Q. David Bowers
"Adverse conditions were that United States coins did not circulate, and in the depression era from 1812 through 1,820- part of which was during the War of 1812, there was a scarcity, and this continued through 1834. Many complaints were made to the Mint. Most small coins traded in the country were a group of silver and copper pieces including small Spanish-American silver coins, English, French, and Dutch silver pieces, United States fractional silver, and United States copper coins, Spanish pieces were much of the largest element. In 1830 the Senate Finance Committee estimated that the total of Spanish silver in circulation was $5 million. If this figure is added to the Mint reports on coinage in the Treasury reports on recoinage it is possible to estimate that the total circulation of coins below the half dollar was in 1830 less than 25 cents per person, an inadequate amount.
"What people needed was a quantity of clean, new, and uniform small coins. The Mint was turning out half dollars that did not circulate and was doing very little else. The legal tender status of foreign coins was renewed in 1806, 1816, 1819, 1823, 1827, and 1834, and according to each of the laws the legal tender of all foreign coins except Spanish pieces was to expire after three years. However, the language was so confusing that it is difficult to analyze today.
"The law of 1806 specifically declared that Spanish dollars and their fractional parts were full legal tender, but no later law ever referred to the fractional coins. After Mexico and Peru achieved independence the Spanish coinage was continued, but the designs and names were no longer those of Spain. After 1830 Mexican coins predominated over Spanish in the United States, just as the Mexican dollar superseded the Spanish piece of eight in China and the Philippines. But none of the legal tender statutes of the United States ever made Mexican fractional coins legal tender. In 1857 the director of the Mint ruled that no Spanish or Mexican fractional coins were legal tender after 1834. It seems probable that the intention of Congress was to make all of them legal tender. However, it is the impression of many historians that foreign coins of all sorts were legal tender in this period. However, many current gold and silver coins were not included in the legal tender provision. There was no specific mention of any type of fractional coin after 1806.
"From 1810 to the Civil War paper money of state banks were the major element in the currency, with such circulation being two to four times the estimated quantity of coin. There were no domestic coins between the half dollar and the $2.50 gold coin and there was in general circulation no coin of any sort larger than a Spanish dollar. Banks filled the vacancy with notes, mostly in the denominations of $1 and $5.
"The silver coins of Mexico and Spain were in circulation in poor condition and once there were not withdrawn either by redemption, by export, or by recoinage. The Senate report of 1830 said that the entire coin currency was depreciated from 6% to 20%, the smaller coins showing the greater losses. Storekeepers habitually accepted coins in any state of depreciation.
"Foreign terminology was prevalent. Although banks used decimal coins and issued notes in dollars and cents, newspapers quoted prices in shillings and pence up through about 1800, after which dollars predominated. Still, in the early nineteenth century one-real pieces of Spain, worth 12-1/2 cents, were called shillings to New Yorkers. Up through the 1840s and 1850s it was not uncommon to quote the prices of articles in fractions of a cent such as 6-1/4 cents or 37-1/2 cents. The government encouraged the use of Spanish fractions by setting postage rates for certain businesses at 6-1/4 cents, 12-1/2 cents, and 18-3/4 cents.
"Foreign terminology was prevalent. Although banks used decimal coins and issued notes in dollars and cents, newspapers quoted prices in shillings and pence up through about 1800, after which dollars predominated. Still, in the early nineteenth century one-real pieces of Spain, worth 12-1/2 cents, were called shillings to New Yorkers. Up through the 1840s and 1850s it was not uncommon to quote the prices of articles in fractions of a cent such as 6-1/4 cents or 37-1/2 cents. The government encouraged the use of Spanish fractions by setting postage rates for certain businesses at 6-1/4 cents, 12-1/2 cents, and 18-3/4 cents.
"Congress failed to see the simple, obvious, and immediate solution of the problem. At any time from 1792 to 1834 the application of the subsidiary coinage principle to the quarter, dime, and half dime would revolutionize the currency situation. The copper coins were demonstrating in a small way the possibility of fiduciary coinage, and in England there was after 1816 an example of successful subsidiary coinage on a national scale. But members of Congress as a group were not familiar with monetary principles. No director of the Mint or director of the Treasury from 1792 to 1850 recommended a subsidiary coinage or endorsed the English system.
"The House Select Committee on Coins, of which Representative White of New York was chairman, presented a report in 1832 which suggested there could be two standard coins-a $10 gold piece and $1 silver coins. All other coins of both metals were to be subsidiary, heavily reduced in weight and coined from bullion owned by the Mint, thereby giving the government a profit. The subsidiary gold coins which would be legal tender to $10 would yield the government a seigniorage of more than five cents per dollar, and silver coins of the denomination of half dime, dime, quarter, and half dollar would give a seigniorage of about three percent. On February 19, 1834, an expanded and improved bill was introduced. However, nothing came of the idea.
"In 1834 a new substitute bill was introduced, not resembling the other one, which became the law of June 28, 1834. The ratio of the value of gold to silver was set at one to 16.002, valuing gold higher than it should have been, as France, a leading country, had a ratio of 15-1/2 percent to one. Spain had a 16.1 ratio but it was not successful. Gold was thus given a higher value in coinage form than it was on the bullion market. Old gold coins became worth more than $1.05 in terms of the new dollar. As gold was more valuable in American than almost anywhere else, payments from Europe, formerly made in silver were now made in gold. Sovereigns began to arrive in large numbers. Gold from Mexico and South America was coined and put into circulation in large quantity. The output of gold mines in Georgia and North Carolina and Virginia, at least half of which had been shipped abroad as bullion, now went to the mints. While the average annual gold coinage from 1825 to 1834 was about $400,000 and none had gone into circulation, just six months in 1834 after the passage of the act the coinage amounted to $4 million, all of which went into circulation.