The History of Currency, 1252 to 1896 Part 21

This scheme was accepted in its entirety by the Act of 2nd April 1792, with the slight change that the standard of silver was changed from 11/12 to 1485/1664 fine. The silver dollar, therefore, weighed 416 grs.

gross (371-1/4 grs. pure silver); on this basis, at a ratio of 15, the equivalent gold piece would contain 24.75 grs. (371-1/4/25 = 27-3/4).

This was accordingly established as the basis of the gold _eagle_ or ten-dollar piece, which was to contain 270 grs. gross (247.5 grs. pure gold).[19] The Act was followed by another on the 9th February 1793, for regulating the rate of foreign coins. The gold coins of Great Britain and Portugal of their then standard were made a legal tender for the payment of all debts and demands, at the rate of 100 cents for every 27 grs. of their actual weight, those of France and Spain at the rate of 100 cents for every 27-2/5 grains.

For a period the system established in 1792 went on, although the ratio established was prejudicial to gold. But, twenty years after, the natural result arrived in America, as in England, and the circulation of gold was completely extinguished in the States by the unseen withdrawal of the metal.

In obedience to a resolution of the Senate of 3rd March 1817, John Quincy Adams, Secretary of State, produced a report on weights and measures, in which he impugned the correctness of the data on which Hamilton had based his reckoning in 1791.

Two years later, 26th January 1819, a committee of the House reported an ill-considered scheme, recommending a change in the ratio in favour of gold, and the imposition of a heavy seigniorage on silver. On the 1st of March following, the House of Representatives directed the secretary to report such measures as might be expedient to procure and retain a sufficient quant.i.ty of gold and silver coin in the United States.

In this report, in referring to one feature in the previous crisis, namely, the necessity in 1814 for the suspension of specie payments, Secretary Crawford stated that, from the commencement of the war until that event of 1814, a large amount of specie was taken out of the United States by the sale of English Government bills, at a discount frequently of 15 to 20 per cent.

He concluded by suggesting a raising of the value of gold in relation to silver, 5 per cent., implying a ratio of 15.75.

In the report to the House of Representatives, dated 17th March 1832, quite a different statement was made, namely, that there was no export of gold from the United States from 1792 to 1821, and that "there were certainly no indications that gold was rated too low in our standard of 1:15 earlier than 1821, when the English demand commenced."

[Sidenote: UNITED STATES: GOLD EXPORT OF 1820]

The terms of the report of the committee on the currency, which was communicated to the House of Representatives on the 2nd February 1821, must be contrasted with this statement. "The committee are of opinion that the value of American gold compared with silver ought to be somewhat higher than by law at present established. On inquiry they find that gold coins, both foreign and of the United States, have in a great measure disappeared, and from the best calculation that can be made there is reason to apprehend they will be wholly banished from circulation, and it ought not to be a matter of surprise, under our present regulations, that this should be the case.... There have been coined at the Mint of the United States 6 millions of dollars in gold.

It is doubtful whether any considerable portion of it can at this time be found within the United States.... It is ascertained that the gold coin, in an office of discount and deposit of the Bank of the United States in November 1819, amounted to 165,000 dollars and the silver coin to 118,000; that since that time the silver coin has increased to 700,000 dollars, while the gold coin has diminished to 1200 dollars, 100 only of which is American."[20]

The committee proposed a bill in the sense of their report, but for seven years--years of acute commercial crises and distress--no actual step was taken. In November of the following year the subject of the disappearance of gold from the currency was brought before the lower house of Congress by Mr. Lowndes. In December 1828, however, the Senate required the Secretary of the Treasury to ascertain the ratio and to state such alterations in the gold coins as might be necessary to conform those coins to the silver coins in their true relative value.

In his report Secretary Ingham insisted on the advantage of a single standard, but, in case of a determination to maintain both gold and silver, he proposed to approximate as near as could be to the French system by establis.h.i.+ng a ratio of 15.625. In case of no change of the ratio he proposed to discontinue the gold coinage, whenever the premium for gold should exceed 2 per cent.

