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UNIVERSITY OF CALIFORNIA



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Deceived
Accessions



ON THE USE OF SILVER



AS MONEY



IN THE UNITED STATES



A DISSERTATION PRESENTED TO THE BOARD OF UNIVERSITY STUDIES

OF THE JOHNS HOPKINS UNIVERSITY FOR THE

DEGREE OF DOCTOR OF PHILOSOPHY




ARTHUR BURNHAM WOODFORD



>r of Economics and Politics, School of Social Economics, New York



BALTIMORE, 1893



PUBLICATIONS OF

THE AMERICAN ACADEMY OF POLITICAL, AND SOCIAL SCIENCE.

No. 96.



ON THE USE OF SILVER

AS MONEY
IN THE UNITED STATES.



AN HISTORICAL STUDY



BY



ARTHUR BURNHAM WOODFORD, PH. D.,

ii

Professor of Economics and Politics in the School
of Social Econemtcsf-New York City.



Sf , O** ,-* V

A PAPER SUBMITTED TO THE
AMERICAN ACADEMY OF POLITICAL AND SOCIAL SCIENCE.



PHILADELPHIA :

AMERICAN ACADEMY OF POLITICAL AND SOCIAL SCIENCE.
1893.



CONTENTS.



PAGE.

Introduction I

Early History of the Mint (1792-1833) .... 3

The Gold Coin Bill of 1834 17

Fractional Silver Coins (1853) 26

Reorganization of the Mint (1873) 31

APPENDIX.

Statement A. List of American Coins .... 44

Statement B. Changes in Gold and Silver Coin . . 45

Statement C. Coinage by Periods since 1792 . . 45

Table I. Gold Coinage by Years 46

Table II. Silver Coinage by Years 49

Diagram I. Gold and Silver Coinage since 1834 . 52
Diagram II. Production of Gold and Silver in the

United States since 1853 53

Table III. Imports and Exports of Silver since 1843 . 54

Table IV. Imports and Exports of Gold since 1843 5^
Table V. World's Production of Gold and Silver

(1492-1880) 58

Diagram III. Annual Production (1873-1891) . . 59
Diagram IV. Ratio of Silver to Gold (1687-1891) .

Diagram V. Value of Ounce of Silver (1833-1892) . 60



TOT

tflriTlBHTY




USE OF SILVER AS MONEY IN THE
UNITED STATES.



INTRODUCTION.

The history of monetary experiences cannot be too often
considered. This consideration is particularly applicable at
the present time to silver in its relation to American coin
currency. Until quite recently silver has been but little
used by the people of the United States as money. Indeed,
it is still practically true that it is only used for change, as
no large bills are issued on the silver reserve. Under exist-
ing law, however, the government is obliged to purchase an
amount of silver nearly, if not quite, equal to the product
of American mines. A new experiment is thus being tried,
the result of which it is exceedingly difficult to predict with
definiteness. An historical study is therefore timely.

The silver question, moreover, is "in politics." It has
even come to occupy a most prominent position, and there has
been developed not only a keen public interest in the philos-
ophy of the bimetallic controversy, of which the silver
question in the United States is but a phase, but a strong
desire for accurate knowledge regarding the history of our
currency.

The free coinage party are practically urging still another
experiment. In considering it and the future currency
policy of the country, and of the world, too frequent refer-
ence cannot be made to the results of the several experiments
in currency legislation which former Congresses have under-
taken. History may afford some light to guide us in
selecting or in avoiding certain courses of action.

The subject has been treated by many writers in recent

(i)



