Washington's View of the U.S. Dollar

The Ottawa Citizen, 14 March 2000
By David Warren

You get what you pay for.

--Ancient economic adage--

I should like to make some remarks on behalf of George Washington. These would be apropos the new American dollar coin that is the subject of a huge publicity campaign. The ads and commercials present a ''wry, sly, totally fly'' character who calls himself George Washington. The face is animated from the portrait on the old $1 bill, and the voice dubbed by the actor Michael Keaton.

OK, I'm not a Yanqui. OK, my ancestors fled the revolutionary armies that were led by that guy, and we're still a bit resentful.

But time heals, and we're now acclimatized to sub-Arctic exile. I was reading through the works of Gen. Washington only recently, and thinking he was not such a bad egg.

To most of the Yanquis (I am spelling it the Cuban way so as to include southerners and westerners) this Gen. Washington has become a revered, strange-familiar, mythopoeic character, the subject of dreams; a symbol, lying just beyond the reach of conscious thought.

But he was a real man, for I've read his letters, and I want to be clear about one thing. The character in the ads is not the real Washington. I know the original, and this is what he says.

He doesn't like the new coin. He thinks it is a fake. He thinks it is, and I quote, ''So not money.'' He thinks the promotion behind it is a pack of lies, starting with the name of this little chip of brass. The U.S. Mint calls it ''the new golden dollar'' but it is not gold, not even fool's gold. The metal weighs less than the copper in a Rose half-penny (circa 1776), and is, says Gen. Washington, ''hardly worth the paper in our Continental scrip.''

As to the TV commercials, he admitted to finding them cute and clever, and to having laughed at his own expense. But he added that a joke requires a time and place, whereas the new dollar will drag on interminably.

Let me now get into the details; and let me reiterate that Gen. Washington agrees with everything I say.

The American, like our own dollar, is descended from the late medieval ''Joachimsthaler,'' from the silver mines of farther Austria. It came down to us through the Spanish new world peso, worth eight reales, minted at Mexico City from the 16th century. It had cognates in the Dutch daalder, the Italian talero, sundry crowns and piasters, the Japanese yen and Chinese yuan -- each once roughly at par in weight and value with a ''piece of eight.'' The old Hapsburg Maria Theresia dollar -- polished like a circle of etched glass -- is still a basis of exchange in Middle Eastern bazaars.

That 16th-century peso, like all those other dollars, contained something in the neighbourhood of 24 grams of fine silver -- worth around $4 present U.S. at the bullion price for silver. This would not seem like much inflation, after more than 400 years.

But it is misleading. The bullion price of silver collapsed soon after the world's governments withdrew the principal demand -- which was for silver to use in coinage. (Canada's dimes, quarters, halves and dollars were in silver until 1967, America's until 1964.) It would multiply several times if this use were now restored.

The real value of a U.S. dollar was instead, when it had meaning, pegged not to silver but to a tiny, genuinely gold, dollar coin, weighing precisely 1.671 grams, . 900 fine. At the bullion price for gold, that would be worth about $15 U. S. today.

Yet once again, gold was depreciated by the withdrawal of demand for gold in coinage (though not by as much as silver, since people still hoard it on a large scale). And gold is a material with so few other uses that, as Gen. Washington told me: ''One might almost say it was placed here by God to serve as the universal medium of exchange.''

So far as I can calculate, the base metals alloyed in ''the new golden dollar'' cost just under three present U.S. cents per coin, or 1/35th of a present-day dollar. This makes a nice symmetry, for when the U.S. dollar was finally taken off the gold standard during Nixon's presidency, it came off a peg of 35 dollars to one Troy ounce.

As Gen. Washington muttered: ''What is 35 times 35? Whatever the answer, put a 'one' over top of it and you get what I think of 'the new golden dollar.' ''

His conclusion: ''Thank God they left my portrait off it.''

© 2000 Southam Inc.