For his entire career after leaving the army, my father was employed by the NSA as a cryptographer. His work sometimes required him to travel. In the early days, when I was a small child, he often traveled to Germany, the North of England, and Alaska. Many years later, long after he retired, I realized that those locations must have been listening stations where the agency was picking up the SIGINT that he was tasked with decrypting. I also realized that that was the reason why he had a Russian-English dictionary and a Russian grammar on his bookshelf (he also had a Swedish-English dictionary, but I’m not sure why he needed that).
Later in his career, as his work became largely administrative, his travels were generally more mundane. In 1964 he paid a visit to St. Paul, Minnesota (maybe there was an NSA field office up there) and stayed at the Twins Motor Hotel. For some reason he brought back a menu from the motel’s coffee shop, and I’m glad he did, because it gives me a little window into restaurant prices back then. I was still too young to pay much attention to prices and inflation, so I wouldn’t have otherwise remembered.
Just as a thought experiment, imagine that my father bought the “Burger Steak Supreme” with a cup of coffee. Salisbury steak, fries, cole slaw, and rolls for $1.25. Coffee was a dime. My father was decent tipper, so he probably handed the waitress a dollar bill, two quarters, and a dime, and told her to keep the change.
The dollar bill would have been a Silver Certificate, and not the Monopoly money — Federal Reserve Notes — that circulates nowadays.
You could take a $1 Silver Certificate down to the bank and exchange it for a silver dollar. I remember doing just that, and getting one of those beautiful Morgan dollars. I was still little, so it felt huge and heavy in the palm of my hand.
My dad wouldn’t have used a silver dollar, though. They still circulated, and you would occasionally see people spending them (usually the later Peace Dollars, which were much less attractive), but quarters and half dollars were used most of the time.
To continue this thought experiment, let’s imagine that he paid for his meal with two Franklin halves, two Washington quarters, and a Mercury dime. Roosevelt dimes were more common by 1964, but Mercuries (strictly speaking, Winged Liberty dimes) were still in circulation, and were more pleasing to the eye, so I prefer to imagine one of those.
Now let’s imagine that he decided to spare his waistline, forgo his lunch, and use his $1.60 in silver to open a savings account for the benefit of his young son. In those days banks were statutorily required to pay 4% annual interest on savings accounts. I remember my passbook, with occasional small deposits noted inside, and the line where a little bit of interest was added each quarter.
At some point between those halcyon days and 1980 the rules changed, and banks no longer had to pay 4% on savings accounts. Interest rates became paltry, and anyone who wanted their savings to accrue significant interest found other vehicles for their money.
But let’s pretend that somehow that little savings account kept chugging along at 4%. When I reached my majority I eschewed withdrawing the money, and left it in the account. As of today it has managed to increase in value to $14.96.
“Big woo, Baron,” I hear you say. “That doesn’t even beat inflation.”
No, it doesn’t. But the funny thing is, neither does the current value of the silver. More on that later.
If my father had hung onto those five silver coins, and I had inherited them, as of today they would be worth approximately $33.60. If I took them down to the local silver dealer, that’s about what he would give me in Federal Reserve play money for their “melt value”. A savings account would have had to pay roughly 5.5% annual interest in order for the deposit to have accrued that much value since 1964.
Now let’s think about what the same meal would cost you today. As it happens, I ate almost the same lunch a couple of days ago at a diner in the little town in the hinterlands where I went to visit relatives. I had a more upscale vegetable than cole slaw (greens), but I had to order it à la carte. Since the diner wasn’t as swank as the Twins Motor Hotel, we’ll just assume they more or less even out. With the coffee (which costs a LOT more these days) and tip, my meal came in at just over $19 in pretend money. That’s more than the 4% savings rate would have given me on the original $1.60, but less than the current value of those silver coins.
However… Restaurant prices haven’t inflated to the extent that other commodities have. Consider what a car or a new house cost you in 1964. Back in the late 1950s my parents paid $22,000 for a custom-built three-bedroom, two-bath brick ranch on a large lot. If I still owned it, that property would be worth about a million in today’s market. In comparison, 22,000 silver dollars are now worth about $460,000 — less than half as much.
So what gives? Why didn’t silver keep up?
I bring all this up because one of Francis W. Porretto’s recent posts discussed Silver Certificates, the Federal Reserve, legal tender, and currency in general. It got me to thinking about changes in the currency since 1964.
As it happens, 1964 was the last year that the Treasury minted silver coins. At that point no silver dollars had been minted since 1935. From 1965 on dimes, quarters, and half dollars were made of a copper-nickel “sandwich”. People called the ugly new coins “Johnson slugs” because they were introduced during the Johnson administration.
