Under the original Coinage Act of 1792, drafted by Alexander Hamilton, the penalty for debasing a coin was death.
Under that law, President Lyndon B. Johnson was guilty of a capital offense.
Fifty years ago today, Johnson signed the Coinage Act of 1965, setting into motion five decades of currency debasement that continues today. Under the law, silver dimes and quarters would no longer contain silver. Instead, the Treasury would mint coins made of “composites, with faces of the same alloy used in our 5-cent piece that is bonded to a core of pure copper.”
Today, we call pre-1965 dimes and quarters “junk silver,” but we really should be calling the modern coins junk, because that's what they're worth.
Johnson promised removing silver would have no impact on the value of US coinage. “[The] Treasury has a lot of silver on hand, and it can be, and it will be used to keep the price of silver in line with its value in our present silver coin,” he said.
The reality turned out a lot different, as Seth Lipsky shows in a Wall Street Journal column.
When LBJ signed the 1965 act, the value of a dollar was almost exactly the same as it had been in 1792—0.77 ounces of silver. Despite some downs and ups, on average it had been remarkably steady for the long span…
“The value of the dollar started sinking after the 1965 coinage act, and by 1980 the dollar—so long valued at 0.77 ounces of silver—plunged to 0.02 ounces of silver. Today it is valued at 0.06 ounces of silver.”
This isn't just some obtuse economic phenomenon. It has a real impact on our daily lives. Currency debasement means less purchasing power for you and me. Our dollars no longer buy the same amount of goods and services. Ultimately, that means we suffer a lower standard of living. As we showed recently, a look at the minimum wage vividly illustrates the impact of currency debasement. In 1964, the minimum wage stood at $1.25. That's five silver quarters. Today, the melt value of those five silver quarters stands close to $15 – the minimum wage so many are clamoring for.