No action was taken on these reports, nor on the similar proceedings in the two following years, nor very little more on the report which in June 1832 the select committee on coins produced. Part of the instructions given to this committee were "to inquire into the expediency of making silver the only legal tender, and of coining and issuing gold coins of a fixed weight and fineness, which shall be received in payment of all debts to the United States, at such ratio as may be fixed from time to time but shall not otherwise be a legal tender."

In the House of Representatives the converse proposition of a gold standard with a restricted legal tender had been made by M. Wilde, 26th March 1832, but when the report appeared it advocated a silver standard.

[Sidenote: UNITED STATES: THE ACT OF 1834]

While Congress was thus delaying over a vital question the New York bankers, May 1834, pressed for the regulation of the gold coins, so as to retain them in the country.

Two months later, 31st July 1834, the long-sought measure pa.s.sed, but in an extraordinary form. At a blow the ratio was changed from 1:15 to 1:16 (15.988), by the reduction of the weight of the fine gold in the gold coins to 23.20 Troy grains, soon afterwards, by an Act of 18th July 1837, changed to 23.22 grains, the standard being changed at the same time from 11/12 to 9/10 fine.

The motives and amount of wisdom which underlay this sudden close of a long period of agitation can be measured from Benton's own words, in his _Thirty Years' View_:--

"A measure of relief was now at hand, before which the machinery of distress was to balk and cease its long and cruel labours--it was the pa.s.sage of the bill for equalising the value of gold and silver and legalising the tender of foreign coins of both metals. The bills were brought forward in the House by Mr. Campbell H. White of New York, and pa.s.sed after an animated contest in which the chief question was as to the true relative value of the two metals, varied by some into a preference for National Bank paper; 15-5/8 was the ratio of nearly all who seemed best calculated from their pursuits to understand the subject. The thick array of speakers was on that side, and the eighteen banks of the city of New York, with Mr. Gallatin at their head, favoured that proportion. The difficulty of adjusting this value, so that neither metal should expel the other had been the stumblingblock for a great many years, and now this seemed to be as formidable as ever.

Refined calculations were gone into, scientific light was sought, history was rummaged back to the times of the Roman Empire; and there seemed to be no way of getting to a concord of opinion either from the light of science, the voice of history, or the result of calculations.

The author of this _View_ had, in his speeches on the subject, taken up the question in a practical point of view, regardless of history and calculations and the opinions of bank officers; and looking to the actual and equal circulation of the two metals in different countries he saw that this equality and actuality of circulation had existed for above three hundred years in the Spanish dominions of Mexico and South America, where the proportion was 16:1. Taking his stand upon this single fact, as the practical test which solved the question, all the real friends of the gold currency soon rallied to it. Mr. White gave up the bill which he had first introduced, and adopted the Spanish ratio.

Mr. Clowney of South Carolina, Mr. Gillet, and Mr. Cambreleng of New York, Mr. Ewing of Indiana, Mr. McKim of Maryland, and other speakers gave it a warm support. Mr. John Quincy Adams would vote for it, though he thought the gold was overvalued, but if found to be so the difference could be corrected hereafter. The princ.i.p.al speakers against it and in favour of a lower rate were Messrs. Gorham of Ma.s.sachusetts, Selden of New York, Binney of Pennsylvania, and Wilde of Georgia, and eventually the bill was pa.s.sed by a large majority, 145 to 35. In the Senate it had an easy pa.s.sage. Messrs. Calhoun and Webster supported it, Mr. Clay opposed it; and on the final vote there were but seven negatives--Messrs. Chambers of Maryland, Clay, Knight of Rhode Island, Alexander Porter of Louisiana, Silsbee of Ma.s.sachusetts, Southard of New Jersey, Sprague of Maine. The good effects of the bill were immediately seen. Gold began to flow into the country through all the channels of commerce, old chests gave up their hordes, the Mint was busy; and in a few months, as if by magic, a currency banished from the country for thirty years overspread the land and gave joy and confidence to all the pursuits of industry."

The panacea thus magnificently lauded soon proved itself worse than inefficient. The ratio was too high, and the silver dollars could not be maintained. They were unduly exported, especially between the years 1848 and 1851. And in order to retain within the country a sufficient amount of small coin the amount of silver in the small coins, from the half-dollar downwards, was reduced by an Act of 24th February 1853. It was at the same time provided that they should be coined only on Government account, and they were made legal tender only up to the sum of five-dollars.

