The Day the Mint Ran Out of Money.

 

    It’s largely forgotten today, but old numismatic mossbacks can quite easily recall the popping of the Great Canadian Coin Bubble in 1965. It was a “market correction” (to put it mildly) that took more than five years before the hobby began to again advance – on wobbly legs. But never has Canadian coin collecting burned with a greater (and unhealthier) heat than it did in the early 1960s; the C.N.A. sometimes signed up as many as 200 new members per month. Unfortunately, much of it was pure old speculation and down in the wreckage went many “collectors”, “investment dealers”, coin teletype systems, weekly market reports and the rest. Hopefully, things have been somewhat better since; if the growth has been slower, it has also been more solid.

    If we have to put a date to the beginning of “coin investment”, it would probably be March, 1957, when the U.S. seminal book “A Guide to Coin Investment” by Dr. Robert Belinski appeared. Until this time, it was almost pure collecting with a happy side benefit being the liklihood of turning a profit when it came time to sell. Prices had been “collector-driven” but now a careful eye was cast on series that were most likely to appreciate in value – and then to outright “investment” (speculation) with actual collecting being of minor importance. The phenomenon soon spread to Canada and numerous “civilians” were brought on side when coin collecting became the subject here and there of articles in newspapers, some of them with very wide circulation. The reporters, of course, were very much concerned with “what’s it worth”, just like most of their readers. And, of course, they tended to cherry-pick and publicize the winners, both collectors and coins. By the early 1960s, they were trumpeting that a 50¢ roll of 1954 Canadian cents, face value at the bank at the time, was now “worth” up to $200! A 1948 silver dollar, bought for less than $10 in the early 1950s, was now –just a few years later – “worth” $250! The impression given was there was big money to be made in recent coins and the earlier ones who tried it found that it was so – since they were part of an expanding market. So, like an onion, the true “collector core” was progressively surrounded with layer after layer of other collectors, semi-collectors, hoarders, speculators and all the paraphernalia that goes along with servicing their needs. Even solid, established dealers had to go along when customer demand turned more and more to rolls and bags of recent mintage, as well as proof-like sets and dollars; progressively, these dealers had to pay more and more to replenish their stock, all the while knowing that some day the roof was going to cave in.

    During the period 1960-5, coin clubs in Canada sprang up like mushrooms after a rain. Many proved to be short-lived, especially those whose main focus was as an “investment club” in coins. At its high-water mark in 1965, the C.N.A. required a full 65 pages just to list its current membership – and that would be only a small fraction of the total numbers of collectors (and “collectors”). Coin collecting was a fever in Canada.

    Some tried to resist the general trend. In 1963, a group of dedicated collectors founded the Canadian Numismatic Research Society whose main aim was to keep our numismatics on an even keel, but at the time their voices were just whispers in a hurricane and the dance went on, faster and more frantic than ever.

    In 1964, there occurred an event in the U.S. that would directly have an impact on Canada. The bullion price of silver rose so that U.S. silver coins came to have their face exceeded by their bullion value, a dollar’s worth containing .7736 Troy ounce of silver. When this news became known, the expected happened: silver coins disappeared from circulation, hoarded away in innumerable cans, jars and socks. Rumour (always an exaggerating liar) held that they were “scarce” and as more and more were hoarded away, it became a self-perpetuating “truth” – so even more were hoarded. “Civilians” – sometimes at 27th hand – came to believe (for whatever reason) that all U.S. coins were scarce and even cents and nickels were popped into the sock. 1964/5 were the years of the Great American Coin Shortage and stores were even forced to offer more than face for rolls of cents and nickels so they could make change.

    As another aspect – but still part of the rise in silver prices – were the Silver Certificates, at the time comprising just about all the U.S. $1 notes in circulation. By law, each was redeemable by the U.S. government for $1 in silver coin, so numerous entrepreneurs began to buy them up through advertisements at something over $1 each, leaving themselves a profit margin between that and the bullion value (.7736 ounce per dollar). Some simply took a cheque for the bullion amount but it was the tenderer’s option to insist on silver coin if he so desired – and some did. But the U.S. government had only one denomination for this purpose: the silver “Morgans” and “Peace” dollars dating back as far as the 1880s and held in reserve for just such a purpose. $1000 in Silver Certificates could be exchanged for a mint-sealed bag of silver dollars and early on one entrepreneur struck pay dirt, even though the bags given out were done purely by chance: he received a full mint-sealed bag of 1903-O silver dollars, a coin that heretofore had been considered rare and with collectors quite willing to pay hundreds of dollars even for a V.G. With that, the floodgates opened and within a short time all the reserve dollars had been dispersed. For a while, publications such as The Numismatic Scrapbook Magazine carried page after page of ads for silver dollars by date and mintmark in conditions from AU to “B.U. Gem Select” (there was no M.S. system in place at the time). The prices were but a fraction of what they had been, depending on how many had shown up.

