. About 3,600,000 ounces were shipped 
to West Germany; 3,100,000 ounces to France; 2,700,000 
ounces to Belgium; and about 4,400,000 ounces to miscel- 
laneous other countries. It is estimated that in 1964 the 
Bank of England recovered about 2,000,000 ounces of silver 
from demonetized British coins and sold about 1,800,000 
ounces in the market. Foreign coinage orders executed by 
the Royal Mint required about 1,000,000 ounces. 

WEST CERMANY—Conmraption of silver in West Ger- 
many in 1964 for industrial purposes is estimated at 46,300,000 
ounces, an increase of about 14% over 1963. Doinestic mine 



■dbyGOOgIC 



COINAGE ACT OT 1965 



production in Germany is small, therefore nearly all of Ger- 
many's requirements must be imported. Imports amounted 
to about 44,700,000 ounces, of which about 32,800,000 ounces 
were received from the Western Hemisphere, and 11,900,000 
ounces from Europe and all other countries combined. West 
German exports totaled approximately 16,000,000 ounces and 
were delivered to Italy, Belgium, Austria, Switzerland and 
France. The silver 5 Deutsche Mark coins are still being 
minted in Germany, In the absence of detailed information 
we are estimating that approximately 1,500,000 ounces were 
used for this purpose, about the same as in 1963. 

FRANCE — The French coinage program which began in 
1959 with the minting of the 5 Franc silver coin continues 
to be important. According to the Paris Mint, a new 10 Franc 
coin was minted in 1964 and scheduled for release January 1, 
1965. The new coin is reported to weigh 25 grams and is 
900 fine containing .72 ounces of silver. The face value 
of the new coin is about $2.04 in U. S. currency. The Mint 
purchased an estimated 13,800,000 ounces in 1964 and used 
about 10,500,000 ounces for coinage. Its stocks at the year 
end amounted to about 10,000,000 ounces and it is anticipated 
that about 7,000,000 ounces will be used in 1965. 

Industrial consumption in France during 1964 amounted 
to about 14,900,000 ounces, an increase of approximately 
1,000,000 ounces over the previous year. Imports totaled 
29,900,000 ounces, of which about 18,100,000 ounces were 
received from the Western Hemisphere; 4,200,000 ounces 
from the United Kingdom; and 7,600,000 ounces from various 
other countries. Exports to various destinations amounted 
to about 3,400,000 ounces. 

13 



■dbyGOOgIC 



COINAGE ACT OF 1966 



ITALY — There continued to be minting of silver coins in 
Italy under the coinage programs authorized in 1958 and 
1961. According to the information available to us oaJy 
about 1,000,000 ounces were used for this purpose in 1964, 
although the Italian Mint is reported to have acquired an 
estimated 6,000,000 ounces during the year. Complete infor- 
mation on imports is not available, but we understand that 
about 4,900,000 ounces were shipped from the United King- 
dom; 4,500,000 ounces from the United States; and various 
amounts from France, West Germany and other countries. 
Details are lacking on the amounts of silver used for indus- 
trial purposes but we estimate that about 20,000,000 ounces 
were consumed. 

CANADA — We estimate that consumption of silver for 
industrial needs in Canada amounted to about 4,800,000 ounces 
whicb was a small increase over 1963. The Royal Canadian 
Mint consumed 13,700,000 ounces for coinage in 1964, slightly 
more than was used in 1963, and purchased about 9,300,000 
ounces. The difference presumably came from existing gov- 
ernment stocks. 

Production in Canada during 1964 is estimated at 31,000,000 
ounces, an increase of about 1,100,000 ounces over the previous 
year. Exports of silver in refined and unrefined form to the 
United States totaled 20,500,000 ounces, an increase of about 
10% over 1963. Imports of silver from the United States 
amounted to 5,000,000 ounces, a decline of about 3,100,000 
outlces from the previous year. 

