The Most Exciting Change America Has Ever Seen

This past February, the American Numismatic Association held its annual convention in Savannah, Georgia. Numismatics is the fancy word for coins (and the study of coins), and the hall was full of small but avid fandoms: gold pieces struck from California gold rush ore, dealers in three-cent silver pieces, a whole society devoted to crushed pennies, which they call “elongateds”.

Reporter Katie Thornton went as a numanistics novice, asking after the most widely collected coin in American history: the state quarter. From 1999 to 2009 the US Mint issued 56 of them, one for every state and territory and Washington DC, and put billions into circulation. Chances are you have one in a couch cushion right now. Most people figured the state quarters were a fun little thing the government did for the hell of it, but they represented a high-stakes government program, which is part of how the US makes money off of making money.

The story starts before America had a currency of its own. The first coins here were whatever settlers happened to carry over: English shillings, Portuguese joes, German talers. It was chaotic. A coin was worth its metal and nothing else, so every piece got weighed at the counter, and a worn coin bought less than a fresh one. There were never enough to go around, either, which is why the colonies went ahead and made corn and wheat and barley into legal tender, with a bushel of corn trading for six shillings in 1631. Then independence came, and Jefferson sat down to write his Notes on Coinage. The argument was basically a gripe. British money made no sense; meanwhile, the Spanish used clean halves and quarters. So in 1792 the new US Mint opened and struck silver dollars, named for the Spanish dólar. A gold eagle was worth ten dollars.

The early designs were deliberately plain, because if every coin looked the same, it meant counterfeits stuck out. They also had no real faces on them, thanks to Washington, who refused to let the Mint put his bust on money. That was a thing kings did, he said, and the country had just fought a war to be done with kings. Over his dead body. (Glance at a quarter now and you’ll see how that held up.)

Making the things was its own ordeal. An engraver cut each design by hand into a tiny steel die, with even smaller chisels, squinting next to a window during the day or by candle at night, and then the image got hammered or pressed onto the blank with muscle, with horses, and eventually with steam. Slow going. The coins stayed dull for a century, until Teddy Roosevelt looked at them, decided they were hideous, and demanded better. What he got was a French contraption called the Janvier Reduction Machine, which could trace a big sculpted model, two or three feet wide, and shrink it down onto a coin-sized die without losing a line. Now Liberty could do more than stand around. The flood of elaborate designs that followed got a name: the American Renaissance of coins.

The change that made the quarters program work, though, was metallurgical. In 1965, looking to save money, Lyndon Johnson convinced Congress to pull the silver out of US coins and replace it with cheap copper clad in a thin layer of nickel. People called them Johnson sandwiches, and almost nobody cared. But it meant a quarter now cost far less than 25 cents to make.

That gap is where the Mint earns its keep. The trick is called seigniorage: produce a coin cheaply, sell it at face value, keep the difference. The Federal Reserve buys coins from the Mint at face value, banks buy them from the Fed, businesses buy them from banks, and the rest of us pay full price whenever we receive some change. The only one really profiting from this chain of sale is the Mint.

By the time Phillip Diehl became director of the US Mint in 1994, the math was souring. Rising metal prices had driven up the cost of making every coin, especially the penny, whose production cost was approaching its face value. (Diehl recommended killing the penny and was ignored. That one would take another three decades.) But the quarter still earned about 22 cents apiece, and Diehl saw a way to sell more of them. Every year people lost quarters or dropped them in jars and car consoles, and the banks had to order replacements. If he could get ordinary people, not just dedicated coin collectors, to pull additional quarters out of circulation on purpose, the Mint could sell that many more. The way to do it was to issue 50 designs worth chasing.

Canada had tried something similar and made money, but Diehl couldn’t simply order new coins; he needed an ally in Congress. He went to Delaware congressman Mike Castle and proposed releasing the quarters not alphabetically but in the order the states ratified the Constitution, an order which happened to put Delaware first. Castle became a champion. The Treasury, which disliked the idea, demanded a study, the standard Washington method for quietly burying a proposal, but the numbers came back in its favor. The program launched in 1999 with Kermit the Frog as its spokesfrog, ran five designs a year for a decade, and minted nearly 35 billion state quarters. By the end, the banking system had bought more than twice as many quarters as in the previous ten years, and the surplus demand returned roughly 2.6 billion dollars to the Treasury, almost exactly what Diehl’s team had predicted. The program worked because millions of people did, for fun, exactly what the Mint was counting on: they found the coins, liked them, and stopped spending them. Thornton came home from Savannah a convert, which is how it tends to go.

Every year the same association that runs the convention urges its members tecnically to do the opposite of what the Mint wants and slip interesting and unusual coins back into circulation, a standing liberty quarter or a wheat penny dropped into the wild for someone to stumble on. Thornton bought a 1951 quarter at the show, struck in San Francisco and never circulated, almost pure silver, for twenty dollars. Then she decided to spend it, and release it too back into circulation, just to picture whoever might pick it up next.