Uncle Sam, the Monopoly Man: Every Man His Own Mintmaster
Wooldridge shows the historical persistence of private money production in competition with government claims to monopoly privileges.
Uncle Sam: The Monopoly Man, “Chapter Three: Every Man His Own Mintmaster,” New Rochelle (NY): Arlington House, 1970, 54-74. (Excerpts)
By William C. Wooldridge
Seignorage has two meanings: The profit to be realized from making coins, and the sovereign’s sole right to that profit. The very word suggests the antiquity of the state’s prerogative over coinage, and it is probably the best accepted of all the government’s monopolies. Rarely has anyone objected to it on principle, but on the other hand, it has been ignored surprisingly often in practice. Until a little over a century ago, coins could be struck with impunity in the United States, for the statutes creating the coinage monopoly were pieced together bit by bit in the form of amendments to the counterfeit laws, and excluded the last private change only in 1863. Therefore, “seignorage” in the United States for many years could accrue to anyone with the imagination to market his own coins.
Very unradical people have long taken for granted the preeminence of private demand deposits, promissory notes, and commercial paper over green, in-the-flesh money. As a larger and larger part of the population, armed with the ever more ubiquitous credit card, capitalizes on various substitutes, government paper money may suffer still further eclipse. American Express has sovereignly proclaimed the end of an era in advertisements denominating its service “the new money.”
Although coins, by contrast, are still considered the state’s prerogative, their past offers more color and more surprises than that of commercial paper. Private coins can be successfully circulated only so long as people want them, and people do not want them unless for some reason tokens meet their needs better than “real” money. That situation frequently recurred right up into the 1960’s whenever the supply of government coins became too limited to furnish enough small change.
On those occasions, private money has made a surprising and sometimes substantial contribution to the nation’s economic life, despite the disposition even of users to regard it as freakish. How it worked in the face of scorn could be explained by conjuring up a desert island in the manner of the speculative economists of the last century, and following the progress of its economy from barter to money. But in America one hardly need theorize, for we have had our own didactic equivalent of a desert island since 1867, when William H. Seward purchased the arctic wilderness of Alaska. The gold rush of 1898 supplied the impetus to population, more traditionally imparted by a sunken ship, and instead of a few clambering mariners, many thousands of sourdoughs descended upon the Klondike. But otherwise Alaska conformed to pattern: government was not much in evidence, government money was almost nonexistent, and barter, generally with gold dust or furs, was of necessity the principal, though mightily inconvenient, vehicle of trade. When Alaska came to that pass, enterprising merchants began to supply the deficiency with their own privately issued coins, not of fishbone or walrus teeth, to be sure, for technology had progressed a long way since the heyday of desert islands, but generally of aluminum (then a rare metal), bearing the name of their issuer’s business.
D. Martin, proprietor of the first store in Juneau, issued one-dollar tokens. The Alstrom Trading Company issued its tokens in denominations of twenty dollars, ten dollars, five dollars, one dollar, and fifty cents. Most other concerns favored smaller amounts, particularly twelve and one-half cents, and sometimes six and one-quarter cents, evincing a somewhat anti-Gallic distaste for the neat gradations of decimal currency. Before the story ended, Alaska had to deal with hundreds of different kinds of money.
The Alaska Pool Hall, the Montana Pool Room, and an assortment of other such places issued their own money, while bars, including one appropriately named “The Mint,” enthusiastically took up the business. “Rain Check, Good for One Snort,” proclaimed the slug of the Timber Bar of Kenai, while the Pioneer Bar of Ketchikan apparently traded on “points,” since its money came in ten-point denominations. If the bingles, as they were onomatopoetically christened, provide a reliable guide, several Italians or Italo-Americans made their way to the Yukon, among them on Ghezzi, a J. M. Giovanetti, whose token was “Good for one Loaf of Bread,” and J. Anicichi, who gave his patrons the choice of “One Drink or Cigar” when they redeemed his tokens, evidence either of cheap drinks or of noble cigars on the Alaskan frontier.
