Money Was Different in 1962
Welcome to ROADTRIP-'62 ™ , for more discussion of things from 1962! My name is Don Milne and I’m your travel guide for this historical virtual tour. This week I’ll be discussing money. I decided to discuss money because we’re traveling through part of the country that had its own money at one time. During the Civil War, the Confederate States Of America issued their own currency. Today there is only one monetary system through the United States, but our bills and coins do look different than they did in 1962. Many other aspects of investing and using money have also changed. Those of you not familiar with 1962 can take a peek back in time to learn where we’ve come from, and those of you who lived it can have a chance to remember. By the time we are finished traveling US-23, we should all have a pretty good model of the world in 1962. Grab yourself a malted at your favorite diner, take those coins out of your pocket and get comfy, and let’s look at a little history of money.
I mentioned way back on our US-23 roadtrip's first page, that you couldn’t just walk into any store and expect to use a credit card in 1962. I used to take hundreds of dollars in traveler’s checks on my trips, because I didn’t have a credit card even in the 1970s and 1980s! Traveler’s checks are a kind of privately-guaranteed money that has declined in use as plastic cards have taken over. The Federal Reserve of St. Louis reports the peak year for issuing the checks was in the mid-1990s. We take plastic money for granted today, even buying groceries and fast-food with it, but back then few stores accepted it. Gas stations, restaurants, hotels, and a few other places were some of the few that you could count on to take a credit card. And even then, it usually was their own card: there was no such thing as the Discover Card, MasterCard, or VISA in 1962! Even by 1970, only 16% of US households had a credit card and only about 20% of merchants accepted them. So, if this has changed, just how much has our money changed in other ways?
If you didn’t have universal credit cards, how did you get credit in 1962? You might think that credit did not exist, but you would be wrong. You could borrow money for major purchases such as a home, a car, a business, a boat or other large items. And you could also borrow for smaller purchases, but it was your local grocer, jeweler, clothing department store, auto mechanic, etc. who would extend credit instead of using mass-market credit cards. The phrase "put it on my account" is now seldom used, but it once described how much of consumer business was transacted. For example, despite the growing suburbs with supermarkets, a lot of food was still purchased at corner groceries in 1962. You might have a personal relationship with the owner over a period of years and he might carry some of your purchases on credit until a later week or month. Similar business was done with your auto mechanic, drug store, and others. Today we just lump all that onto one or more universal credit cards, handled by some bank that contracts with our more local bank, and we never deal directly with the question of whether a merchant sees us as a good credit risk or not. The old system just cannot work in a world of Walmarts, where the local manager cannot possibly get to know the tens of thousands of different customers who come into his store.
As with many things we’re familiar with today, universal credit cards have their origins in the years surrounding 1962. Larger stores and changes in buying habits brought on by suburbanization and television meant that things were changing throughout the 1950s and 1960s. By 1955, over 100 banks offered credit card plans, but these were limited to local areas. By 1958, American Express, Diners Club and other had created systems where you could charge something, but you had to pay the bill in full next month. There was no interest, and credit did not continue indefinitely. Also in 1958, California’s Bank of America (yes, I know it’s a nationwide bank today, but we’ll talk about that later) mailed 60,000 of their new BankAmericards, featuring pre-approved credit, to residents of Fresno, California. This is the dawn of the bank credit card as we know it. By 1966, MasterCard got in to game, founded as a cooperative of banks who did not want to work within the existing systems. Meanwhile, the BankAmericard was franchised to banks in other states, also beginning in 1966. Administration of this card was taken over by a cooperative of the issuing banks in 1970, and by 1977 it was renamed Visa.
Some of you have debit cards today instead of credit cards. Debit cards were offered early on, as an alternate, but credit became the common method of payment in this country. For reasons no one has quite figured out yet, debit cards became much more popular in European countries such as France, Germany, and Norway. Today these distinctions have blurred somewhat, but we still prefer to borrow now and pay later.
