City, family and American history intertwined with gold

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Gold built and shaped Colorado Springs a century ago.

The Mining Exchange Building, now on its way to becoming a luxury boutique hotel, was built to house what became the nation’s busiest stock exchange, eclipsing (for a time) New York in both share and dollar volume. More than 500 companies, most involved in gold mining, were listed on the exchange.

Speculators, promoters, bankers, con men and grifters flocked to the Pikes Peak region. The boom lasted almost two decades, leaving us with The Broadmoor, the El Pomar Foundation, the Myron Stratton Home, the stately homes of the Old North End and the working-class neighborhoods of the Westside.

Once deeply involved in gold mining, investment banker and Colorado Springs native Timothy Collins saw gold soar from $41 an ounce in 1971 to a peak of $800 in 1980, watched it decline to $250 in 2000, and then run to $1,350 today.

Anyone who bought gold at its 1980 high and held it since then has lost money, thanks to inflation.

Gold yields no income and has little intrinsic value other than that given by our collective imagination. It’s scarce, indestructible, easily transported and has served for millennia as a store of value.

Collins thinks you ought to own some of the yellow metal.

“We’re the only country whose currency hasn’t massively depreciated or collapsed,” Collins said. “It’s not an investment — it’s an insurance policy.”

Collins has been around too long to predict either hyperinflation or economic stagnation/deflation for the United States — leave that to the folks who make money from predictions of doom.

One thing is certain to him, though. Governments the world over have often pursued policies that have caused their currencies to depreciate, thereby getting out of debt at the cost of rendering individual savings worthless.

It’s hard to imagine that our government would ever institute policies that might cause its currency to collapse– or is it?

Article I, Section 10 of the U.S Constitution:

“No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts…”

Nicely written. But those prudent restrictions were written into our country’s foundational document by the very revolutionaries who had already rendered valueless America’s first currency.

A quick history lesson:

Lacking a means to finance the Revolutionary War, the Continental Congress began issuing paper currency in 1775.

The notes, called Continentals, were backed only by good intentions — the new nation had neither a treasury nor the ability to levy taxes. Prominent merchants were persuaded to personally sign each bill, although they prudently refused to guarantee payment.

During the course of the war, Congress authorized the issuance of more than $200 million in Continentals.

The first issues held their value, encouraging Congress to print even more. By 1778, Continentals retained less than 20 percent of their face value. By 1781 they were valueless, giving rise to the phrase “not worth a Continental.”

In 1790, Congress redeemed Continentals with U.S. Government bonds at 1 cent on the dollar, payable in 1811.

Today, Continentals are quite rare. I found one on eBay the other day, a $4 bill which I bought for the princely sum of $72. The crudely engraved note reads, “This bill entitles the bearer to receive four Spanish milled dollars, or the value thereof in gold or silver, according to a resolution of Congress, passed at Philadelphia, February 17, 1776.”

Milled Spanish dollars, or pieces of eight, were one-ounce silver coins minted throughout Spanish America. They circulated freely throughout the 13 colonies.

My $4 bill, signed by my great-uncle who was a Philadelphia merchant, has sentimental and historical value — but that’s it.

As Benjamin Franklin noted after the war, Continentals served in the place of taxes. Someone had to pay for the revolution, and flooding the marketplace with dubious currency was the only strategy available to the infant republic.

But with the Tea Party’s ascendance, maybe there’s hope for my Continental — even at a penny on the dollar. I could take it to the Denver Mint and ask for the proceeds of a 4-cent treasury note.

I’ll call up South Carolina Sen. Jim DeMint (appropriate name) and ask him to accompany me in support of my humble mission. He’s particularly concerned about our country’s soaring national debt, and surely he’d support paying such a modest and ancient claim.

Let’s see: Four cents, compounded semiannually at a modest 8 percent since 1790 = $1,249,479.92.

And yes, Senator, a check drawn on the treasury would be fine.

I’ll buy gold with the proceeds.

Hazlehurst can be reached at johnhazlehurst@csbj.com or at 719-227-5861.