Simple Liberty  

 

     
   
     

An American Monetary History Timeline

1850 to 1899

Written by Darrell Anderson.

1851

Gold discovered near Bathurst, New South Wales, Australia. The Australian gold rush soon begins, further increasing the aggregate supply of gold with respect to silver. Silver begins to rise in value with respect to gold and as a commodity, thereby contributing to silver circulating losing its currency as a medium of exchange.

March 3, 1851

Volume 9 Statutes at Large, 31st Congress Session II, Chapter 20, pp. 587–591. A legislative act reducing the price of postage to three cents and concurrently authorizing U.S. Mints to produce three-cent coins (section 11). The coin was composed of ¾ silver and ¼ copper with a weight of 12⅜ grains of metal. The weight was purposely divorced from the statutory definition of a dollar in order to keep the coin in circulation rather than be valued more for its bullion and commodity value.

For additional information about the reduction in postage rates, readers should investigate the private American Letter Mail Company founded in 1844 by Lysander Spooner. Spooner penned the treatise The Unconstitutionality of the Laws of Congress Prohibiting Private Mails and proved too competitive for the U.S. postal service. In 1845 the competition motivated a significant reduction in postal rates as well as legislation prohibiting private mail carriers (Volume 5 Statutes at Large, 28th Congress Session II, Chapter 69, pp. 748–752). With the postal monopoly sustained, Spooner and other private carriers were forced out of business.

February 21, 1853

Volume 9 Statutes at Large, 32nd Congress Session II, Chapter 79, pp. 160–161. The legislative act defined the weight of the half-dollar to be 192 grains and established the weight of the quarter-dollar, dime, and half-dime coins proportionally. The act established a three-dollar gold coin and prohibited private silver coinage from being used in treasury actions. The legal tender status of these fractional dollar coins was limited to $5.

The intent was to encourage circulating fractional dollar coinage rather than fractional dollar paper notes as well as divorce the relationship of these fractional dollar coins from the statutory definition of a dollar. The hope was to encourage silver to remain in circulation as a currency. Despite the 1834 act to encourage circulating silver as currency, subsequent gold discoveries negated those efforts by making gold more abundant than silver and essentially removing silver from circulation as a currency. From the 1837 coinage act the statutory definition of a dollar was 412.5 grains of metal, 9/10 pure, containing 371.25 grains of silver. Proportionally therefore, a half-dollar silver coin should contain 206.25 grains of metal and 185.625 grains of silver. Through the 1853 act the metal content of the half-dollar was 192 grains and 172.8 grains of silver.

By statutorily reducing the amount of silver and alloy in the fractional dollar coins to an amount less that what would be proportional with respect to the statutory dollar coin, which effectively made the coin more useful as a token medium of exchange rather than a source of silver commodity, this 1853 act was designed to keep silver in circulation, at least with these fractional dollar coins.

1853

Gold production peaks at approximately 10 times the amount of only twenty years earlier. Silver rapidly disappears from circulation as currency. Gold production would slowly but steadily decline until the 1890s.

1854

U.S. Mint established at San Francisco, California.

December 21, 1854

Volume 11 Statutes at Large, 33rd Congress Session II, Chapter 15, pp. 599–601. An act criminalizing the issuing and circulating within the District of Columbia of notes of less than $5.

February 21, 1857

Volume 11 Statutes at Large, 34th Congress Session III, Chapter 56, pp. 163–164. The act specified the exchange rates of Spanish and Mexican coins. The act required all foreign coins received at the Treasury to be melted and recoined rather than returned to circulation as is, and repealed the legal tender status of all foreign coins. The act stopped minting the half-cent coin and modified the composition of the copper penny with the intent of reducing the minting costs of that coin.

September 12, 1857

1857 Steamship Central America sinks with a million dollars in gold and silver causing the Ohio Life and Trust Company to fail, and sparks the Financial Panic of 1857.

December 23, 1857

Volume 11 Statutes at Large, 35th Congress Session I, Chapter 1, pp. 257–260. Legislators authorize President to issue up to $20 million of interest-bearing Treasury notes. The notes were not issued as legal tender nor declared as such. The notes were intended to be IOUs and evidence of indebtedness.