Paper money (and coins) works because a government says that everyone in the country of issue must accept the money as payment for goods and services. The idea of paper money took hold in the 1700s, as a promise by a government to pay you coins (usually gold or silver) if you presented the money to the government. This promise meant that everyone who held the money had the same claim against the government, and thus everyone could value the paper money equally. This fixed the value of all exchanges made with the money and made modern commerce possible without moving large amounts of gold or silver around. Of course, one feature required of such a system is that everyone can recognize what is real and what is counterfeit money. The US continued to back our money with silver while we journeyed in 1962, with the words "Silver Certificate" appearing on the $1 bills we would have seen.
The government is the enforcer for the system, but in recent years our government has muddied the monetary waters by constantly changing the money! Just look at our $20 bill, featuring President Andrew Jackson. He first appeared on the $20 bill in 1928, in a bit of irony because when he left office back in 1837, he cautioned public about paper money in his farewell address. This design was modified slightly several times over the years, and we would have seen the 1950 version. In 1963, the phrase "Redeemable in Lawful Money" is removed because Congress removed US currency from having silver backing. Only minor changes were made until 1998, when the bill received a complete redesign. After only five years, it was completely redesigned again, with colors added.
Coins have been subject to even worse confusion. For example, in 1962, there was exactly one design for a quarter, the Washington quarter, issued since 1934. It contained 90% silver and 10% copper. In 1965, the alloy was changed to the "sandwich" style in use today, in which a core of pure copper is sandwiched between two layers of the alloy cupronickel (75% Copper, 25% Nickel). The design of the faces stayed the same but the silver was gone, just as it also disappeared as backing for our bills. In 1999, the popular 50 states designs began to be issued and it’s only become more complex since. Today, we even have multiple designs for the penny!
I briefly mentioned that Bank of America was a California bank, and that you probably dealt with a local bank in 1962. The past 30 years of fairly continuous bank mergers, buyouts, and outright federal takeovers have significantly changed where your money is accounted for. Ohio, on our travel route, is home to one of America’s giant banks today: Fifth Third Bank. A look at the history of just that one bank will give a good picture of what’s happened since 1962. The precursors of today’s Fifth Third Bank were organized in Cincinnati, Ohio way back in 1858 and 1863. A few years later, one of these banks, Third National Bank, bought the other. The resulting bank merged with the local Fifth National Bank in 1908, and thus was born the unusual name of Fifth Third Bank. Unlike a great many banks in the United States, this company weathered the Great Depression and even purchased the assets of other failing Cincinnati area banks from 1930 through 1933. Things remained fairly stable though our 1962 era, so we would not have seen any Fifth Thirds on US-23: it was too far from Cincinnati, and Fifth Third was still just a local bank there.
But they went on an expansion spree in the 1980s. They began purchasing local banks farther away, with the Fayette County Bank, in Ohio. By 1985 Fifth Third went interstate, buying American National Bank, of Newport, Kentucky. They expanded to Columbus, Ohio later that year by creating a new Fifth Third Bank of Columbus. Fifth Third continued expansion by buying up local banks in Ohio, Kentucky, and Indiana throughout the late 1980s. In 1990, they leap-frogged several states and opened a new bank in Naples, Florida. Fifth Third came to a second city along US-23, reaching Toledo, by purchasing First Ohio Bancshares in 1989. Chillicothe came next, with purchase of a bank there in 1993. Fifth Third Bank also grew during the Savings & Loan disaster of 1993, when the US government closed hundreds of savings & loan institutions in a somewhat smaller version of our recent mortgage crisis. Fifth Third picked up at least three of these failed institutions. By now a very large retail bank, they decided to change the scope of the company and throughout the late 1990s they purchased commercial mortgage companies, broker-dealers and investment management firms, merchant services and other financial firms. By 2001 you could see Fifth Third offices along US-23 in Michigan, as they acquired Old Kent Bank there. This also added some offices in the Chicago area. At the other end of US-23, they entered Georgia in 2007 and bought another bank there, in Atlanta, in 2008. Recently, Fifth Third continued expansion during the banking crisis, buying another Florida bank. Today you can find one of their branches almost anywhere along our route.