MEXICO — Production of silver in Mexico during 1964 
amounted to about 41,000,000 ounces, a decline of about 
2,000,000 ounces from the preceding year. It is reported that 



■dbyGOOgIC 



THE NEW YORK 
SILVER PRICE 

1915 THROUGH 1964 



Du,iiz=db,Google 



404 



COINAGE ACT OF l«eS 



-a;33Rag = 5Sg ajag8jge89««gagj:^«}»!q^^« 



O 

%° 
O E 

>- '" 

lU 

z 





1 i 




a 


















L 












■ ^ 












+ E^ " 
















' 




- 


: B _. s 





















— ? 












r=^ T « 




f ?. 










._■ 


■ = -. 1 ' a 




Ti " 








1 ? ^ 




-r = 








^' »■ 




44^^ ' 4- != 




ij» " 




\i' ' 




' i jS 




■^ K 




Ta ^ p 


_^ . _ . . _|_ _ 


& -° 


1 1 _^=«=±=-- 


7" p 


' ~ ^^n 1 




_[_, 


4 - ^ 


- ^:;- 






'^= - 




. ' 1 - 



Du,iiz=db,Googlc 



COINAGE ACT OF 1909 



HISTORICAL HIGHLIGHTS 

1919 - The quotation reached the all-time high of VilVi^ 
on November 25, 1919 due to strong demand for 
silver during the reconstruction period after World 
War I. 

1932 - The silver price declined to a record low of 2^V4( 
on December 29, 1932 following a period of poor 
demand caused by deflation, depression of world 
trade, demonetization and debasement of coinage. 

1935 - The quotation reached 8U on April 26, 1935 as the 
result of heavy speculative buying due to the silver 
purchase program of the United States Government. 

1942 - Wartime price controls were established. 

1950 - The market was stabilized by the operations of the 

to Mexican and United States Governments. 
1961 



- On November 28, 1961 the United States Treasury 
suspended sales of silver to domestic industry. 

- On September 12, 1963 the first large scale redemp- 
tion of silver certificates took place. The effective 
cost of 129.3^ an ounce established a new ceiling 
price for silver. 



■dbyGOOgIC 



COINAGE ACT OF l»fl6 



an increase in production is likely but is not expected before 
1966. Consumption for industrial requirements increased to 
4,000,000 ounces from the 3,200,000 ounces used in 1963, but 
only about 800,000 ounces were used for coins, all of which 
were one-peso 10% silver alloy coins. Exports of silver from 
Mexico amounted to 29,500,000 ounces, approximately 27% 
less than 1963. Most of this silver was shipped to West 
Germany and the United States. Withdrawals from circula- 
tion of demonetized coin produced only about 500,000 ounces, 
considerably less than the 2,700,000 ounces recovered in 1963. 
Government stocks at December 31, 1964 are estimated at 
about 14,000,000 ounces, and there may still remain 60,000,000 
to 65,000,000 ounces of silver in the hands of the public in the 
form of demonetized coin. 



JAPAN — Industrial consumption of silver in Japan during 
1964 amounted to about 20,000,000 ounces. Japanese coinage 
required a total of 16,300,000 ounces. This was a sharp rise 
over the 5,000,000 ounces used tor coinage in 1963 and is 
attributable to the minting of special silver coins com- 
memorating the World Olympics held in Tokyo during the 
year. About 13,500,000 ounces of the amount used by the 
Japanese Mint were obtained from government stocks and tha 
remaining 2,800,000 ounces from domestic sources and imports. 
The government stocks at the year end, including wartime con- 
fiscated silver that was released and transferred to the Japanese 
Government, is reported at about 23,500,000 ounces. About 
1,600,000 ounces of "confiscated" silver was released to private 
sources during 1964. Silver production in Japan is estimated 
at 15,700,000 ounces, an increase of approximately 5% over 
the previous year. Information regarding Japanese imports 
for the full year is not available but if our estimates are 

15 



■dbyGOOgIC 



COINAGE ACT OF 1»C6 



correct, about 9,500,000 ounces were received, with more than 
half this amount coming from the United States. 

