In Gold We Trust
Unless you’re wearing a homemade tinfoil helmet and listening to George Noorey’s late night talk show on the radio, with a burlap sack of gold bullion buried beneath the large amber stone in your turnip garden—unless you’re doing all of that—you’ve probably made an unconscious decision to trust the U.S. government with your currency.
Everybody does. You walk around with a pocket full of green paper marked with Latin, pyramids, runs of numbers and letters, stoic faces, spiritual testaments, endangered species, and a single glowing eyeball.
Or worse yet, you don’t carry cash. You trust your colorful slice of plastic that represents the stash of paper that a bank actually doesn’t have. There’s a lot of trust floating around these days.
The images on currency aim to manufacture trust and suspend the suspicion that maybe, just maybe, your piece of paper is worth nothing more than just that—a piece of paper. This piece of paper with George Washington is worth one; this piece of paper with Andrew Jackson is worth 20; and this piece of paper from Zimbabwe that boasts a value of ten trillion? It sells for $14.95 online.
The Cuban Peso holds a photo of José Martí, the “Apostle of Cuban Independence”—a poet and revolutionary philosopher. His forehead climbs toward the back of his hairline and his push broom mustache adds an almost comedic poignancy. On the Tanzania Shilling, two men in light clothing haul a sideways tuna toward the shore—a sign of their prosperous fishing industry.
We’ve been trained to trust these symbols and their stories. And unless you live in certain eco-trailblazing, or indigenous, communities, a landlord won’t accept a sack of tuna. But when the trust becomes brittle, American’s return to bed with their oldest lover: gold. The price of gold has multiplied six times since the morning of 9/11, shooting from $271.50 per ounce to over $1,624 per ounce.
Why gold? Because gold is valuable in any country; it’s naturally rare; you can hide it under your floorboards and protect it with your bowie knife. Gold is a currency you can trust without a bank and without a government, and even in the worst troughs of recession, gold sells in the pawnshop.
Gold has been there for us through some hard times, but one hundred years from now gold will be as irrelevant as the once-popular beach shells have become.
We left gold for a reason. Gold didn’t have any sense of imagination. But in order to predict your future, you must know your past.
Double Eagles on the Dime
The year is 1933. The U.S. is still on the Gold Standard and in economic shambles after nearly a half-decade of severe depression. The time comes for the trembling hand of democracy to select a new president, and it chooses Franklin D. Roosevelt—who arrives with a gift. He calls it The New Deal.
During the first two months of 1933, the rate of withdrawal of gold from banks tripled, and during the week leading up to FDR’s inauguration, in January 1934, more than $226 million of gold was withdrawn.
Before midnight on his inauguration day, March 4th, FDR issued an executive order for an emergency congressional meeting set to take place on March 9th—five days away. Until then, nobody would be allowed to withdraw gold from the banks; he called it a “Bank Holiday.”
March 9th came, and Congress enacted the Emergency Banking Relief Act requiring all persons to surrender any gold coins, bullion, or certificates to the Federal Government. In turn, the cooperating citizen would be given an equivalent amount in a different form of currency—silver, certificates, or coins.
Things went to plan. By April, $600 million in gold had returned to Federal Reserve Banks. But some people were holding out, so FDR issued another proclamation:
Many persons throughout the United States have hastened to turn in their possession as an expression of their faith in the government and as a result of their desire to be helpful in the emergency. There are others, however, who have waited for the government to issue a formal order for the return of gold in their possession. Such an order is being issued today.
August rolled around and the president issued another executive order: 15 days to return your gold. Fifteen days, folks.
Then came the final warning. January 17th, 1934 would be the final day to return your gold.
On January 30th, 1934, Congress passed the Gold Reserve Act of 1934, consolidating all prior legislation, and officially making all U.S.-issued gold coins became property of the U.S. government.
Eight months later, a man was arrested at the 30th Street train station in Philadelphia carrying 104 gold coins. His name was Israel Switt, he went by Izzy, and the government should have never let him go, but they did after confiscating his coins.
Then, the most bizarre thing happened, a 1933 Golden Double Eagle was listed in an auction in New York City, which is impossible because the government never issued a 1933 Golden Double Eagle; they were discontinued in 1932.
