Late last month when Minnesota governor signed H1A into law, it was great news for Minnesotans who want to invest in bullion. This is because the bill contained a sales-tax exemption on precious-metals bullion, ushering Minnesota into a group of 35 states that have a full or partial sales and use tax exemption on precious-metals bullion and coins.  

While it may seem against Minnesota’s best interest to collect less in revenues from businesses selling bullion, studies done in other states show that the sales tax revenues from other sources are increased by these kinds of exemptions. Because some states do not charge sales tax, buyers from other states will purchase bullion or collectible coins in those states rather than pay taxes in their own state. This is terrible for local coin dealers in states that border states with exemptions, as was previously the case with Minnesota. The competitive disadvantage for them translates into fewer sales, fewer employees, and less money in payroll and income taxes collected.

We’ve discussed before what a problem counterfeiting is in the coin world. In recent years counterfeit coins have proliferated in America so frequently, many of them imported from China via online sales, that the U.S. Mint has issued warnings. A few years ago, when the stock market was in freefall and real estate rapid lost value, collecting coins became not just a hobby but an investment for many people. The characteristics about coins that make them valuable - origin, condition, scarcity, and history - do not fluctuate much over time and, unlike bank accounts, coins are not hackable (although they can, of course, be stolen). Counterfeiting is a significant threat to collectors, however, and anyone involved with coins has an incentive to stop it.

In April the European Central Bank issued new €50 banknotes they designed to be far less vulnerable to counterfeiting. These orange-yellow bills were designed in consultation with Stanford neuroscientist David Eagleman to so that anyone - not just currency experts - would be able to spot a fake. The usual security measures are present, including watermarks, color-changing inks, threads, and microprinting, but instead of relying on high tech measures, the ECB took a new tack: focusing on face recognition. This is because the general populace doesn’t look at their money very carefully and the human brain isn’t designed to spot inconsistencies in objects that often decorate paper money.

Previously we talked about the Great Depression and what its effects were on coins minted during that era. However, the largest coin disaster of the 1930s was Franklin Delano Roosevelt’s infamous gold confiscation. His Executive Order 6102 of 1933 strikes fear, or at least anxiety, in the hearts of some coin collectors (and gold bugs) even now. Many coin collectors view the U.S. government’s confiscation of gold with anger and loathing as well as feelings of foreboding for the future. When a government has the right to or enforces a perceived right to confiscate gold bullion and gold coins from its own population, what does that mean for coin collectors today? Well, it’s not as ominous as you might think.

While what happened is a tragedy for historic gold coins and collectors, it’s unlikely to reoccur today because FDR’s confiscation of gold was done to bail out the Federal Reserve which in years prior to the Depression had issued millions more in gold-clause notes than it had gold to back them with. Today the Federal Reserve no longer has to pay back its liabilities in gold. It hasn’t since 1971 when President Richard Nixon closed the international dollar-gold exchange window.  

The British gold sovereign is another coin that was designed and minted as a result of a politics.

People unfamiliar with the strife, plotting, unseating, and court intrigue that resulted when Henry of Bolingbroke, one grandson of Edward III, rose up and deposed Richard II, another of his grandsons, might be interested to know that the civil war depicted in the popular television show, Game of Thrones, is loosely based on the chaos of this period - the Wars of the Roses - in English history. For nearly a century, the country saw assassination attempts, imprisoned kings, secret marriages, brothers betraying brothers, and, of course, the famous missing and murdered Princes in the Tower.

Sponsored by Democratic Senator from Nevada, Key Pittman, the Pittman Act of 1918 “authorized the conversion of not exceeding 350,000,000 standard silver dollars into bullion and its sale, or use for subsidiary silver coinage, and directed purchase of domestic silver for recoinage of a like number of dollars.” 

The main reason for the passage of this act was the need to finance the Great War in Europe. Wars require troops, armaments, and munitions, and all of that requires money. Gold quickly became scarce as all money of intrinsic value does during war, but America had quite a lot of silver dollars in circulation. There were far more than were being used for commercial needs, although eventually America’s entrance into the war did create a demand for all coins. 

People who have grown up using a universal United States currency are often surprised to learn how diverse historical American coinage and currency is. Local and state banks issued their own money, backed by reserve currency, and did business for hundreds of years this way. It wasn’t until 1863 that President Lincoln signed the National Bank Act into law. This created the United States National Banking System, a prototype of what we use today:

“The National Banking Act (ch. 58, 12 Stat. 665; February 25, 1863), originally known as the National Currency Act, and was passed in the Senate by a narrow 23–21 vote. The main goal of this act was to create a single national currency and to eradicate the problem of notes from multiple banks circulating all at once. The Act established national banks that could issue notes which were backed by the United States Treasury and printed by the government itself. The quantity of notes that a bank was allowed to issue was proportional to the bank's level of capital deposited with the Comptroller of the Currency at the Treasury. To further control the currency, the Act taxed notes issued by state and local banks, essentially pushing non-federally issued paper out of circulation.”