The direction of this step will be seen at a glance--it was in the direction of the gold valuation. This is as plainly the case as it was in the Latin Union, already exemplified (p. 190). Further, it was so conceived and explicitly stated by Dunham, who piloted the bill through the House. "We have had," he said, "but a single standard for the last three or four years. That has been and now is gold. We propose to let it remain so, and to adapt silver to it, to regulate it by it." Legally, the old silver dollar was left untouched, and the gold and silver valuation was not expressly abolished. No reference whatever was made to the silver dollar in the Act, for the simple reason that for years nothing had been seen of them. They did not and could not circulate.

There was plenty of gold, and the absence of silver with the change in standard therein practically implied was either unnoticed, or regarded, if at all, only with indifference.

The final step in the simplification and unification of this system was commenced in 1870, when a bill was prepared for a revised coinage law with a pure gold standard, silver being demonetised as a legal tender money. The bill did not become law till 12th April 1873. And no opposition was expressed in either the House of Representatives or the Senate to the abolition of the double standard. The silver dollars previously coined (of which, however, but few were in existence) maintained their quality as legal tender; but the coining of new dollars, whether on Government or private account, was forbidden.

[Sidenote: UNITED STATES: THE LEGISLATION OF 1873-74]

This Act was therefore simply the complement of the preceding legislation of 1853.

The completion of this system thus established was provided in section 3586 of the Revised Statutes of 1874, by which the silver coins of the United States were declared legal tender only up to five dollars, thus completing, from December 1873 onwards, the demonetisation of silver, and the establishment of gold monometallism on the English plan. As an effective scheme it meant little because of the prevalence of paper.

Within a very short time of the pa.s.sing of this bill, however, began the great change in the relative value of the precious metals which has continued since. The silver-producing interest, at that moment on the eve of receiving an enormous accession of strength by the Nevada finds, made itself heard. At the same time the prospect of the resumption of cash payments brought an additional incentive and interest. A commission to investigate the question of standard was therefore appointed, 14th August 1875, and a majority of this commission recommended the establishment of the double standard. Thereupon Bland, one of the members of the commission, proposed in the House of Representatives the re-establishment of the double standard, at the old ratio of 1:15.988, with free coinage of silver.

The question of resumption was pressing near. On the 1st January 1879 the States were to return to cash payments. On what basis should that return be effected? Should the Act of 1873 be maintained, or should a return be made to the bimetallic system which had prevailed before then?

The Government was of the former opinion; the majority of Congress of the latter.

The silver party, finding the measure could not be carried over the veto of the president, agreed to a compromise, under which the free coinage clause was dropped, and it was as a compromise that the Bland Act so-called, the "Act to authorise the coinage of the standard silver dollar, and to restore its legal tender character," pa.s.sed on the 28th February 1878.

To the favourers of a gold system it was conceded that in the maintenance of the previous legal ratio of 15.988, the silver dollar should be reserved for Treasury reckonings, and a maximum minting limit of 4 million dollars monthly should be fixed. The bimetallists gained the fixing of a minimum limit of 2 million dollars monthly of silver coinage, and the clause enjoining the President of the United States to take steps for the meeting of an international conference.

[Sidenote: UNITED STATES: BLAND AND SHERMAN ACTS]

This scheme became law immediately, and on the 1st January 1879 the United States resumed specie payment. As far as the actual circulation of the country is concerned this return is only nominally effective. The habit of employing redeemable paper had grown too strong and continuous, and even the rule of the New York banking-houses, to employ only gold in clearing-house settlements, has been formally, though not absolutely, abolished by the Act of Congress of 12th July 1882, which provided that no national bank should be a member of a clearing-house at which gold and silver certificates were not accepted in payment of balances. The Bland Bill deceived the hope of both parties, as such a compromise might be expected to do. It remained in force, notwithstanding, till August 1890, and during the twelve years, 1878-1890, the United States coined a matter of 370 million silver dollars, employing therein 9 million kilogrammes of silver--a third of the total contemporary production.

Almost yearly, up to 1887, the repeal of the silver purchase clauses of the Bland Bill and the suspension of the silver coinage was recommended to Congress by presidential message, and in the reports of the Secretary of the Treasury.