Secret Service arrived at the auction without warning to verify the coin’s existence. Either somebody was counterfeiting coins, or something much more dubious had transpired, and in either case, somebody’s balls would be busted.
The coin, it was deemed, was an authentic creation of the U.S. Mint. Impossible. Not impossible. After doing some follow-up research, it turned out that in the final months on the Gold Standard, the U.S. Mint had coined 445,000 1933 Double Eagles, but they were melted into bullion before being released into the economy, and sent to the coffers of Fort Knox.
So how did this single coin arrive at the auction? The existence of that coin poops on the shoe of any credibility the U.S. Mint could ever have; it’s a chink in the armor; it’s the small destruction point on the Death Star that Luke Skywalker shoots at the end of the first Star Wars movie.
The Secret Services launched an investigation and recovered nine 1933 Double Eagles. Each coin could be traced back to the same little man—Izzy Switt—the known gold coin hoarder from Philadelphia. They interrogate Switt but he allegedly knew nothing. He just purchased his coins “with other coins at different times.”
The Secret Service believed otherwise. They believe he was in a racket with a corrupt cashier who worked at the Mint in 1937, but they couldn’t prove it. Switt swore that he did not have any more 1933 Double Eagles in his possession and after a thorough five-year investigation of the topic, the Statute of Limitations allowed Switt to escape uncharged.
The recaptured coins were melted to bullion and sent to the coffers—Fort Knox. Order had been restored. The Secret Service could finally get a good night’s rest. But there was one little minor loose end. Nothing big, more of a dot-your-i-cross-your-t sort of detail.
One 1933 Double Eagle survived. It belonged to King Farouk in Egypt. The Secret Service requested that it be returned, but it wasn’t. Farouk pointed out that the Treasury Department had issued an export license for the coin in February of 1944, however mistakenly.
Israel Switt died on January 18th, 1990. He didn’t leave behind anything interesting or spectacular: a jewelry shop, probably a rusty Plymouth, maybe some investments. Oh, and a safety deposit box. But nobody ever bothered opening it.
In 1996, Stephen Fenton, a British coin collector, arrived in the U.S. for a meeting at the Waldorf Astoria with a well-to-do American collector. Fenton brought with him one 1933 Double Eagle, ex-property of an Egyptian king.
But the Secret Service had seen this coming. The well-to-do American was a pawn for The Service, and Fenton was arrested on the spot.
Fenton hired New York City Attorney Barry Berke and six years of litigation ensued. Since the government had mistakenly issued the export license for the coin, the U.S. Mint agreed to allow the coin to be auctioned, but only if half the proceeds went to the U.S. Mint.
On July 30, 2002, the Egyptian Double Eagle was auctioned for more than $7.5 million, not including the additional $20 charge that the purchaser was required to pay to the US Mint in order to have the Double Eagle “issued” as a lawful coin, or the $20 more to compensate the Mint for the money lost when the coin was stolen. The buyer remains unknown, but he or she purchased the most expensive coin in history.
Case closed. The Secret Service recovered all the coins and melted them into bullion, and even turned a decent profit.
A year later Joan Langbord drilled open her dead father’s safety deposit box. Box 442. Her father had been a jeweler in Philadelphia who went by the name of Izzy Switt; he’d died 12 years earlier and left her to run the historic shop in Philadelphia’s Jewelry District.
She found ten 1933 Double Eagles. Ten of the most expensive coins in history—the subject of international intrigue—and then called New York City lawyer Berry Berke. He’d know what to do.
In July 2011, the trial began. An 80-year timeline of mistakes, corrections, and lies conceals the truth. If the Langbord family wins, they will be permitted ownership of the 10 coins, each a manifestation of a breach in the system, a symbol of failure, and the last breath of the Gold Standard.
If the United States of America wins, the coins will be melted into bullion and sent to rest in the coffers of Fort Knox, where they will behave, and the only evidence of the 80-year glitch will be in the history books and the collection of an anonymous collector, making the most valuable $20 in the world worth even more.
Time Is Money
On October 28th, Justin Timberlake’s new movie In Time hit theaters. The trailer begins with a black screen covered by the text, “In the late 21st century time has replaced money as the unit of currency.” The film describes a world where everyone is given 25 years to live and everything—instead of money—costs time. A cup of coffee costs four minutes. Rich men live for a hundred years. People kill each other to steal time and it raises the question: how will you spend your time? Don’t waste it.
