Chapter XXII

OUR COINAGE BEFORE AND AFTER THE WAR. But Little Coin in Circulation in 1869--General Use of Spanish Pieces--No Mention of the Dollar Piece in the Act of 1853--Free Circulation of Gold After the 1853 Act--No Truth in the "Demonetization" Charge--Account of the Bill Revising the Laws Relative to the Mint, Assay Offices and Coinage of the United States--Why the Dollar was Dropped from the Coins--Then Known Only as a Coin for the Foreign Market--Establishment of the "Trade Dollar"--A Legal Tender for Only Five Dollars--Repeated Attempts to Have Congress Pass a Free Coinage Act--How It Would Affect Us--Controversy Between Senator Sumner and Secretary Fish.

At the date of the passage of the act "to strengthen the public credit," on March 19, 1869, there was but little coin in circulation in the United States except gold coin, and that was chiefly confined to the Pacific coast, or to the large ports of entry, to be used in payment of duties on imported goods. Silver coins were not in circulation. The amount of silver coined in 1869 was less than one million dollars and that mainly for exportation. Fractional notes of different denominations, from ten to fifty cents, were issued by the treasury to the amount of $160,000,000, of which $120,000,000 had been redeemed, and $40,000,000 were outstanding in circulation or had been destroyed. These fractional notes superseded silver coin as United States notes superseded gold coin. The coinage laws as they then existed were scattered through the laws of the United States from 1793 to 1853, and were in many respects imperfect and conflicting.

The ratio fixed by Alexander Hamilton, of fifteen ounces of silver as the equivalent of one ounce of gold, was, at the time it was adopted, substantially the market ratio, but the constant tendency of silver to decline in relative value to gold had been going on for years and it continued to decline, almost imperceptibly perhaps, and the legal ratio in France having been fixed at fifteen and a half to one, there was an advantage in shipping gold to that country from this, and consequently very little if any of our gold, even if coined, came into circulation. By the act of 1793 foreign coins were made a legal tender for circulation in this country, and the Spanish silver dollar, on which ours was founded, with the 8th or "real" pieces, found great favor. Singularly enough, in Mexico and the West Indies, the Spanish population would exchange their dollars for ours, dollar for dollar, although their pieces, if not worn, were each three grains heavier. This led to an exchange of our dollars for the Spanish ones, which were promptly recoined at the mint at a fair profit to the depositor.

This put upon the government the expense of manufacturing coins with no advantage. The evil grew so great that in 1806 the further coinage of our silver dollars was prohibited by President Jefferson, in an order issued through the state department, as follows:

"Department of State, May 1, 1806. "Sir:--In consequence of a representation from the director of the Bank of the United States, that considerable purchases have been made of dollars coined at the mint for the purpose of exporting them, and as it is probable further purchases and exportations will be made, the President directs that all the silver to be coined at the mint shall be of small denominations, so that the value of the largest pieces shall not exceed half a dollar.

"I am, etc.,
"James Madison.
"Robert Patterson, Esq., Director of the Mint."

The coinage of the silver dollar at our mint was not resumed until 1836. The small and worn Spanish pieces, being legal tender, also drove from circulation our fractional coins coming bright and plump from the mint. Bank notes and these worn pieces furnished the circulation of the country.

The condition of the currency became so objectionable that in 1830 the subject was taken up by a special committee of the House of Representatives, appointed for the purpose. Three reports were submitted, in one of which the committee stated that of $37,000,000 coined at our mints only $5,000,000 remained in circulation. A bill was submitted to the House fixing the ratio at 15.625 to one, and was strongly urged. There appeared no special opposition to the measure for a time, but the feeling of opposition to the circulation of bank bills had become very strong among the people and was reflected by the administration.

In the Senate the opposition to bank bills was headed by Thomas H. Benton, who openly advocated so changing the coinage ratio that gold would circulate to the exclusion of the notes, and perhaps incidentally of silver also. The matter of providing for silver, however, received little attention. The ratio was changed to sixteen to one, John Quincy Adams and Daniel Webster joining with Calhoun and Benton in bringing it about. It was well understood at the time that the operation of this act would banish silver. The object of the change was distinctly stated, especially by Mr. Benton, who said:

"To enable the friends of gold to go to work at the right place to effect the recovery of that precious metal, which their fathers once possessed; which the subjects of European kings now possess; which the citizens of the young republics to the south all possess; which even the free negroes of San Domingo possess; but of which the yeomanry of America have been deprived for more than twenty years, and will be deprived forever, unless they discover the cause of the evil and apply the remedy to its root."