In December 1889 President Harrison and Secretary Windam definitely proposed to cease the coining of silver, and to limit the issues of silver certificates to the value of the silver bullion as deposited, reckoning that value at its then market price. From these proposals sprang, by the same peculiar process of committee gestation which had produced the Bland Act, the compromise which pa.s.sed on the 14th July 1890, under the t.i.tle of the Sherman Act.

This act represents a compromise not of principles but of self-seeking interests. The main regulations of the law, which came into force on the 13th August 1890, were:--

1. The Secretary of the Treasury is to purchase silver to not more than the monthly amount of 4,500,000 oz. at the market price, so long as that price is below 129.29 cents per oz.

2, 3. To issue Treasury notes against the purchases, the said notes to be full legal tender, and capable of forming part of bank reserves.

5. Up to 1st July 1891, 2 million oz. monthly of this silver to be coined into dollars. That coinage to cease after the date specified, except so far as necessary to secure the Treasury notes. At the same time the Act declares the intention of the American Government to preserve the parity of gold and silver.

The fillip given by this legislation to the price of silver was over in a moment, and almost immediately the question recurred for pressing consideration, on the strong demand of the silver party for free coinage in place of these as yet ineffectual purchase schemes. The impotent close of the international monetary conference at Brussels, in February 1893, was followed by the Act of the Governor-General of India in Council of June 26th closing the Indian Mint to the free coinage of silver. Left practically alone in her stand in defence of silver, America, in the simple interest of her gold reserve, was obliged to abandon the field, and after a bitter fight the repeal of the clauses of the Sherman Act, which had enacted the compulsory purchase of silver, was carried in November 1893.

[Sidenote: UNITED STATES: COINAGE 1793-1893]

We are too near the event to estimate these later developments of the situation, but as yet two remarkable facts have hinged upon this report--(1) the immediate depreciation of the value of silver and the effect on the export of silver to India were not such as might _a priori_ have been conjectured; (2) the ceasing of the silver purchase deprived the currency of the United States of its only remaining element capable of expansion, and of all the countries of the world the United States stands most in need of an expanding and expansible currency.

COINAGE OF THE MINTS OF THE UNITED STATES.[21]

+--------+---------------+--------------++--------+---------------+---------------+ | Years. | Gold | Silver || Years. | Gold | Silver | | | (Dollars). | (Dollars). || | (Dollars). | (Dollars). | |--------+---------------+--------------++--------+---------------+---------------+ | 1793-5 | 71,485.00 | 370,683.80 || 1813 | 477,140.00 | 620,951.50 | | 1796 | 77,960.00 | 77,118.50 || 1814 | 77,270.00 | 561,687.50 | | 1797 | 128,190.00 | 14,550.45 || 1815 | 3,175.00 | 17,308.00 | | 1798 | 205,610.00 | 330,291.00 || 1816 | ... | 28,575.75 | | 1799 | 213,285.00 | 423,515.00 || 1817 | ... | 607,783.50 | | 1800 | 317,760.00 | 224,296.00 || 1818 | 242,940.00 | 1,070,454.00 | | 1801 | 422,570.00 | 74,758.00 || 1819 | 258,615.00 | 1,140,000.00 | | 1802 | 423,310.00 | 58,343.00 || 1820 | 1,319,030.00 | 501,680.70 | | 1803 | 258,377.50 | 87,118.00 || 1821 | 189,325.00 | 825,762.45 | | 1804 | 258,642.50 | 100,340.50 || 1822 | 88,080.00 | 805,806.50 | | 1805 | 170,367.50 | 149,388.50 || 1823 | 72,425.00 | 895,550.00 | | 1806 | 324,505.00 | 471,319.00 || 1824 | 93,200.00 | 1,752,477.00 | | 1807 | 437,495.00 | 597,448.75 || 1825 | 156,385.00 | 1,564,583.00 | | 1808 | 284,665.00 | 684,300.00 || 1826 | 92,245.00 | 2,002,090.00 | | 1809 | 169,375.00 | 707,376.00 || 1827 | 131,565.00 | 2,869,200.00 | | 1810 | 501,435.00 | 638,773.50 || 1828 | 140,145.00 | 1,575,600.00 | | 1811 | 497,905.00 | 608,340.00 || 1829 | 295,717.50 | 1,994,578.00 | | 1812 | 290,435.00 | 814,029.50 || 1830 | 643,105.00 | 2,495,400.00 | +--------+---------------+--------------++--------+---------------+---------------+