As I noted above, there was no giant Fifth Third Bank anywhere along US-23 in 1962. In fact, there were only local banks; hundreds of them. Many of these local banks were also expanding in their market areas, as suburbs grew in the larger towns. But besides banks, there were other local financial institutions. As today, there are credit unions, though credit unions were less of a factor and used to be restricted to specific groups of people as members. And before 1993, there were many ‘savings & loans.’ What was the difference between a bank and a savings & loan? While a bank generally makes all types of financial transactions, a savings & loan specialized in savings deposits and making mortgage and other loans. By law, they were required to have at least 65% of their loans as mortgages or other consumer loans. They would not have trust departments, make large-scale commercial loans, and did not borrow directly from the Federal Reserve. Some savings & loans were even mutual associations, similar to credit unions, meaning that the depositors and borrowers were members with voting rights. Savings & loans were not allowed to offer checking accounts until the late 1970s, so if we made deposits in one during 1962, we would have required a bank account to write checks. Various other laws were changed during the 1980s and the savings & loan disaster saw many of these institutions dissolved or merged by the government in the early 1990s. There are still a few around today, but the number is few and they operate nearly the same as commercial banks.
I think it would be interesting to compare what we could get for our money in 1962 vs. 2010, so here’s a few tidbits. For interest rates on personal savings, you could get 4.6% interest then: today you can’t even get 1%! No wonder we could build a space program, interstate freeway system, schools for all the baby boomer children, and whole suburbs full of new homes and stores. We were saving money that was then loaned out to build things. Even if you had enough money to directly buy 10-year US Treasury bonds as an investment, today’s rate is only 3.22%, compared to the 1962 rate of 3.95%. You make out best by just spending your money now, because you can't afford to invest it! Of course, there are other ways to invest, such as the stock market. On December 29, 1961, the Dow Jones Industrial Average of 30 stocks closed at 731.14. On January 3, 2011 it opened at 11577.43. If you could have bought and held that index, you would surely have made some money! Of course, you couldn’t do that, because index funds that track the Dow didn’t exist back in 1962. You would have had to buy all 30 stocks and rebalance the portfolio over the years as stocks were dropped and added from the Dow. Still, that extra work over those 49 years would have paid off.
That new suburban home I mentioned in 1962 would have had an average cost of $12,500. It would also have had a 30-year home mortgage rate of about 5.8%. In May 2011 it’s 4.77%, so maybe we should resume building new homes, as they cost less to finance today. But, as we are all too aware, gasoline costs a lot more today. It’s easy to see why when the price of a barrel of oil in 1962 averaged $2.85 and in May 2011 it’s selling for $100.69. To use that gasoline, the Chevrolet Impala convertible had a base price around $3275 in 1962. In a lower price range, the 1962 Plymouth-Valiant had a base price of around $2369 for the 4-door sedan. In either case, you would likely have carried a 3-year loan, versus today’s common 5-year loan. And you would have bought the car as personal leasing was not done.
The prices of all common consumer products have changed a lot over the years, too. But, keep in mind that inflation has reduced the value of a dollar a lot since 1962. Using figures from the Bureau of Labor Statistics, something that cost $1 then would cost about $7.29 now. All prices do not inflate evenly, so actual prices today will vary some from that average. I mentioned house and car prices; furniture is another big ticket item. Jerry Leon’s Furniture in Sylvania, Ohio sold an 8-piece maple bedroom set for $159, with low monthly payments of only $7. A new color TV set was $400, which inflation adjusted to $2916 would buy a very large flatscreen set today. A new bicycle cost between $29.99 and $38.88, depending on the accessories. Of course, the median family income was $6000, so everything should be measured against that.
Some of the lower priced, everyday consumables included:
- A dozen eggs at 32 cents.
- A gallon of gasoline at 28 cents: I can’t compare today because the price keeps going up and down too fast!
- First-class postage stamp at 4 cents: today it’s 44 cents.
- Candy bars were 5 cents, as were Popsicles.