Abercrombie’s of Ketchikan issued two-cent, four-cent, and eight-cent coins redeemable only in lots of two hundred, fifty, and twenty-five respectively. Another token urged its holder to “Take me to Harry and Charley, Cordova House.” Only the imagination and business sense of a proprietor governed the denomination, value in kind, or redeemability of a coin, so practically every issue differed from every other in one or more of these particulars. Sugiya and Company, Salmon Packers, for instance, issued ship money in denominations of five dollars and less, which they would honor only on board their vessels.
Some of the pieces struck a Chamber of Commerce note: Chitina, site of the largest copper nugget ever discovered in Alaska, produced copper pieces bearing the legend “Native copper from Chitina,” while a different locality advertised “From the land of gold, where there is plenty for all.” Perhaps one can detect a certain amount of humorous boosterism in the coin inscribed “W. Jensen, at the Louvre call for Slemp’s beer”; Jensen’s saloon, however well supplied with Slemp’s or even barroom art, could not have arrogated the name of the museum with a straight face. Some of the later tokens were in fact issued by Chambers of Commerce or benevolent societies with inscriptions urging that the holder save them for a souvenir rather than spend them, advice worthy of some Yukon Necker, since an unredeemed token was money in the pocket of the issuer.
A one-man hole-in-the-wall might produce its own money, such as the twelve-and-one-half-cent piece issued by the Juneau Arctic Barber Shop. A great territorial enterprise might as well; the Northern Commercial Company operated over one hundred stores all over Alaska, so its tokens never travelled far from a source of redemption even if for some reason they should fail to pass in other establishments. Private money even transcended national boundaries; the coins of the North American Trading and Transportation Company were as acceptable in its Canadian stores as its Alaskan, and so become a truly transnational currency.
Everyone familiar with desert islands might guess what happened next. Commerce should have suffered from the number and variety of bingles—what was a token that was good for a cigar in the Moravian mission outpost at Bethel worth in Fairbanks? Certain storekeepers should have realized the potential of pushing as many tokens in change as they possibly could, secure in the belief that few would ever find their way home. Counterfeiters should have applied their skill to reproducing the high denomination pieces. And finally, these multitudinous inconveniences should have cumulatively rendered all such private money worthless and removed it from circulation, reducing Alaska once more to barter or creating a demand for government fractional currency (change).
Seward’s peninsular Folly, however, failed to follow that script. Whatever the inhibitions on circulation may have been, they did not grow chronic enough to make the use of bingles impossible. Apparently proprietors found it in their own best interest to issue only what money they needed for convenience’ sake, which was little enough, to judge from the prices collectors pay for the surviving tokens. And citizens either devised a way to evaluate the miscellany of pieces, or spent them primarily in the stores of their origin, for bingles continued in use until outlawed in relatively recent times.
A story about their outlawry, although possibly apocryphal, in itself shows what wide acceptance the private money earned. An Alaskan—make him an Eskimo, since the whole affair has an implausible ring—travelled to Seattle, Washington, and in the course of his wanderings decided to communicate his whereabouts to the folks back home. Having entered the Seattle Post Office to purchase the necessary stamps, he was shocked and distressed when the clerk refused to take bingles in payment. Such was the indignation of Alaskans at this slight to their state, the story goes, that their representatives illegalized private money shortly thereafter.
Present-day inquirers may play Frazier and attempt to extract some useful kernels of fact from the myth, or at least with its aid to divine prevailing attitudes. First, bingles had become such an Alaskan fixture that a citizen saw nothing inherently absurd in trying to buy stamps in the United States with them. Second, the use of bingles survived the frontier scarcity of government money which initially inspired them; bingles remained popular with merchants, though hardly essential, into modern times. Third, it took a positive law to remove them from circulation; the natural advantages of official money did not automatically carry the field.