INDIA-'-The Bombay market continues to be virtually iso- 
lated and exerts little or no influence on other world markets. 
Imports of stiver are prohibited, and exports are under 
strict control. According to reports received, however, silver 
is assuming growing industrial importance. The price 
fluctuated considerably during the year largely due to the 
growing imbalance in supply and demand. The highest 
price recorded during 1964 was Rs. 2fi9.50 per kilo attained 
at the end of January and the lowest of Rs. 242.50 per kilo 
occurred in mid-June. These prices were equivalent to $1.76 
an ounce and $1.58 an ounce, respectively. There was an 
unusual rise in demand for industrial uses including jewelry, 
and consumption is estimated at about 12,000,000 ounces. 
This compared with only 2,500,000 ounces reported for the 
previous year. The silver needed to satisfy this demand 
had to be obtained internally, since imports are prohibited, 
and this resulted in higher prices. We understand that about 
10,000,000 ounces were obtained by melting down stiver arti- 
cles and cut coins. 

THE OUTLOOK 
We believe that continued stability in the New York 
published price for silver can be reasonably expected through- 
out 1965. Our reasons for this opinion are: 

(1) In order to discourage hoarding and to keep our 
present silver subsidiary coins in circulation, the Treasury 
will be most interested in preventing an increase in the price 
of silver. Public Law 88-36, which was passed on Jtme 4, 
1963, together with implementing Instructitms of the Secre- 

16 



■dbyGOOgIC 



408 



COINAOE ACT OF 19C0 



tary of the Treasury issued on Jun« 22, 1963, provide th« 
authority and the procedure for accomplishing this. For 
reference, the texts of both the Law and the Instructions 
are included in this Review as an appendix. 

(2) Even after Congressional action on coinage, it will 
probably take some time to effect a changeover, during which 
period the Treasury will need to continue protecting existing 
coin. 

(3) Treasury stocks are sufficient to prevent a price 
increase at least until a new coinage program has been 
completed. 

It is difficult to see how a solution to the United States 
subsidiary coinage problem can be postponed very long. The 
nature and the timing of this solution will probably be the 
most important factors affecting the long range trend of 
the price of silver. 

We believe that the United States will ultimately have 
to adopt a non-silver subsidiary coin. An analysis of avail- 
able statistical evidence seems to us to point inevitably to 
the abandonment of silver for coinage. The fundamental 
question is whether it will be done sooner, or later. If the 
present rate of decline in Treasury stocks is not slowed, 
total withdrawals during 1965 could amount to as much as 
400,000,000 ounces, most of which would be for coinage and 
speculaticm rather than industrial uses. 

It is argued that we need intrinsic value in our subsidiary 
coin to maintain public confidence in the dollar. In our opinion 
this argument is not valid. Many industrialized nations 
today manage very well on a non-silver subsidiary coinage 
system. The fact is that we are now seeing why intrinsic 

17 



■dbyGOOgIC 



COINAGE ACT OP 106S 409 



value can be a disadvantage. Our coins, just like our Federal 
Reserve Notes, are intended to be useful in transacting busi- 
ness. It is difficult to understand why intrinsic value should 
be considered important for a 10< piece but not a $10 bilL 
Intrinsic value in a medium of exchange can be a serious dis- 
advantage, and the high value of our present silver subsidiary 
coins has undoubtedly contributed to their shortage. 

During Congressional hearings held in 1963 on Public Law 
88-36 it was made very clear that one of the purposes of the 
law was to provide much needed stability to the silver market 
and that silver should be treated as a commodity and not as 
a monetary metal. The next logical step for Congress to take 
in carrying out the program begun in 1963 is the prompt 
authorization of a non-silver subsidiary coin in order to accom- 
plish the double purpose of providing for an adequate coinage 
supply in the future and of preserving our valuable Treasury 
stocks for more essential uses. 

December 31, 1964. 



■dbyGOOgIC 



COINAGE ACT OF 1008 



WORLD SILVER CONSUMPTION 

(BzcludiiiK CommniiUt Dominated Ar«u) 

(In Hillioiit of Ooncet) 



Indiutrial Um: 

United SUtn „ 

Canada. 