+--------+---------------+--------------++--------+---------------+---------------+ | Years. | Gold | Silver || Years. | Gold | Silver | | | (Dollars). | (Dollars). || | (Dollars). | (Dollars). | |--------+---------------+--------------++--------+---------------+---------------+ | 1831 | 714,270.00 | 3,175,600.00 || 1863 | 22,445,482.00 | 809,267.80 | | 1832 | 798,435.00 | 2,579,000.00 || 1864 | 20,081,415.00 | 609,917.10 | | 1833 | 978,550.00 | 2,759,000.00 || 1865 | 28,295,107.50 | 691,005.00 | | 1834 | 3,954,270.00 | 3,415,002.00 || 1866 | 31,435,945.00 | 982,409.25 | | 1835 | 2,186,175.00 | 3,443,003.00 || 1867 | 23,828,625.00 | 908,876.25 | | 1836 | 4,135,700.00 | 3,606,100.00 || 1868 | 19,371,387.50 | 1,074,343.00 | | 1837 | 1,148,305.00 | 2,096,010.00 || 1869 | 17,582,987.50 | 1,266,143.00 | | 1838 | 1,809,765.00 | 2,333,243.40 || 1870 | 23,198,787.50 | 1,378,255.50 | | 1839 | 1,376,847.50 | 2,209,778.00 || 1871 | 21,032,685.00 | 3,104,038.30 | | 1840 | 1,675,482.50 | 1,726,703.00 || 1872 | 21,812,645.00 | 2,504,488.50 | | 1841 | 1,091,857.50 | 1,132,750.00 || 1873 | 57,022,747.50 | 4,024,747.60 | | 1842 | 1,829,407.50 | 2,332,750.00 || 1874 | 35,254,630.00 | 6,851,776.70 | | 1843 | 8,108,797.50 | 3,834,750.00 || 1875 | 32,951,940.00 | 15,347,893.00 | | 1844 | 5,427,670.00 | 2,235,550.00 || 1876 | 46,579,452.50 | 24,503,307.50 | | 1845 | 3,756,447.50 | 1,873,200.00 || 1877 | 43,999,864.00 | 28,393,045.50 | | 1846 | 4,034,177.50 | 2,558,580.00 || 1878 | 49,786,052.00 | 28,518,850.00 | | 1847 | 20,202,325.00 | 2,374,450.00 || 1879 | 39,080,080.00 | 27,569,776.00 | | 1848 | 3,775,512.00 | 2,040,050.00 || 1880 | 62,308,279.00 | 27,411,693.75 | | 1849 | 9,007,761.50 | 2,114,950.00 || 1881 | 96,850,890.00 | 27,940,163.75 | | 1850 | 31,981,738.50 | 1,866,100.00 || 1882 | 65,887,685.00 | 27,973,132.00 | | 1851 | 62,614,492.50 | 774,397.00 || 1883 | 29,241,990.00 | 29,246,968.45 | | 1852 | 56,846,187.50 | 999,410.00 || 1884 | 23,991,756.50 | 28,534,866.15 | | 1853 | 39,377,909.00 | 9,077,571.00 || 1885 | 27,773,012.50 | 28,962,176.20 | | 1854 | 25,915,962.50 | 8,619,270.00 || 1886 | 28,945,542.00 | 32,086,709.90 | | 1855 | 29,387,968.00 | 3,501,245.00 || 1887 | 23,972,383.00 | 35,191,081.40 | | 1856 | 36,857,768.50 | 5,142,240.00 || 1888 | 31,380,808.00 | 33,025,606.45 | | 1857 | 32,214,540.00 | 5,478,760.00 || 1889 | 21,413,931.00 | 35,496,683.15 | | 1858 | 22,938,413.50 | 8,495,370.00 || 1890 | 20,467,182.50 | 39,202,908.20 | | 1859 | 14,780,570.00 | 3,284,450.00 || 1891 | 29,222,005.00 | 27,518,856.00 | | 1860 | 23,473,654.00 | 2,259,390.00 || 1892 | 34,787,222.50 | 12,641,078.00 | | 1861 | 83,395,530.00 | 3,783,740.00 || 1893 | 56,997,020.00 | 8,802,797.30 | | 1862 | 20,875,997.50 | 1,252,516.50 || | | | +--------+---------------+--------------++--------+---------------+---------------+

[Sidenote: UNITED STATES: MOVEMENTS OF METALS, 1851-1893]

IMPORT AND EXPORT OF THE PRECIOUS METALS INTO AND FROM THE UNITED STATES.

