Half dollars: from asset to irrelevance

The half dollar, which once supported the backbone of the nation’s economy, hasn’t been relevant for more than a decade. Since 2002, it’s been struck only for the benefit of collectors. Any coins of that date or later, if found in circulation, were likely placed there by accident (or by a quixotic collector determined to keep the denomination alive).

In the early years of the nation, the coin was king. According to the Philadelphia Federal Reserve bank’s web site, “Coinage of silver began in 1794 and only the half dollar and the dollar were struck consistently; smaller denominations were coined only on demand of depositors.”

Between 1803 and 1840, the Mint struck no silver dollars for circulation and didn’t produce the denomination in meaningful amounts again until 1878 when production of the Morgan dollar began. That left the half dollar to fill the larger coin’s role in bank transactions.

Neil Carothers reports in Fractional Money: A History of Small Coins and Fractional Paper Currency of the United States, “(T)he half dollar was the desirable coin for major transactions, bank reserves and payment abroad. The coins did not circulate widely.”

Before the Civil War when private banks issued their own paper money, bank reserves typically consisted of casks of half dollars. There are reports that the kegs were often transferred from bank to bank in advance of the bank examiner, leaving one bank as soon as the official was gone and arriving at the next bank just before he got there.

Writing on wildcat banks in Ypsilanti Gleanings in 2005, researcher Gerry Petty noted, “The failure of the Bank of Ypsilanti in 1838 occurred when it was discovered that the assets of the bank had been ‘borrowed’ from another bank. In fact, the same barrel of silver half dollars had been noticed by the bank examiner as the same one that he had just audited the week before at another bank in Oswego.”

Because of their use as bank reserves, half dollars did not circulate much during the first half of the 19th century. This accounts for the fact that Bust half dollars routinely are graded as About Uncirculated and better.

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