To the Congress of the United States:
From the early days of our independence the United States has used a system of coinage fully equal in quantity and in quality to all the tasks imposed upon it by the Nation's commerce.
We are 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 1792. For 173 years, we have maintained a system of abundant coins that with the exception of pennies and nickels is nearly pure silver.
The long tradition of our silver coinage is one of the many marks of the extraordinary stability of our political and economic system.
Continuity, however, is not the only characteristic of a great nation's coinage. We should not hesitate to change our coinage to meet new and growing needs. I am, therefore, proposing certain changes in our coinage system--changes dictated by need-which will help Americans to carry out their daily transactions in the most efficient way 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. Silver is becoming too 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 thousand tons--of silver for our coinage this year. That is far more than total new production of silver expected in the entire Free World this 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 life--from using pay telephones to parking in a metered zone to providing our children with money for lunch at school.
The legislation I am sending to the Congress with this Message will ensure a stable and dignified coinage, fully adequate in quantity and in its specially designed technical characteristics to the needs of our Twentieth Century life. It can be maintained indefinitely, however much the demand for coin may grow.
Much as we all would prefer to retain the silver coins now in use, there is no practical alternative to a new coinage based on materials in adequate supply.
THE NEW COINAGE 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 five 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 now depend upon heavily for many kinds of food and other goods.
THE HALF DOLLAR 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 percent 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 Kennedy. Its size will be unchanged.
THE SILVER DOLLAR No change in this famous old coin, or plans for additional production, are proposed at this time. It is possible that implementation of the new coinage legislation 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 silver we are now putting into coins annually.
I want to make it absolutely clear that these changes in our coinage will have no effect on the purchasing power of our coins. The new ones will be exchanged at 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 obligations 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 designed 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 is, 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:
OTHER AUTHORITY REQUESTED First--As a useful precautionary measure, I request stand-by authority to institute controls over the melting and export of coins to assist the protection of our existing and our new silver coinage.
Second--I request authority to purchase domestically mined silver at not less than $1 .25 per ounce.
Third--I am asking for authority to reactivate minting operations temporarily at the San Francisco Assay Office.
Fourth--As a safeguard for assured availability of the new coinage, I am asking for new contracting authority for the procurement of materials 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 installation 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 OF THE COINAGE MUST 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 comprehensive 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 progressively incompatible with the maintenance of silver in all our subsidiary coins.
On the average, in the five years from 1949 through 1953, new silver production in the Free World amounted to about 175 million troy ounces per year, while consumption amounted to more than 235 million ounces. There was an average deficit in those five post-war years of more than 60 million ounces of silver per year.
In the latest complete five years, 1960 through 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 five 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 five years averaging over 40 million troy ounces, or some 1,370 tons, a year.
The gap between the production of silver and silver 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.
There is no dependable or likely prospect that new, economically workable sources of silver may be found that could 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 four years. This would be of little help. Further, because silver is produced chiefly as a by-product of the mining of copper, lead and zinc, even a very large increase in the price of silver would not stimulate silver production 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 United States coinage does not currently depend upon new silver production, because for many years we have supplied silver for our coinage out of large Treasury stocks, which still amount to 1 billion troy ounces.
But--and this is the crux of the matter-at the present pace, this stock cannot last even as much as three years. We would then be shorn of our ability to maintain the coinage, and, if there were no alternative to our present silver coinage, the nation would be faced with a chronic coin shortage. That is why definitive action is necessary at this session of the Congress.
PROTECTION OF THE COINAGE It is necessary for the United States 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 hoarding 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 fact 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.
It is as additional protection for the existing coinage that I am requesting stand-by authority to institute controls over the melting, treating or export of United States coins.
It may be asked why we seek stand-by control authority since we retain a large 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 new coinage will help us protect the silver coinage by freeing our silver reserves for redemption of silver certificates at $1.29 per ounce. Thus, we can assure that no incentive will 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 silver might result from the enactment of this legislation largely removing silver from our subsidiary coin. It is for the purpose of protecting silver producers from a precipitate drop in the price of silver resulting from the action of the government that I am requesting authority for the Secretary of the Treasury to purchase any newly mined domestic silver offered to him, at the price of $1.25 per troy ounce.
THE SAN FRANCISCO ASSAY OFFICE Coinage operations at the San Francisco Mint were ended in 1955. Legislation converting the Mint to the San Francisco Assay Office was passed in 1962. As part of our efforts to overcome the coin shortage of the past year, coin blanks have been cut and annealed at the San Francisco Assay Office. Present law forbids full minting there. However, we will temporarily need the facilities 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 modern 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 ARE RECOMMENDED 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 highly complex problem, we have settled upon the two types of composite, or clad, coins I have already described. These are 10-cent 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 compatible 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.
The automatic merchandising industry is a large and growing part of our national economy. Last year, $3 1/2 billion worth of consumer items were sold through 3 1/2 million of these machines. On more than 30 billion separate occasions a consumer made a purchase by putting a coin in a machine. In growing numbers, factories, hospitals and other places now depend upon automatic vending for the service of goods. A million and a half people now rely upon coin controlled rending for at least one meal a day. The use of coin operated devices is expanding rapidly, not only in merchandise vending, but also in a number of other services.
Six million of our coin-operated devices, including nearly all vending machines, have selectors set to reject coins or imitations 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 in 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 electrical 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 high silver content. They are the only practical alternatives we have discovered to our present coinage.
Selectors exist that can handle coins with the widely varying electrical properties of, say, nearly pure silver and nearly pure nickel. But that is not enough. When 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 electrical properties, the coin-operated machines become subject to a high degree of fraudulent use. This would be costly to all concerned.
The future may bring selectors of a different kind able to accept coins of widely varying electrical 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 three years in the services of these machines. This would impose heavy inconveniences 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 modern coinage, working alongside our existing silver coinage. The new coins that I am recommending to you do this, and do it well, because they were specifically designed for the task.
The new half dollar was designed with the strong desire in mind of many Americans to retain some silver in our every-day coinage. We believe 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 have enough silver to extend this to the dime and quarter: they are heavily used, indispensable coins that we must have at all times in large quantity. We are convinced that we can include a 40 percent silver 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 COINAGE We believe the recommendations being made for a new coinage are 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 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 member each from the two houses 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 technological 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 President, the Congress and the Secretary of the Treasury on the results of its studies.
THE COINAGE--CURRENT AND PROSPECTIVE 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 cent 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 circulation of the old and new coins for the indefinite future. There is no reason for hoarding the silver coinage we now 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 to overall employment of these metals to create supply or price problems.
In the first year after new coins are authorized, we expect to make 3 1/2 billion pieces of the new subsidiary 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 in this way to avoid any new coin shortage in the transition to production of the new coins, and within a period of less than three years to reach a point at which we could if necessary meet total coinage needs out of production of the new coins.
I am satisfied that, taking into account all of the various factors involved in this complex problem, the recommendations that I am making to you are sound and right. Your early and favorable action upon the proposed legislation will make it possible to produce and issue to the public a coinage that will be acceptable, provide the maximum convenience, and serve all the purposes-financial and technical--of modern commerce. In considering this problem the needs of the economy and the convenience 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 approval at the earliest possible date.
LYNDON B. JOHNSON
The White House
June 3, 1965