My dad grew up in New York state on the North Fork of Long Island. In 1952, when he was 16, his widowed step-grandmother Vera announced she was moving to Oil City, Pennsylvania. But first, she wanted to simplify and downsize. Would my dad be interested in buying her gold coins at face value?
At first, Dad couldn’t talk. He just spluttered. He couldn’t believe his good fortune. He was a rabid collector of coins, with a burgeoning supply of interesting coinage dating back into the previous century.
Add to this fanaticism, a small dollop of greed. Dad knew that paying face value was a steal. I’m not sure if Vera knew this and was just being grandmotherly, or if she was clueless. It hardly matters, but it certainly added fuel to the burning desire to acquire those coins.
The problem? The same problem of all teenagers the world over: Not enough cash. Dad had $15 to his name, or about $137 in today’s money.
One other factor I haven’t mentioned: These were outlaw coins. Nineteen years prior, during the height of the depression, in 1933, President Franklin Roosevelt signed Executive Order 6102, criminalizing the possession of more than $100 ($1,843 today) worth of monetary gold.
Everyone had to turn in any gold that exceeded $100 by May 1, 1933 in exchange for $20.67 ($381 today) per troy ounce. Violation of the order was punishable by a fine up to $10,000 ($184,000 today) or up to ten years in prison, or both.
The primary reason behind the order was to remove the constraint on the Federal Reserve which prevented it from increasing the money supply during the depression, a primary objective of Roosevelt’s. The Federal Reserve Act (1913) required 40% gold backing of Federal Reserve notes issued. But by the late 1920s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. However, if gold could not be legally owned, nor redeemed, then it could not constrain the central bank.
It had been sold to the public under a different rationale though. The stated reason for the order was that hard times had caused “hoarding” of gold, stalling economic growth and making the depression worse. This propaganda was touted to every corner of the country, with the understanding that it was everyone’s patriotic duty to comply.
According to news reports of the time, Americans overwhelmingly bought into this rationale, until the following year. That’s when the Gold Reserve Act of 1934 changed the value of gold from $20.67 to $35 per ounce, netting a big profit for the government. Suddenly, dutiful citizens who beat the deadline by trudging to the bank for the gold-for-cash exchange felt like they’d been duped.
Except Vera, who was sitting on a big pile of gold coins. Coins she was now looking to find a good home for.
Dad was desperate to get his hands on them. What an awesome addition they would make to his collection! And they would add a little notoriety to boot, something that would be attractive to any 16-year-old.
Then Dad made what he calls “the biggest mistake of my life.” That has to be hyperbole, but it helps you understand how strongly he felt at the time. “I went to my father to ask for a loan to purchase the coins.”
His father – Pop Pop to me – had always maintained a strong Puritan work ethic that emphasized hard work, discipline, and frugality. And the strict obedience to all government laws, unless they overtly conflicted with biblical instruction.
His reaction to his son’s request? “You want to borrow money for what? That sounds like hoarding!” There wouldn’t be – couldn’t be – any more discussion of the matter.
“Then I made the second biggest mistake of my life,” Dad recalls. “I gave up.”
Looking back, he knows he could have asked other family members for a loan on the sly, and could have still made that purchase. But instead he resigned himself to the loss.
Sixty-five years later, Dad still rues his timid and defeatist attitude from that time.
Vera trudged to the bank and turned in all her gold coins, except for the two that Dad could muster payment for:
- 1879 $5 coin
- 1900 $2.5 coin
The $5 coin is worth $400 today; the $2.5 coin is worth $315.
Do you have any old money-related regrets that you can’t put out of your mind?
Ms. Steward says
What an interesting story! Thanks so much for sharing. I don’t think I knew about FDR’s “hoarding” limitation.
Interesting history, no doubt!