1859

Gold discovered in Colorado and mining began in earnest. Comstock Lode silver vein discovered.

1860

U.S. political financial debt is approximately $65 million.

June 22, 1860

Volume 12 Statutes at Large, 36th Congress Session I, Chapter 180, pp. 79–80. Legislators authorize President to borrow up to $21 million to redeem Treasury notes. The notes were not issued as legal tender nor declared as such. The notes were intended to be IOUs and evidence of indebtedness.

December 17, 1860

Volume 12 Statutes at Large, 36th Congress Session II, Chapter 1, pp. 121–124. Legislators authorize President to issue up to $10 million of interest-bearing Treasury notes. The notes were not issued as legal tender nor declared as such. The notes were intended to be IOUs and evidence of indebtedness.

April 1861

War Among the States begins.

December 1861

All bankers suspend redemption of bank notes in specie.

February 12, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 20, p. 338. Legislators authorize President to issue up to $10 million of interest-bearing Treasury notes. The notes were not issued as legal tender nor declared as such. The notes were intended to be IOUs and evidence of indebtedness.

February 25, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 33, pp. 345–348. Popularly known as the Legal Tender Act of 1862. A legislative act authorizing the issuance of $150 million non interest-bearing United States notes (commonly referred to as Greenbacks). The act authorized $500 million in interest-bearing bonds (commonly known as 5–20s because they were redeemable in 5 years and paid in full in 20 years).

Although inflationary because of a senseless war and harshly criticized by hard-money theorists, many people overlook the fact that Greenbacks were introduced into circulation interest-free. The primary problem behind Greenbacks was a senseless war.

March 1, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 35, pp. 352–353. Authorized the Secretary of Treasury to issue IOUs to public creditors.

March 17, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 45, p. 370. Popularly known as the Coin Purchase Act. Authorized the Secretary of Treasury to purchase coins with bonds.

July 11, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 142, pp. 532–533. A legislative act authorizing the issuance of $150 million non interest-bearing United States notes.

July 17, 1862

Volume 12 Statutes at Large, 37th Congress Session II, Chapter 196, p. 592. Popularly known as the Postage Currency Act of 1862. An act providing for the issuing of “postage currency” and allowing payments to be made with postage stamps for amounts less than $5 and prohibiting circulation of private currency notes less than $1.

1862

U.S. Mint established at Denver, Colorado, but originally only as an assay office. The California Supreme Court justices decide that Greenbacks cannot be declared legal tender because the state constitution prohibited the use of a paper currency for taxes.

February 25, 1863

Volume 12 Statutes at Large, 37th Congress Session III, Chapter 58, pp. 665–682. Popularly known as the National Currency Act of 1863 and National Bank Act of 1863. An act to provide a national currency. Established National Banking Associations and the office of the Comptroller of the Currency.

March 3, 1863

Volume 12 Statutes at Large, 37th Congress Session III, Chapter 73, pp. 709–713. A legislative act authorizing the issuance of $400 million non interest-bearing United States notes. Authorized the Secretary of the Treasury to issue fractional currency notes less than $1. Imposed a 2 percent annual tax on private bank notes in circulation.

April 22, 1864

Volume 12 Statutes at Large, 38th Congress Session I, Chapter 66, pp. 54–55. The act modified the composition and weight of the one-cent coin and created authority to mint a bronze two-cent coin.

June 3, 1864

Volume 12 Statutes at Large, 38th Congress Session I, Chapter 106, pp. 99–118. Popularly known as the National Currency Act of 1864 and National Bank Act of 1864. Amended the National Bank Act of 1863 and limited issuing Greenbacks to $300 million.

June 17, 1864

Volume 12 Statutes at Large, 38th Congress Session I, Chapter 127, pp. 132–133. Prohibited the sale of gold coin and bullion.

July 2, 1864

Volume 12 Statutes at Large, 38th Congress Session I, Chapter 209, p. 344. Repealed the act of June 17, 1864 prohibiting the sale of gold coin and bullion.