+------------------------------------------------------------------+ | Gold and Silver. | +--------------------------+-------------------+-------------------+ | | Import (Dollars). | Export (Dollars). | +--------------------------+-------------------+-------------------+ | Yearly average, 1851-55 | 5,151,817 | 39,432,522 | | " 1856-60 | 10,385,770 | 59,589,841 | | " 1861-63 | 24,112,923 | 43,611,777 | +--------------------------+-------------------+-------------------+

+-----------------------------------------------------------------+ | Gold. | +-------------------------+---------------------------------------+ | | Import (Dollars). | Export (Dollars). | +-------------------------+-------------------+-------------------+ | Yearly average, 1864-70 | 11,117,584 | 58,757,484 | | " 1871 | 6,883,561 | 66,686,208 | | " 1872 | 8,717,458 | 49,548,760 | | " 1873 | 8,682,447 | 44,856,715 | | " 1874 | 19,503,137 | 34,042,420 | | " 1875 | 13,696,793 | 66,980,977 | | " 1876 | 7,992,709 | 31,177,050 | | " 1877 | 26,246,234 | 26,590,374 | | " 1878 | 13,330,215 | 9,204,455 | | " 1879 | 5,624,948 | 4,587,614 | | " 1880 | 80,758,396 | 3,639,025 | | " 1881 | 100,031,259 | 2,565,132 | | " 1882 | 34,377,054 | 32,587,880 | | " 1883 | 17,734,149 | 11,600,888 | | " 1884 | 22,831,317 | 41,081,957 | | " 1885 | 26,691,696 | 8,477,892 | | " 1886 | 20,743,349 | 42,952,191 | | " 1887 | 42,910,601 | 9,701,187 | | " 1888 | 43,934,317 | 18,376,234 | | " 1889 | 10,284,858 | 59,951,685 | | " 1890 | 12,943,342 | 17,274,491 | | " 1891 | 45,298,928 | 79,187,499 | | " 1892 | 18,165,056 | 76,735,592 | | " 1893 | 73,280,575 | 80,010,633 | +-------------------------+-------------------+-------------------+ | Silver. | +-------------------------+-------------------+-------------------+ | Yearly average, 1864-70 | 5,469,798 | 16,818,279 | | " 1871 | 14,382,463 | 31,755,780 | | " 1872 | 5,026,231 | 30,328,774 | | " 1873 | 12,798,490 | 39,751,859 | | " 1874 | 8,951,769 | 32,587,985 | | " 1875 | 7,203,924 | 25,151,165 | | " 1876 | 7,943,972 | 25,329,252 | | " 1877 | 14,528,180 | 29,571,863 | | " 1878 | 16,491,099 | 24,535,670 | | " 1879 | 14,671,052 | 20,409,827 | | " 1880 | 12,275,914 | 13,503,894 | | " 1881 | 10,544,238 | 16,841,715 | | " 1882 | 8,095,336 | 16,829,599 | | " 1883 | 10,755,242 | 20,219,445 | | " 1884 | 14,594,945 | 26,051,326 | | " 1885 | 16,550,627 | 33,753,633 | | " 1886 | 17,850,307 | 2,954,219 | | " 1887 | 17,260,191 | 26,296,504 | | " 1888 | 15,403,189 | 28,027,949 | | " 1889 | 18,678,215 | 36,689,248 | | " 1890 | 21,032,984 | 34,873,929 | | " 1891 | 27,910,193 | 28,783,393 | | " 1892 | 31,450,968 | 37,541,301 | | " 1893 | 27,765,696 | 47,463,399 | +-------------------------+-------------------+-------------------+