    With the silver dollar supply exhausted, the government began giving out “silver crystals” and then striking a 1964-D “Peace Dollar” for Silver Certificate redemption. After a quantity was struck, it was decided not to issue this dollar and, so far as we can tell, all were returned to the melting pot. Legislation made the rest of the Certificates redeemable for cheques calculated at the current bullion rate for silver.

    Meanwhile the administration of President Lyndon Johnson grappled with the coin shortage problem, meeting it with blow after legislative blow in 1964. The price of silver was frozen in the U.S. and its export allowed only through licence. The former silver denominations became debased, the dimes and quarters composed of copper-nickel plated copper and the half dollar silver-plated copper as of January 1, 1965. With the need for mint capacity to strike all this “replacement coinage”, the production of proof sets ceased until 1968. To further quench “collector demand”, mint marks were removed from all denominations until 1968, no matter that the coin had been struck at the Philadelphia, Denver or San Francisco Mints. Lastly, Johnson declared that he was prepared to strike frozen-date 1965s until Doomsday if that was needed to overcome the coin shortage. It wasn’t; 1966 dates appeared later in that year.  With the “silver coin binge” out of the way and billions of base replacements in circulation, coin speculation in the U.S. was largely curtailed.

    But when checked, speculators are first prone to cast about for other, similar fields and in 1964 their gaze was drawn northward to Canada and the Royal Canadian Mint, armed with a slingshot to protect against a buffalo stampede. Canada, unlike the U.S., was still using silver coins (albeit .800 fine); Canada, unlike the U.S., was still producing a sort of counterpart to the proof set in the “proof-like set”.

    The Canadians, of course, were aware of the danger. They had their own heated numismatic market. Production and sale of proof-like sets had climbed from 98,373 in 1961 to 200,950 (1962) to 673,006 (1963) to 1,653,162 in 1964, the year in question. Partly in response to the demand of the “bag” and “roll” hoarders, regular coin production also rose by 50-100% per year during this time. By 1964, just under 400-million coins were struck, including 7,296,832 of the previously unpopular silver dollar. The government of Lester Pearson was doing its best to cope, especially when the primary business of the Mint was to strike “pocket change”.

    Therefore, late 1964 saw some restrictive legislation was brought in. The price of proof-like sets was raised from $3 to $4. A maximum of five sets could be sold to one person, in contrast to the previous fifty. All orders must be accompanied by full payment and none could be postmarked before January 1 of the year in question. Lastly, for 1965, a total of 2-million sets would be struck (which, all things considered, should have been plenty – after all, the record for the U.S. proof set had been set in 1964 when just under 4-million were coined).

    Everyone badly, badly underestimated the herd instinct of the speculator. On New Year’s Eve, 1964, outside Besserer Street Post Office, Ottawa, was thronged with people and cars, many bearing U.S. licence plates. These were not revelers but a huge crowd each bearing suitcases, dunnage bags, cardboard boxes and the like, each crammed with envelopes and each envelope containing an order for five 1965 proof-like sets from the Mint. Since only five per customer was allowed, the envelopes might have the same address but the recipient various spouses, parents, children, relatives, cats, dogs, goldfish – whoever. Since this post office was the closest to the Mint, its mail would be the first received. As midnight tolled, the mail slot began to be stuffed with the orders, so many that staff inside – called in to work just for this occasion – were kept busy trucking the receptacles away lest the slot become plugged. So many orders were posted here that those at the end of the line had to wait up to two hours for their turn.

The Run on the Mint, January, 1965. Cartoon in the Toronto “Globe & Mail”.

    Some mail sorters worked all New Year’s Day and the full complement of 63 called in at 11:30 New Year’s Night. Orders were to have everything cleared by 8:15 a.m. January 2. If there was a snarl, it was not going to be the Post Office’s fault.