2 ANNAI^S OF THE AMERICAN ACADEMY.

times, either in special treatises,* or in the systematic
text-books on political economy, particularly those by
Andrews, Ely, and Walker. Three international confer-
ences have been held in the vain hope of securing concerted
action by the principal commercial nations. The question
has been made the subject of investigation by Congressional
and by Royal Commission. Yet, in spite of books and
reports, of investigations, prize contests, and the rest,
widespread ignorance remains regarding the prominent and
fundamentally important facts in the history of the use made
of silver as money by the people of the United States ; the
laws which have been passed ; the conditions which gave
rise to these statutes ; and the effect of the various enact-
ments on the circulation of coin throughout the community.
Materials for original study are to be found in the statutes
themselves and in the reports of the Congressional debates
-connected with their enactment, in reports to Congress, in
petitions, and in current financial literature. The reports
of the Silver Commission of 1876 and of the International
Monetary Conferences of 1867, 1878, and 1881 are replete
alike with information and with argument concerning the
relative merits of gold and silver for use either separately or
conjointly as money. Abstract discussion of the advantages
or the dangers of ' ' bimetallism ' ' is not attempted here : it
is the aim of the writer to show the actual use made of silver
as money during the century, by the people of the United
States, and to explain the reasons for that use, in the hope
of correcting false ideas and disseminating a knowledge of the
necessary conditions of bimetallism.

* Sumner, "History of American Currency" (1874); Cernuschi, " Nomisma, or
lyegal Tender " (1877); I,inderman, " Money and I,egal Tender in the United States"
(1877) Weston, "The Silver Question " (1878); Walker, "Money" (1878), and "Money,
Trade and Industry" (1879) ; Bolles, "Financial History of the United States," 3
vols. (1879-1886) ; Knox, " United States Notes" (1884) (third edition 1888) ; Upton,
"Money in Politics" (1884); I^aughlin, "History of Bimetallism in the United
States " (1886) ; Nicholson, "Money and Monetary Problems" (1888); S. Dana Hor-
ton, "Silver in Europe" (1890); Boissevain, " The Monetary Question" (1891);
Cowperthwait, " Money, Silver and Finance" (1892); Ehrich, " The Silver Question"
(1892); Taussig, "The Silver Situation in the United States" (1892).



USE OF SILVER IN THE UNITED STATES. 3

EARLY HISTORY OF THE MINT.

In 1783 Robert Morris presented to the ''United States,
in Congress Assembled, ' ' a specimen American coin. Our
national coinage may be said to date from the making of
this coin.

For several years the matter had been under discussion
and had been made the subject of special reports ; but Con-
gress repeatedly postponed definite action. The report of a
special committee created in 1784, of which Jefferson was a
member, outlined a plan, based on the report of the Super-
intendent of Finance. On July 6, 1785, and August 8,
1786, more definite regulations were made in anticipation of
the creation of a national currency, and finally, on October
1 6, 1786, there was enacted ' * An Ordinance for the estab-
lishment of the Mint of the United States of America and
for regulating the value and alloy of coin," and provision
was made for the employment of proper officers and workmen
in the Mint. This plan, however, was never carried into
execution, as matters of greater importance occupied the
government and the people of the United States. It was not
until after the adoption of the Constitution that the Mint was
established, and it was practically a generation and a half
before a national coin currency came into general use.

In the practical administration of affairs it is often an im-
perative necessity that, with or without the aid of legislation,
the kind of money to be received by the government in pay-
ment of taxes, dues, etc. , shall be determined. When income
does not equal expenditure, it becomes necessary for a gov-
ernment to borrow money. During the Revolutionary War
the Congress of the United States had authorized the execu-
tive officers to borrow dollars. But what is a "dollar?"
No one is disposed to ask this question when the currents of
industry, trade and commerce are flowing smoothly. It is
only in periods of sudden change and uncertain credit, or of
legislative interference with the representative of the money
of account, that doubt arises. In the years following the



4 ANNALS OF THE AMERICAN ACADEMY.

adoption of the Constitution the matter became one of serious
difficulty, requiring for its resolution the careful and disinter-
ested consideration of the statesmen of the period.

In a certain sense it is entirely in the power of Congress
to determine what shall be considered a dollar what shall
be the monetary unit of the country. Every industrially
developed community must have a money of account. It is
at once the evidence and the basis of commercial progress.
It is the condition of trade on a large scale. But the political
power in the State, the statutory law, determines what shall
be the material representative and coin equivalent of the unit
of account, as well as what shall be legal tender in payment
promises of to pay money and in settlement of obligations. By
the Constitution of the United States (Article I., Section 10)
the States are forbidden to ' ' coin money ; emit bills of credit ;
make anything but gold and silver coin a tender in payment
of debts." And by Article I., Sections, clauses, Congress is
given power " to coin money, regulate the value thereof,
and of foreign coin, and fix the standard of weights and
measures. ' ' This power Congress has repeatedly exercised.