March 3, 1865

Volume 13 Statutes at Large, 38th Congress Session II, Chapter 78, section 6, p. 484. Popularly known as the National Currency Act of 1865. The act amended the National Currency Act of 1864 and imposed a 10 percent annual tax on private bank notes in circulation.

March 3, 1865

Volume 13 Statutes at Large, 38th Congress Session II, Chapter 100, pp. 517–518. The act created a new three-cent coin composed of 75 percent copper and 25 percent nickel.

April 12, 1866

Volume 14 Statutes at Large, 39th Congress Session I, Chapter 39, pp. 31–32. Popularly known as the Contraction Act. Instructed the Secretary of the Treasury to begin retiring Greenbacks from circulation.

May 16, 1866

Volume 14 Statutes at Large, 39th Congress Session I, Chapter 81, pp. 47–48. The act introduced a five-cent coin composed primarily of nickel. The legislation was motivated by investors with significant interests in the nickel industry.

February 4, 1868

Volume 14 Statutes at Large, 40th Congress Session II, Chapter 6, p. 34. Popularly known as the Currency Reduction Suspension Act. Suspended the retiring and cancellation of Treasury notes.

1869

Bank of New York v. Board of Supervisors, 74 U.S. (7 Wallace) 26. Supreme Court justices decided that Greenbacks were securities and not money, but a promise to pay dollars.

Lane County v. Oregon, 74 U.S. (7 Wallace) 76. Supreme Court justices decided that state bureaucrats could not be coercively required by federal legislators to accept Greenbacks in the payment of state taxes.

Bronson v. Rodes, 74 U.S. (7 Wallace) 229. Supreme Court justices decided that Greenbacks were not dollars as defined by statute and that they were only promises to pay dollars.

February 19, 1869

Volume 15 Statutes at Large, 40th Congress Session III, Chapter 32, p. 270. Prohibited using United States notes as security or collateral in any loan made through a national bank association.

March 18, 1869

Volume 16 Statutes at Large, 41st Congress Session I, Chapter 1, p. 1. An act pledging that all United States notes would be (eventually) converted to specie.

1870

U.S. political financial debt is approximately $2.5 billion.

February 1870

Hepburn v. Griswold, 75 U.S. (8 Wallace) 603. The Supreme Court justices declared the legal tender acts of the 1860s unconstitutional under the Fifth Amendment of the U.S. Constitution.

July 12, 1870

Volume 16 Statutes at Large, 41st Congress Session II, Chapter 252, pp. 251–254. Allowed national banking association members to issue up to $1 million in notes redeemable in gold if they possessed federal government bonds as collateral.

1870

U.S. Mint established at Carson City, Nevada.

March 3, 1871

Volume 16 Statutes at Large, 41st Congress Session III, Chapter 124, p. 580. The act provided for the redemption of all minor coinage in aggregate amounts not less than $20.

May 1871

Knox v. Lee, 79 U.S. 457 and Parker v. Davis, 79 U.S. 457. Combined with Hepburn v. Griswold and Juilliard v. Greenman, 110 U.S. 421 (1884), popularly known as the Legal Tender Cases. The Supreme Court justices reversed their decision in Hepburn v. Griswold, and upheld the legal tender status of Greenbacks. The justices decided that the Legal Tender Acts were constitutional and that debtors could repay debts in Greenbacks rather than gold or silver specie as specified by contract.

February 12, 1873

Volume 17 Statutes at Large, 42nd Congress Session III, Chapter 131, pp. 424–436. Popularly known as the Coinage Act of 1873 or Mint Act of 1873 and eventually dubbed “The Crime of ‘73” a few years later when the aggregate silver supply became more abundant and the market price of silver decreased. Originally intended to create a more uniform coinage system because all of the previous legislative acts had created a hodge-podge of coinage, many of which no longer circulated popularly.

The act created a 20 dollar (double-eagle) gold coin and stopped the minting of silver dollars. The act created what would be popularly known as the “trade dollar” (section 15). The trade dollar was intended primarily for use in foreign exchanges rather than domestic, because silver was more popular than gold in some regions of the world, such as the Far East and contained 420 grains of silver rather than the statutory 412.5.