The idea makes sense, since time is at the root of some exchanges. If you spend time doing this, I’ll give you this.
That’s one way to look at the future of currency. Another way: this summer in New York City, the American Society of Botanical Artists launched their exhibition, Green Currency. The exhibition shows 43 fine art pieces depicting botanicals that play a significant role in our economy, including sugar maple, common cattail, yellow birch, bing cherries, turnip rape, and potato. These are botanicals of value, objects of intrinsic worth, acting as their own currency.
These two opposing views regarding the future of currency are reminiscent of a famous R. Crumb poster titled “A Short History (and Future) of America.” It’s a wall poster containing a grid of slides. The history begins in the top-left slide with an empty beautiful landscape—the beginning. Then the slides continue with images showing colonization and provincial stages, and then industrialization followed by modern times. The poster offers three different options for the future. The first option is called The Ecotopian Solution, with bikes, tree houses, fiddles, and farmers’ markets. Then there is The Fun Future, containing hover-motorcycles, urban style, and modern architecture. And finally, there is Ecological Disaster, that is an unkempt barren land beaten by a smoggy sunlight.
Currency has a similar set of options. The following falls into the Fun Future category.
The Future of Funds
In 2010, Reuters reported that 80% of Americans do not trust their government to do what is right. So why would they trust the government with their finances?
In the cold northern climes of Winnipeg, Canada, Jeff Coleman sits as one of the volunteer overseers of the world’s most prominent digital currency: the Bitcoin. It’s not backed by gold, a government, a bank, or a company. It’s backed by nothing. It was created with the intention of alleviating the need to trust anything other than math. The currency is protected by nearly-unhackable cryptographic codes.
It all started on Halloween of 2008, when an internet user going by the name of Satoshi Nakamoto published a paper he’d written onto an email thread being used by a network of cryptographers. The thread: Gmane.comp.encryption.general. The paper was a detailed proposal for an open source peer-to-peer currency designed to be decentralized and intrinsically rare, with a maximum capacity of 21 million.
“It was a very high-level paper. A lot of people think it could have gotten the author a Ph.D. if they wanted one. But it was just published on an online mailing list. So not in any institution, not attached to any real physical person or anything like that, just the name,” Jeff Coleman explains.
Then Satoshi Nakamoto began to develop the software and loaded it directly to a public website, inviting anybody to participate in the open-source project. People became interested and began to participate in building the encrypted currency, Jeff Coleman included.
As the project developed, Nakamoto began to withdraw himself/herself from the proceedings, and on December 13th, 2010, Satoshi Nakomoto posted his/her last comment onto the thread. And that was the last anybody ever heard of Satoshi Nakamoto.
When Nakamoto first designed the software, he included something called Safe Mode, which, in the case that somebody tried to overtake the network, he would have the ability to launch Safe Mode and freeze everything.
“[Nakomoto’s] last comment was fairly nondescript.” Coleman explains. “But there was one thing that is a little bit notable. . . One thing that Satoshi did before leaving was remove Safe Mode, so that Satoshi himself no longer has the power to put the clients into that mode. It was removed from the software.”
One year earlier, the first official physical Bitcoin transaction took place: 10,000 Bitcoins for a pizza. The day I spoke with Coleman, Bitcoins were being traded at nearly $30 USD per Bitcoin, which would make that pizza worth $300,000. But that was an exceptionally good day. Today, they’re worth about three bucks a pop.
There are currently more than seven million Bitcoins on the market, and as they increase in value—according to the coding structure—the length of time it takes to create new coins becomes increasingly difficult. This intelligently designed limitation adds to the currency’s value, credibility, and trustworthiness.
“Cocaine, crack, heroin, meth, LSD—they’re all listed online,” New York City Senator Chuck Schumer said in a June press conference. He’s speaking about Silk Road Marketplace, where users are anonymously purchasing illegal drugs. “The website is nothing more than an all-you-can-order buffet of contraband that needs to be shut down immediately,” Schumer went on to say.
What are people using to buy this contraband? Bitcoins, of course. Welcome to the future of drug dealing.