By the act of 1834, superadded to by the act of 1837, the ratio of sixteen to one instead of fifteen to one was adopted. The result was that gold coins were largely introduced and circulated; but as sixteen ounces of silver were worth more than one ounce of gold, the silver coins disappeared, except the depreciated silver coin of other countries, then a legal tender. To correct this evil, Congress, on the 21st of February, 1853, provided for the purchase of silver bullion by the government, to be coined by it and not for the owners of the bullion. That was the first time the government had ever undertaken to buy bullion for coinage purposes. It provided for the purchase of silver bullion and the coinage of subsidiary silver coins at the ratio of less than fifteen to one. No mention was made of the dollar in the act of 1853. It had fallen into disuse and when coined was exported, being more valuable as bullion than as coin.

As the value of the minor coins was less that gold at the coinage ratio, they were limited as a legal tender to five dollars in any one payment. They were, in fact, a subsidiary coin made on government account, and, from their convenience and necessity, were maintained in circulation. They were similar to the coins now in use, revived and re-enacted by the resumption act of 1875.

It was not the intention of the framers of this law to demonetize silver, because they were openly avowed bimetallists, but it limited coinage to silver bought by the government at market price. They saw, in this expedient, a way in which silver could be more generally utilized than in any other. Mr. R. M. T. Hunter, an avowed bimetallist, in a report to the United States Senate, said:

"The mischief would be great indeed if all the world were to adopt but one of the precious metals as the standard of value. To adopt gold alone would diminish the specie currency more than one-half; and the reduction the other way, should silver be taken as the only standard, would be large enough to prove highly disastrous to the human race."

He evidently did not consider the purchase of silver bullion at its coinage value by the government, instead of the free coinage of silver, as monometallism.

After the passage of the act of 1853, gold in great quantities, the produce of the mines of California, was freely coined at the ratio of sixteen to one, and was in general circulation. If, then, the purchase of silver, instead of the free coinage of silver, is the demonetization of silver, it was demonetized practically in 1834, and certainly in 1853, when the purchase of silver and its use as money increased enormously. In 1852 the coinage of silver was less than $1,000,000. In the next year the coinage of silver rose to over $9,000,000, and reached the aggregate of nearly $50,000,000 before the beginning of the Civil War. Then, as now, the purchase of silver bullion led to a greater coinage than free coinage.

This was the condition of our coinage until the war, like all other great wars in history, drove all coins into hoarding or exportation, and paper promises, great and small, from five cents to a thousand dollars, supplanted both silver and gold.

When, therefore, it became necessary to prepare for the coinage of gold and silver to meet the requirements of the act of 1869, "to strengthen the public credit," it was deemed by the treasury department advisable to revise and codify the coinage laws of the United States. Mr. Boutwell, then Secretary of the Treasury, with the assistance of John Jay Knox, deputy comptroller, afterwards comptroller, of the currency, and the officers of the mints of the United States, prepared a complete code of the coinage laws. It was submitted to experts, not only to those in the treasury but also to all persons familiar with the subject. The bill was entitled, "An act revising and amending the laws relative to the mint, assay offices, and coinage of the United States."

The law, tested by experience, is conceded to be an excellent measure. A single provision of the bill has been the subject of charges and imputations that the silver dollar was, in a fraudulent and surreptitious way, "demonetized" by this act. There is not the slightest foundation for this imputation. The bill was sent to me as chairman of the committee on finance, and submitted to the Senate with this letter:

"Treasury Department, April 25, 1870. "Sir:--I have the honor to transmit herewith a bill revising the laws relative to the mint, assay offices, and coinage of the United States, and accompanying report. The bill has been prepared under the supervision of John Jay Knox, deputy comptroller of the currency, and its passage is recommended in the form presented. It includes, in a condensed form, all the important legislation upon the coinage, not now obsolete, since the first mint was established, in 1792; and the report gives a concise statement of the various amendments proposed to existing laws and the necessity for the change recommended. There has been no revision of the laws pertaining to the mint and coinage since 1837, and it is believed that the passage of the inclosed bill will conduce greatly to the efficiency and economy of this important branch of the government service.

"I am, very respectfully, your obedient servant,
"Geo. S. Boutwell, Secretary of the Treasury.
"Hon. John Sherman,
"Chairman Finance Committee, United States Senate."