    At that time, two trucks loaded with 156 bags of mail arrived at the Numismatic Section of the Royal Canadian Mint, swamping it from the very outset. Since it was obvious that the orders would greatly exceed the 2-million sets, about ten pounds of mail was taken from each bag and those orders filled. The rest were returned unopened, the envelopes stamped “Return to Sender” and “The Quota for 1965 is Exhausted”. No orders except those that came through the Besserer Street Post Office were filled at this time. Orders had been received for an estimated six million sets over the first few days –
about four million from the local post office on New Year’s Eve alone.

    The lucky recipients of this first “rare” issue of only two million sets did just fine. Dealers readily offered $10 – even $12 – per set since the going retail price late in January, 1965 was as high as $18.        

    Then the roof caved in.

    The Mint was flooded with calls and communications complaining about the disappointment in not receiving sets and resenting the advantage held by the location of the Besserer Street Post Office. The Pearson government met just as much criticism, both inside and outside the House.

Lucky recipients were advised of their success by notifications such as the above, dated 2 January, 1965 – with an “Approximate Shipping Date” of 6 months! For a fee of $1, the Mint would change the name of the recipient of “No. 325100” to another person. In this way, “futures” were sold in the 1965 proof-like sets.

    Therefore in a Press Release dated February 1, 1965, the Minister of Finance announced that due to the “exceptional current demands for 1965 sets of ‘uncirculated coin’” … all such demands will be met. “We shall keep the presses running on the 1965 sets for just as long as may be necessary to meet requirements”, even if it meant “continued production beyond the end of the calendar year”. Those who had had their orders returned, were asked to re-submit them.

    Of course, not many did. Of the returned orders for 4-million or so sets, less than 25% (actually 904,352) re-ordered. Within hours of the Minister's announcement, holders of 1965 sets – dealers as well as speculators – were busy unloading as many as they could at a “special price” of $12 or even less. But since any collector could order one from the Mint for $4, why bother? Not many did. The whole bubble popped and prices soon drifted down past even the Mint price, halted only by bullion or face value ($1.91) – whichever was more.

    The bursting of the proof-like bubble was not the end of it. A whole unstoppable slide began in the roll and bag market of current coins. No premium over face or bullion could be obtained and huge amounts of these early-60s coins wound up as rolls turned into the banks. Even then, these institutions were loath to accept the silver dollars (or even many of the 50-cent pieces, for that matter) since there was no commercial call for them. The turning in of all this coin caused mintages in 1966 to shrink greatly from the 1965 high-water mark – sometimes by more than half.

    But beyond that was the wreckage of fortunes, usually of speculators but sometimes of dealers and collectors who were sideswiped by the craze. Gone were the massive lists of applications for C.N.A. membership – during 1966, monthly new applications might be as few as 6 to 12 names. The Montreal C.N.A. Convention in the summer of 1965 was a rather sedate affair whereas even six months before, little less than bedlam could have been expected. (There was even a private medal first sold at this event that commemorated the Day the Mint Ran Out of Money).The hobby cooled just that quickly.

    Nor did the Canadian government fare all that well. Based on the unprecedented demand for coin and proof-like sets early in 1965, the minting business was immediately overhauled: new machinery and presses were bought, additional new facilities set up in Hull and personnel hired. By great exertion, the government achieved capability – at almost precisely the same time as much of the demand for it evaporated. Remember: about 6-million proof-like sets were ordered in the first days of January, 1965; for the whole year 1966, only 672,514 were ordered – and, generally speaking, the numbers continued to decline to something less than 200,000 over the years. Even demand for ordinary circulating coin was roughly halved: about 514-million (1965); about 288-million (1966).

    And just as Centennial Year added a little life to the floundering hobby, it was hit again by the elimination of silver from the coinage in 1968. Recovery was very slow for some years. Perhaps some arrived as speculators but stayed as collectors when they caught the bug; but probably more potential collectors left when their neophyte fingers were burned.

    Never is a bubble craze of any type good. Be wary of it. For, my friend, it could happen again.

Wayne Jacobs is numismatic expert. He is the award winning author of numerous articles. He is the secretary and editor of the "Mid-Island Coin Club Numismatic Journal"of Nanaimo, Vancouver Island , British Columbia. The MICC journal are hosted here: MICC webpages Copyright 2006 Wayne Jacobs. This article may be reprinted freely for non commercial purpose only if the resource box is left intact, linking back to us.