- A loaf of bread was 20 cents.
- Ground beef at the supermarket was for 3lbs for $1, today I find it at $2.39 per pound, if I’m lucky.
- Children’s t-shirts, if you hit a sale, could be as low as two for just 69 cents.
- Women’s flats, sandals, and dress shoes for $2 a pair.
- A 45prm record (2 songs) was $1 at S.S. Kresge’s and other dime stores. Today you can get one song as a download for $0.99, essentially double the price.
- A cheeseburger with two patties for 50c at Bill’s Big Burger of Sylvania, Ohio, or get a single McDonald’s hamburger for just 20 cents.
- Go out to the movies for just 50 cents for the ticket, 20 cents for popcorn, and 10 cents for the drink, and get change from your dollar!
- LIFE Magazine was only 20 cents, and MAD only a quarter. LIFE is gone and MAD is $ 5.99 today.
- Of interest to us travelers, Motel 6 started in 1962, and rooms really were only $6 a night!
The Euro currency did not exist in 1962, but the European Common Market, which would later create it, did. Congress passed the Trade Expansion Act as an answer to the growing power of the European Common Market. It began the process of creating a commercial-financial partnership by allowing the president to manipulate tariffs between the US and Europe, to improve trade. The US had a continuing deficit in the balance of payments with foreign countries, and we began to worry about the claims of foreign creditors. Our multi-billion dollar deficit then pales in comparison to today’s annual deficits in trillions of dollars. But, our gold reserves were shrinking as a result. Gold reserves were important back then, as the dollar was officially tied to real gold backing. Between 1959 and 1961, the U.S. Treasury had to finance a high balance of trade deficit through sales of gold to foreign central banks. Today, we simply print more paper or electronic money with no backing. In 1962, the price of gold was $35 per ounce, as officially set by the US government back in 1934. In May 2011, the price is $1527 per ounce and changes daily because gold is freely traded and the dollar is no longer tied to it. Canada fixed its dollar at $0.925 US dollars during 1962, in an attempt to encourage exports and discourage imports. Today the Canadian dollar is priced around $0.977 US. Many countries related to Great Britain used a system of money that was not divided into 100 cents per unit; it instead was set up somewhat like our 16 ounces to the pound system. But change was coming as financial transactions turned increasingly to computers. In 1963, Australia started their change to decimal currency, and introduced it in 1966.
In addition to the President manipulating tariffs, the Federal Reserve manipulated currency exchanges with other countries (they still do). In early 1962, the Federal Reserve began buying and selling foreign currencies. Until that time, the Treasury Department controlled international finance. The program caused concern and the House Banking Committee asked the Treasury to track the Federal Reserve's program. The Wall Street Journal reported on June 12, 1962, that the Federal Reserve was working with the central bank of Switzerland on the next in its series of currency swap agreements. The purpose appears to have been to improve the position of the dollar versus other currencies, but The program may have worked, as by November the Journal reported that the Argentine peso, the Chilean escudo and the Colombian peso all dropped sharply in US dollar valuation.
And finally, there’s a few ways we handle our money today that we could not have done in 1962. We would have had to stop at banks along the way if we needed more cash to spend, because there were no ATMs. The automated teller machine was being developed by several people in the US, Sweden, and Great Britain in the years between 1959 and 1963. Luther Simjian has been credited with developing and building the first cash dispenser. Another model, called a Bankograph, was installed as an experiment in New York City in 1961, but removed after just 6 months. The first overseas versions of an ATM was installed in Tokyo in 1966, and by Barclays Bank in a London suburb in 1967. We also could not use internet banking or Paypal to make purchases, because there was no internet! Cash was king in 1962. Speaking of cash, you remember those coins we took out of our pocket before this discussion? I think I’ll grab a few and get something from a vending machine before resuming my ROADTRIP-'62 ™ travels. Hmmm, I wonder what you could buy in vending machines in 1962?
All photos by the author and Copyright © 2012 - Milne Enterprises, Inc., except as noted.
All other content Copyright © 2012 - Milne Enterprises, Inc.