1964 


1963 


1962 


1961 


1960 


123.0 
4J 
4.0 
23.0 
14.8 
46J 
20.0 
50.0 


110.0 
4.6 
3.2 
20,0 
13.9 
40.5 
20.0 
40.0 


110.0 
4.6 
3.3 
2Q.0 
13.5 
41.8 
19.6 
35.0 


105J) 
4.5 
3.4 
20.0 
14.0 
43J 
19.1 
30J) 


IQQJI 
4J 
4.0 
16J 
13.0 
40.2 
21.6 
25.0 


Mexico 






Other Countriei _ 

Coinage (a): 

Canada. 


285.9 

13.7 
10.5 
1.0 
16J 
20.0 


252.2 

13.0 
12J1 
.5 
5.0 
25.0 


247.8 

10.9 
13.7 
3.5 
1.4 
20.7 


239.5 

6.2 
23.8 
5.6 
1.4 
44.2 


224.6 

7J 
12.2 
7.1 
4.6 
26.5 




Italy- 




Total Coinaga (a) 


61.5 


55.5 


50.2 


81.2 


57.9 


347.4 


307.7 


298.0 


320.7 


282.5 



(a) CoMumption of diver for United States coinage hai been ezclnded 
from these tablet. SuppUea needed for thii purpou are obtiUaed 
entirely from Treasury stacks and have never been part of market 
demand. The amounts consumed for the past five yeani have been aa 

1964 1963 1962 



203.0 111.5 



77.4 



1961 
55.9 



1960 
46.0 



■dbyGoogIc 



OOINAOB ACT OT 19S< 



WOKLD SILVER SUPPLIES 

(Ezcloding Conututnut Domiuud Attn) 

(In HiUioiu of OuncM> 



New Prodnctloii: 


1964 


1963 


1962 


1961 


1900 


41.0 

».o 

31.0 
37.0 
4.5 

9J 

s&o 


42J 
39.0 
29.9 
36.4 
4.9 

9.1 

15S.1 

55.0 


41.2 
36J 
30.4 
32J9 

3.B 

7.1 
151.7 
54J) 


4&3 
34.0 
31.4 
34.1 
3.9 

153.2 

50.0 


44J 
36J 

34 Jl 
304 
4.9 

74 

150J 

404 


United StatM. 

Cuuda „ 

Pern 


BolivU 


Other. Sontfa and Centnl 

American Cwmtrie*.- 

Total Wettem Hemi- 

iphere. „,.. 

Outside the Weatem Hemi> 


Total New ProAictioa.. 
Other SuppUei: 

U. S. Treaiury Silver 

Stocks of Foreign Govern- 


21M 

IMJi 

20.0 
20.0 

11.4 


213.1 

25.2 

10.0 
15.0 

4ao 

4.4 


205.7 

.9 

4J 
20.0 
25it 

35J) 
6.9 


203.2 

02.6 
15.9 

9ao 

55.0 

29.0 


2074 

nj 

124 
104 
9:7 

214 




Salea by Red China 

Holdings and Inventory 

Reductions 

Salvage and Other Htocal- 

laneoua Sources 

Total Other Supplier-. 
Total World SUver 

Leta Siwcnlative Holdinci 


202.4 


94.0 


924 


192J 


74.7 


H1A 


307.7 


290.0 


305.7 
79U» 


2124 


Available for Cottsnmption.... 




947.4 


307.7 j MW 


920.7 


2024 



db,Google 



COINAGE ACT OF 19S£ 



IMPORTS OF SILVER INTO THE 

UNITED STATES 

(Excluding Lend-Leaie Returna) 

(In Millions of Ounces) 



ImpoTtad from : 

Canida 

Mexico 

Peru 



I 1964 



....] 20.5 
.1 11.0 



1963 



1962 



21.8 
11.0 



Total Wettera 

Hemisphere 

All Other Countriet..., 



EXPORTS OF SILVER FROM THE 

UNITED STATES 

(In Millions of Ounces) 



Bxponcd to: 