When, under the Articles of the Confederation, Con-
gress instructed the Superintendent of Finance to report
a table of rates at which the different species of foreign
coins, most likely to circulate within the United States,
should be received at the Treasury, Morris insisted, by
way of reply, that "In the present moment [1782] it is
by no means of such consequence to establish the relative
value of different coins, as to provide a standard of our own
by which in future to estimate them." His report* was
devoted to an exposition of the dangers and disadvantages
threatening the existing currency and to the presentation of
a plan for improving it. He argued that a uniform currency
was necessary to industrial security and development. Coins
of every description Spanish and English coins, coins of
France and coins of Portugal coins of various values and

* Diplomatic Correspondence, Vol. XII. , p. 81



USE OF SILVER IN THE UNITED STATES. 5

of varying value all were current in different parts of the
country. The pound was the money of account, but most
diverse ideas prevailed regarding pounds, shillings, and pence.
The want of small coin for the common occasions of trade ;
the need of a legal tender to protect both the honest debtor
and the honest creditor ; the disappearance of the depreciated
medium, the Continental currency, with its infinite incon-
venience and danger ; all argued the wisdom of adopting an
American coinage system and of establishing a government
mint. The time appeared opportune. There was a suffi-
cient supply of specie in the country : it needed only to be
recoined into American coins, and this could be done in a
very short time. Above all, the public credit, which was
almost completely broken, would be greatly strengthened.
In the mind of the Superintendent, or of his Assistant,
Gouverneur Morris, who is probably the author of the report,
in the main, the opportunity imposed the duty. Still, for a
decade, Congress took no action.

The conclusive argument, the compelling cause, which
finally brought partial order out of monetary chaos, was
indicated by Hamilton in his report on the ' ' Establishment
of a Mint," January 28, 1791. ''The dollar originally con-
templated in the money transactions of this country, ' ' says the
report, ' ' by successive diminutions of its weight and fineness,
has sustained a depreciation of five per cent. . . . The
value of property . . . fluctuates with the fluctuations
of a foreign mint. ' ' Manifestly there was neither security,
convenience, nor economy in dependence upon a foreign
mint. Depreciation and debasement of our money by acts
of a distant sovereign were not to be tolerated. The Second
Congress, by the Act of 1792, attempted to provide the
means for securing a uniform, convenient, and intelligible
system of national coins.

Perhaps the most important feature of the act establishing
the mint was the provision authorizing the free coinage of both
gold and silver. Both metals were to be coined gratuitously



6 ANNAI^S OF THE AMERICAN ACADEMY.

for all comers, in the order of arrival. The legal step
tending toward bimetallism was taken in this first act regula-
ting the currency. The silver dollar or unit was * * to be of
the value of a Spanish milled dollar ' ' as the same was then
current, "and to contain," continues the statute, "three
hundred and seventy-one grains and four-sixteenths parts of a
grain of pure, or four hundred and sixteen grains of standard
silver."* This unit for silver coins was not that proposed
by Morris one-quarter of a grain of pure silver, with 1440
to the dollar which Jefferson had characterized as too
minute for ordinary use and too laborious for computation.
It was not the unit urged by Jefferson himself, who desired
a single unit both for weight and for money. It was not
entirely the dollar suggested by Hamilton. The pure metal
contained, 371^ grains, was in accordance with his proposi-
tion, and it is interesting, though perhaps not important, to
note that no change has since been made in the weight of
pure metal in silver dollars except for the small number
of trade-dollars coined in the seventies. The gross weight,
416 grains, was that of an average lot of Spanish coins
bearing the date 1761, but then no longer current.

The principles and proposals of Hamilton concerning gold
coins were adopted entire. The gold coins were spoken
of as units or dollars. ' ' A preference, ' ' he says, ' * ought
to be given to neither of the metals, gold or silver." He
was of the opinion that the money unit had virtually been
gold rather than silver, silver dollars having circulated by
tale as a mere money 'of convenience, without much regard
to either weight or fineness ; but he presented what seemed
to him strong reasons for endeavoring to make permanent
the concurrent circulation of both kinds of money. Both
alike were required for home and for foreign trade.