Where Currency Goes to Die
The men’s bathroom at the Denny’s in Burbank is hot, dry, and fluorescent. A sticker on the toilet-seat-cover dispenser reads, “Awaken the Empire” in gothic print across an apocalyptic cityscape. An aluminum cane leans against the sink without its owner.
In the room next door, Scott McNatt steps onto the open patch of carpet in front of the chattering crowd of paper money collectors 45 minutes behind schedule. He’s wearing a dusty Los Angeles Lakers 2000 championship hat and a denim button-up shirt. His jeans have blue-collar stains on them. There’s a heroic quality to his simplicity.
The brick walls hold framed nostalgic photographs of eras past—a jukebox, Marilyn Monroe, a gumball machine—memories that belong in museums or graveyards. “Welcome, everybody, to the June meeting of the L.A. Paper Money Club.”
McNatt begins handing out bright green flyers that read, “Los Angeles International Paper Money and Coin Show—September 3rd and 4th. Location: Automobile Driving Museum, El Segundo, CA.” This year marks Scott’s fourth year hosting the show, and he’s hoping for 500 guests, a 100-person improvement from last year’s attendance.
A copper-faced man named Mark hacks phlegm into a piece of Italian bread like it’s a napkin, then uses his slice of bread as a sponge over the corners of his salad plate.
Scott quiets the room. Every currency collector must sooner or later make their big decision: what sort of collector am I going to be? To be a collector of any significance, an area of focus is essential. Gregg collects currency with pictures of trains. “If its got a train on it, I’ll find it,” he says with two quick nods. Bryan collects inter-war Baltic state notes. Tim likes the American stuff.
Mark stands, confused, and wipes his face, “Where’s my cane?” Fabiola the waitress appears behind Scott with a fresh cup of coffee. The stretched breast pocket of Mark’s shirt hangs taught with a fluorescent orange pack of Grand Prix cigarettes, overlapping another pack of green Sheriff cigarettes.
Among the chatter, Gregg Bercovitz explains the variety of ways a one-dollar bill can be worth more than a dollar. He lays an example on the table encased in clear plastic. “This is what they call a Radar. Look at the serial number.” The serial number reads: 07633670. “It reads the same forwards as it does backwards, like the word radar. R. A. D. A. R.” These idiosyncrasies may bump the value of a one-dollar bill to $20, and maybe more, depending on the rarity.
Some people look for serial numbers to match their birthday. Some like it when the number sequences repeat—repeaters. There are numbers that climb upwards—up-ladders. And sequences that climb downwards—down-ladders. Star notes, Barr notes—these bills are famous for the rare signatures on them. Each has its own unique flare; each attracts a different sort of collector.
After a quick auction, Scott lets his last words float. “Any other news?”
Phil Iverson raises his hand. “Go Phil,” Scott says.
“For those who might not know, the coin store on Ventura and Van Nuys was robbed last week.”
Eyes dart and chewing stops. 90-year-old Burt Doling was tied up and held at gunpoint in his coin and stamp store in the Valley. Burton Doling Stamps and Coins has been in operation since 1951. The robber got away with cash and a book of gold coins.
Currency is never safe, I suppose. People will forever be trying to put their hands on other’s stacks.
Scott finally allows the copper-faced man named Mark to have a moment with the crowd. Mark tries to sell a Croatian note, then a Cambodian, a Lao, a French Indochine, a 1914 Mexican note, a North Korean note, some 19th century checks from New York banks, a 1976 Coca-Cola note, a receipt from 1869 with calligraphy handwriting, and a Jamaican $100 bill—no bites.
Mark returns to his seat and Fabiola begins handing each collector their itemized bill.
The Coffers at Fort Knox
There’s something intrinsically adulterous about currency. It’s impermanent, unpredictable, and absolutely desirable; it refuses to behave. No matter how we stamp it, name it, and decorate it with tales of purity, at its core it remains cheap and slutty.
Our relationship to currency is only as true as that between a couple, bound by marriage, but scarred by a single instance of infidelity that exists eternally through hopeless matrimony.
Cue: Fabiola arrives with the coffee and a tab. Georgia Peach French Toast: $5.99. Coffee is on the house tonight—free of charge.