1964 


1963 


1962 


1961 


I960 












Canada „ „ 


5.0 


8.1 


7.2 


12.0 


2J 


United KinEdom 


48.0 


8.3 


1.6 


5.9 


5.7 


France ^ 


14.0 


7.3 


— 


4J 


7.4 


West Germany „ 


10.0 


2.2 


1.6 


11.1 


5.7 


Italy 


4.S 


2.6 


.3 


2.S 


.5 
















10.5 


1.1 


2.0 


.5 


.5 




99.0 


31.5 


13.1 


3M 


26.6 





db,Google 



COINAGE ACT OF 196S 



TREASURY SILVER 
(In HillioRt of Ouncea) 



Held in Treasury: 
Securing SUver Certificatea: 


Dec. 31 
1964 


Dec 31 
1963 


Dec. 31 
1962 


Dec. 31 
1961 


Dec. 31 
1960 


1,1M.3 
2.3 
7.5 

i7.g 


1,532J 
22.1 
2.7 
25.2 


1,654.5 
72.7 
2.4 
37.0 


1,730.5 

100.7 

2.6 

28.5 


1.741.8 

124.9 

2.0 

123.5 




Subaidiary Coin 

Free SUver Bullion- 
Total Treaaury Stocki 
Outalde the Treasury: 


1^18.0 


1,582.5 


1,766.6 


1,862.3 


1,992.2 


372.6 
1,5S9J 


352.9 
1,365.2 


303.6 
1,270.3 


276.4 
1,194.0 


252.5 
1,140.0 




ToUl SUver Outride 
the Treatory. 


1,931.9 


1,718.1 


1,573.9 


1,470.4 


U92.5 


3,149.9 


3,300.6 


3,340.5 


3,332.7 


3,384.7 





SILVER QUOTATIONS 





New York Price 


London Spot | 




High 


Low 


Average 


High 


Low 


Aveng« 


1964 


12«.300< 


129J0O* 


129.300< 


112.250d 


111.625d 


111.923d 


1963 


129.300 


121.000 


127.9:2 


111.750 


103.875 


110.126 


1962 


122.000 


101.000 


108.374 


104.250 


84.375 


9:.510 


1961 


104.750 


91.375 


92.449 


88.750 


79.375 


B0.225 


196C 


91.375 


91.375 


91.375 


80.250 


79.000 


79J77 


195S 


91. 625 


B9.B75 


91.202 


80.250 


7S.87S 


78.827 


1958 


90.375 


88.625 


89.044 


78.750 


74.750 


76.216 


195J 


91J75 


B9.625 


90.820 


eojoo 


77.125 


78.931 


195« 


91.625 


90.000 


90.826 


8U75 


76.625 


79.134 


195! 


92.000 


85.2S0 


89.099 


80.250 


73.750 


77.542 



db,Google 



COINAGE ACT OF 19SS 



Digitized byGOOgIC 



COINAOE ACT OF 19SS 



Public Law 88-36 
AN ACT 



To repeal certain legislation relating to the purchase of 
silver, and for other purposes. 

Be it enacted by the Senate and House of Representatives 
of the United States of America in CongreM assembled, 

TITLE I— SILVER BULLION, SILVER 

CERTIFICATES, AND FEDERAL 

RESERVE NOTES 

SECTION 1. The Silver Purchase Act of 1934 (31 
U. S. C. 311a, 316a, 316b, 405a, 448-448e, 734a, and 734b). 
section 4 of the Act of July 6, 1939 (31 U. S. C. 316c), and 
the Act of July 31, 1946 (31 U. S. C- 316d) are hereby 
repealed. 

SEC. 2. The Secretary of the Treasury shall maintain 
the ownership and the possession or control within the 
United States of an amount of silver of a monetary value 
equal to the face amount of all outstanding silver certifi- 
cates. Unless the market price of silver exceeds its 
monetary value, the Secretary of the Treasury shall not 
dispose of any silver held or owned by the United States 
in excess of that required to be held as reserves against 
outstanding silver certificates, but any such excess silver 
may be sold to other departments and agencies of the 
Government or used for the coinage of standard silver 
dollars and subsidiary silver coins. Silver certificates shall 
be exchangeable on demand at the Treasury of the United 
States for silver dollars or, at the option of the Secretary 

24 



■dbyGOOgIC 



COINAGE ACT OF 1965 



of the Treasury at such places as he may designate, (or 
silver bullion of a monetary value equal to the face amount 
of the certificates. 