* This most peculiar proportion was not actually adopted by the mint authorities
until 1796, after Congress had repeatedly refused to modify it, and the Director of
the Mint was unwilling longer to disobey the statute. Why this inconvenient
standard, i-M 5 , was first adopted and then forced on the mint, it now seems
impossible to determine.



USE OF SILVER IN THE UNITED STATES. 7

"If gold be most convenient," he said, "in large payments, silver
is best adapted to the more minute and ordinary circulation. . . .
To annul the use of either of the metals as money is to abridge the
quantity of circulating medium, and is liable to all the objections
which arise from a comparison of the benefits of a full, with the evils
of a scanty, circulation."

Hamilton was a practical bimetallist. He aimed to secure
the concurrent circulation of the two metals for commercial
convenience. To-day ' * free coinage ' ' is demanded on the
score of justice as between debtor and creditor. The con-
current circulation of the two kinds of coins proposed is at
least a matter of doubt ; it might or it might not result, by
raising the price of silver to $1.29 per ounce, as is
predicted.

Bimetallism is to be defined either as a state of the law or
a state of the currency. If the latter is accepted as the most
satisfactory definition of the term, the state of the law must
be regarded as merely the means to the end, and practical
bimetallists those who seek the end may and will differ as
to the law which will prove most efficacious under any exist-
ing circumstances. Mr. Bland asserts, and some, perhaps all,
of the men who act with him honestly believe, that concurrent
circulation would result from a law allowing the free coinage
of both metals at the old ratio of 16 to i. Hamilton, a
century since, in considering the state of the currency,
believed that the two kinds of coins would circulate only if
made at the ratio of 1 5 to i . He fully appreciated the diffi-
culties of successfully carrying out the policy of bimetallism,
and the necessary consequence which would follow any con-
siderable underrating of either metal " banishment of that
which is undervalued ; . . . diminution of the total
quantity of specie which a country would naturally possess ;
. . . greater and more frequent disturbance of the state
of the money unit. ' ' He therefore urged that care be taken
to regulate the proportion of pure metal in the two varieties
of coin, " with an eye to their average commercial value."



8 ANNALS OF THE AMERICAN ACADEMY.

Hamilton, placing this market ratio at very near 15 to i,
and believing that this ratio would be permanent, proposed
(i) gold coins, with 24^ grains, and (2) silver coins,
with 371^ grains of pure metal to the dollar,

" The alloy in each case to be one-twelfth of the total weight, which
will make the unit 27 grains of standard gold, and 405 grains of stand-
ard silver. The former," he continues, "is exactly agreeable to the
present value of gold, and the latter is within a small fraction of the
mean of the two last emissions of [Spanish] dollars the only ones
which are now found in common circulation."

The questions before Congress, as enumerated by Hamil-
ton in this report, were the following :

1 . As to the nature of the money unit

2. As to the proportion between gold and silver, if coins
of both metals were to be established

3. The amount and composition of the alloy

4. The amount of seigniorage

5. The number, denomination, sizes and devices of the
coins

6. The currency of foreign coins.

The answer which Hamilton gave to the first and second
of these questions was simply, That the law should recognize
and endeavor to make permanent the conditions of the cur-
rency existing at the time so far as the unit and the concur-
rent circulation of both gold and silver coins were concerned,
and should establish and preserve a standard dollar by the
substitution of national coins for a miscellaneous lot of semi-
international coins with constantly changing values.

These principles were practically those presented by Jef-
ferson in his letter of 1784. In the time intervening after
that report was written Jefferson had studied with care the
practical features of the art of coining as practiced in Kurope,
and had acquainted himself with workers in metal and the
possibilities of securing officials for the Mint. When the
Mint was established, in 1792, it was placed under his
charge in the Department of State. We may conclude



USE OF SII/VER IN THE UNITED STATES. 9

then that, while the outline of our system of currency
was determined by the conditions of colonial trade, its
distinguishing characteristics may be ascribed in about equal
measure to the influence of these three men Morris, Jefferson
and Hamilton.