The bingles’ cataloguer, Maurice Gould, from whom all the examples of particular coins given above are taken, in recounting the story of the Alaskan’s abortive trip to the Seattle Post Office refers to the private coins as “legal tender,” appropriately in quotation marks, since they lacked the defining characteristic of legal tender, the legally conferred right to extinguish debt whether or not the creditor wanted that tender. But Gould suggests that in Alaska private money did resemble legal tender in certain respects, for it circulated everywhere and it would have been thought churlish to refuse it, as the story of the Eskimo’s indignation in Seattle indicates. In other words, private money for many years remained a commonplace of the Alaskan economy, the “legal tender” of Seward’s icebox while it had no other. Merchants issued it at will, their customers took it voluntarily and spent it indiscriminately. Nothing but necessity compelled its acceptance; nearly everyone, however, preferred the convenience of the distinctive little aluminum coins from the Pioneer Bar and a hundred other combination mints and watering spots to gold dust and bear skins. The advantages plainly outweighed the disadvantages…
Most commentators on private money, including those who have recognized its utility, agree that it has been primarily important as an expedient and a stopgap rather than as a permanent alternative to legal tender. Nevertheless, the history of private coinage retains a quixotic fascination for students of government monopolies, for time and again some unlikely local has turned himself into a mintmaster overnight, sometimes with surprisingly propitious results. The issuers’ adventures make good reading if not necessarily satisfactory paradigms for solution of present-day problems.
The desirability and, ideally, the superiority of a government coinage, however, do not self-evidently dictate the present statutory monopoly over items “intended to be used as money.” From the first this has sounded like a fairly silly antiwampum law, notwithstanding the longstanding tradition of seignorage. The statute’s earliest recorded application offended the common sense of the judge who tried the case. The Monongahela Bridge Company and various other enterprises, faced with the continuing shortage of coins, used tickets inscribed “good for one trip” to make change. Although the practice seemed clearly to violate the terms of the statute, and the judge said as much in so many words, he chose to interpret it away with a nonjudicial fillip: “From our knowledge of the gentlemen having the management of these companies, we are satisfied they entertain no desire to abuse [their corporate privileges.]” The indictment was dismissed.
Very possibly the judge’s practically extrastatutory opinion is all that makes it legally possible for today’s bus companies to issue script for change, a practice annoying to customers but hardly subversive of the nation’s money supply.
Enforcement activity seems as frivolous now as it was in 1863. William F. Rickenbacker has collected some examples of merchants who tried to help alleviate their own problems arising from the coin shortage of 1964 by issuing various money substitutes. The Jewel Tea Company proposed to issue script in one-cent, five-cent, and ten-cent denominations to make change for its customers; Krogers, too, planned to resort to a similar expedient. In Monroe, Wisconsin, the First National Bank actually paid out $400 for the manufacture of 20,000 wooden nickels to be used as small change. A Nantucket merchant minted his own coins embellished with an imperious whale. The United States Treasury, however, frowned on all these palliative enterprises and threatened some of their perpetrators with prosecution if they did not desist, a stance that reduces the monopoly to comic-opera dimensions indeed. So far as the leading cases reveal, the only remotely salutary application of the century-old law ever to see court was against an amusement park operator whose tokens, stamped “good for amusement only,” were being misused as slugs in vending machines. But the government lost because the slugs could not realistically be considered money. With no more than a few wooden nickels to its credit, the statute seems more a weapon for Mouse-That-Roared harassment than an instrument of seriously considered public policy.
A convention of the ghosts of the hundreds of private American mintmasters, from hard-drinking old Higley to the still corporeal Mr. Gilroy Roberts (whom the Franklin Mint of Philadelphia—which does not produce money but souvenir coins—lured away from Uncle Sam a few years ago), would be a backslapping, morris-dancing affair with quantities of beer quenching any sense of somber public service. The likes of Lindenmuller made money to make money, not to serve their fellow citizens, and the very desire for gain that motivated America’s mintmasters guaranteed that they would circulate their product only when the public’s necessities furnished an outlet. The irony of the coinage monopoly is that it almost never requires enforcement except when something goes wrong and the resulting complications make private money particularly useful.