SEC. 3, The first sentence of iie ninth paragraph of 
section 16 of the Federal Reserve Act (12 U. S. C. 418) is 
amended by inserting "$1, $2," immediately after "notes of 
the denominations of". 

TITLE II- REPEAL OF TAX ON TRANSFERS 
OF SILVER BULLION 

SEC. 201. (a) Subchapter F of chapter 39 of the Internal 
Revenue Code of 1954 (relating to silver bullion) is hereby 
repealed. 

(b) The table of subchapters for such chapter 39 is 
amended by striking out the last line thereof. 

(c) Section 6422 of such Code (relating to cross refer- 
ences) is amended by striking out paragraph (7) and by 
renumbering paragraphs (8), (9), (10), (11), (12), (13), and 
(14) as paragraphs (7), (8), (9), (10), (11), (12), and (13), 
respectively. 

(d) Section 6808 of such Code (relating to special pro- 
visions relating to stamps) is amended by striking out para- 
graph (11) and by renumbering paragraphs (12) and (13) 
as paragraphs (11) and (12), respectively. 

SEC. 202. Section 201 shall apply only with respect to 
transfers after the date of the enactment of this title. 

Approved June 4, 1963. 



■dbyGOOgIC 



COINAGE ACT OF 19«« 417 



Extract 

from FEDERAL REGISTER of July 24, 1963 

Volume 28 — Number 143 

DELIVERY OF SILVER BULLION IN EXCHANGE 

FOR SILVER CERTIFICATES 

Instructions of the Secretary of the Treasury 

Pursuant to the authority of Public Law 88-36 of June 
4> 1963, I hereby designate the United States Assay Office 
at New York City and the United States Assay Office at San 
Francisco as places where silver bullion may be obtained 
in exchange for silver certificates. All requests for silver 
bullion in exchange for silver certificates shall be directed 
to the Fiscal Assistant Secretary of the Treasury, Wash- 
ington, D. C, 20220. Such requests may be made through 
the Federal Reserve Bank of New York, New York City, or 
the Federal Reserve Bank of San Francisco, San Francisco, 
California, attention Fiscal Agency Department. 

At the time of making such request, silver certificates 
shall be tendered to the Treasurer of the United States, 
Washington, D, C, or the Federal Reserve Bank through 
which the request is made. If the request is made through 
one of the Federal Reserve Banks specified, other funds 
may be tendered, in a form satisfactory to the Bank. If 
funds other than silver certificates are tendered, they shall 
be accompanied by a request that the Federal Reserve Bank 
acquire for the account of the person making the tender 
silver certificates in an equivalent amount and that, upon 
acquisition of the required amount of silver certificates, they 
be accepted for the account of the assay office for exchange 
for silver bulUon of equivalent value computed at the mone- 



■dbyGOOglC 



COINAGE ACT OF 19SG 



tary value of silver of $1.292929292 per fine troy ounce. 
Delivery of the tUver bullion shall b« effected at the assay 
office in fine silver ban of approximately 1,000 ounces. The 
face amount of certificates tendered in exchange must be 
equal to the monetary value of the silver bullion raised to 
the next highest dollar. 

Where consistent with the public interest, silver bullion 
shall be delivered at whichever of the designated assay offices 
is specified by the person requesting silver bullion. 

DOUGLAS DILLON 
Secretary ot the Treasury 



July 22, 1963. 

o 



■dbyGOOgIC 



r 



db,Google 



db,Google 



iiiliirin 

3 6105 045 162 869 




DATE DUE 1 



































































































STANFORD UNIVERSITY LIBRARIES 
STANFORD, CAUFORNIA 94305-6004 




A 



D.glizodbyGOOgle 





Colnai 

III 

3 


i^V^H 


■ 


ffiiiiliiiiii 
illllllllllMll 

6105 045 162 869 
















DATE DUE 
















































































































1 












J 






STANFORD UNIVERSrTY 
STANFORD, CAIIFORNIA 

i 


4 

-IBRARIE 
94305«M 

J 



D.glizodbiGoOglc