In the discussion regarding the Mint and the currency
during this early period one seeks in vain for any evidence
of a bimetallic controversy like that of recent times. As a
state of the currency in every way desirable and convenient,
bimetallism was an acknowledged fact. It was accepted not
only as practicable but necessary, and the law which laid
the foundation of our national coinage system was conceived
for the purpose of providing the legal conditions necessary
to its continuance. It had been, and for a long time it
continued to be, an open question whether the expenditure
necessary for the establishment of a government mint would
be a good investment. But when it was determined to
undertake this work discussion seems to have become limited
to the purely practical considerations of convenience in
the coins. Indeed, little more interest was manifested in
the subject, at the time, than during the days of the Con-
tinental Congress. Though the bill was before the Senate
several times between December 21 and January 9, the only
reference to it in the Annals of Congress regards the em-
ployment of officers, the keeping of accounts, and the emblems
to be borne by the coins. The latter subject occasioned
an interesting and an amusing discussion in the House,
and even resulted in a difference between the two Houses.
The Senate had proposed a representation of the head of the
President for the time being, with his name, etc. , but it was
objected that to do this was to incur the danger * ' of imitating
the flattery and almost idolatrous practices of monarchies."
Despite the popular ridicule of the idea of "the people's
being enslaved by their President, and much less by his
image on their coin," the House of Representatives, by a
vote of 24 to 32, refused to recede from its amendment in




io ANNAI^S OF THE AMERICAN ACADEMY.

favor of a design ' ' Emblematic of Liberty . ' ' The Senate
ultimately accepted the amendment, but the character of the
emblem was left entirely to the discretion of the administra-
tion.

April 2, 1792, the Act was approved by President
Washington, who had been authorized the year previous to
engage artists and procure apparatus, and the work of
minting began at once. But the making of coin was a new
industry in this country. The initial difficulties to be
overcome were many and great. Workmen were to be
obtained, and the plant, and the raw material furnished ;
suitable buildings, furnaces, delicate machinery, dies, rollers,
presses, drawing and milling machines were wanted ; and
both materials and tools were lacking, and machinists and
skilled workmen were not easily found. Finally, when the
Mint was ready for work, there was little work to be done.
Coin and bullion were sent in small quantities only, and the
treasury did not provide means for the purchase of bullion.
The expense of refining, much greater then than now, was
at first borne entirely by the government. Again there
were no laws which properly protected the government in
the monopoly of coinage. In the report for 1795, the
Director of the Mint states that mints were erected at Balti-
more and elsewhere, professedly to imitate the coins of
foreign countries and to furnish a debased gold coin for the
West India market. How much minting they did is not
stated.

The minor and technical difficulties relating to methods
of manufacture and management were gradually overcome,
partly with, partly without, the aid of legislation. But the
major difficulty remained : neither coin nor bullion was
offered at the mint with any regularity or in sufficient quan-
tities* to employ the mint officials or to affect appreciably
the coin currency of the country. This lack of material
was at once a cause and an effect of the difficulties

* See American State Papers, Finance, I., pp. 476 and 504.



USE OF SILVER IN THE UNITED STATES. n

encountered. Neither gold nor silver was produced in the
country ; no private interest existed anxious to avail itself
of the privilege of having its product gratuitously manu-
factured by the government ; v neither was there any induce-
ment for individuals to offer foreign money for recoinage
while the foreign coins were convenient and were full legal
tender.

Worst of all, the treasury entirely failed to co-operate
with the mint in the effort to provide a system of national
coins. Even after inquiry on the part of a House Com-
mittee, the secretaries refused compliance with a very
definite provision of the statute, according to which all coin
received by the government officials in the treasury depart-
ment was to be sent to the mint and recoined into American
money before being allowed to pass into circulation again.
It is true that the governmental transactions of receipt and
in many instances expenditure of moneys took place at
distant points. The officials in charge apparently deemed it
unwise to entail the expense of transportation in both
directions. Even the money received in Philadelphia was
not sent to the mint. As late as 1803, the Director of the
Mint reports that no precious metal had been coined on
account of the Government of the United States.

Hamilton had considered three years an ample time for
the conversion of the coin currency of the country. The
average annual net ' ' ordinary ' ' receipts of the government
from 1796 to 1800 were over $8,000,000 an amount cer-
tainly equal to one-half the total alnount of coin in the
country at the time. That the conversion of the coin was
possible within three years is conclusively shown by these
figures ; still the average annual coinage at the mint for the


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