The act repealed all previous statutory acts “inconsistent” with the 1873 act. The effect of this act moved the monetary system from a silver standard to a gold standard (section 14).

The U.S. Mint became a part of the Department of the Treasury.

The apparent reason for removing silver from circulation were reasonable. The 1834 statutory exchange ratio between silver and gold was 16:1, but for many years the commodity value of silver exceeded the statutory currency value. For many years gold had increased as the de facto circulating coin. Silver had therefore ceased circulation as currency and people no longer were bringing silver to the mints for coinage in any significant amounts.

Yet, silver had not disappeared. New silver deposits around the world had recently then appeared. Slowly silver was dropping in market value because of the increased supply. Under the free coinage laws, the Secretary of the Treasury was required to mint all bullion brought to the mints and circulate the coin. The Secretary was not allowed to refuse. Yet, as silver mining continually increased the Secretary simply could not buy that much bullion. Add the fixed statutory 16:1 ratio and depositors received the better deal whenever they sold silver to the mints because agents at the mints paid with gold. This shortage in gold was the real reason for stopping free coinage of silver.

Yet, by statutorily removing silver coin from circulation, the 1873 act significantly impacted the economy because with silver removed from circulation, existing world gold deposits could not maintain the demand for currency. A long-term deflationary cycle followed.

However, so much silver was mined that the market value of silver dropped dramatically and, as a commodity, gold became the more valuable metal. The Mining Act of 1872 encouraged large mining efforts, and with subsequent worldwide silver mining and the ensuing deflationary cycle, Congressional legislators received much pressure to return silver to circulation.

The proximity of that 1873 act and those large silver discoveries largely created the silver controversy that thereafter arose. That the aggregate silver supply had been increasing slowly — thereby causing a drop in market value but nonetheless providing a source for “cheap money” — provided a basis for allegations of political mischief.

The Populist political party rose in part due to the economic pressures felt by Midwest farmers caused by the lack of a circulating currency. Subsequent gold deposit discoveries (mainly Alaska and South Africa) and a new process for mining gold (potassium-cyanide extraction) increased the amount of gold available for coinage and essentially quashed the silver movement. However, the large increase in available gold for circulation was inflationary and felt in the economy for the next several decades.

March 3, 1873

Volume 17 Statutes at Large, 42nd Congress Session III, Chapter 268, pp. 602–603. Specified the exchange rates of certain foreign coins.

September 1873

Jay Cooke and Company fails, igniting the Panic of 1873 and the general depression from 1873 to 1879.

1874

Gold discovered in the Black Hills of South Dakota.

June 20, 1874

Volume 18 Statutes at Large, 43rd Congress Session I, Chapter 343, pp. 123–125. Limited the legal tender status of silver coins to exchanges of 5 dollars. The intent was to create an illusion that silver coins were in circulation while discouraging actual circulation of silver coinage. To discourage dumping silver into the Treasury and encourage the new gold standard, the act imposed a 0.5% fee for converting bullion into coinage.

Limited the amount of Greenbacks to be in circulation at $300 million and modified the title of the June 3, 1864 act to “the national-bank act.”

January 14, 1875

Volume 18 Statutes at Large, 43rd Congress Session II, Chapter 15, p. 296. Popularly known as the Species Resumption Act of 1875. Converted Greenbacks for gold at par.

March 3, 1875

Volume 18 Statutes at Large, 43rd Congress Session II, Chapter 143, pp. 478–479. The act provided for a new but short-lived twenty-cent coin.

July 22, 1876

Volume 19 Statutes at Large, 44th Congress Session I, Joint Resolution 17, section 2, p. 215. The resolution repealed the legal tender status of the “trade dollar.”

February 28, 1878

Volume 20 Statutes at Large, 45th Congress Session II, Chapter 20, pp. 25–26. Popularly known as the Bland-Allison Act of 1878 and Coinage Act of 1878. Through public pressure, primarily members of the Free Silver Movement, who advocated the unlimited coinage of silver, the act restored silver coinage to circulation. That act required the Secretary of the Treasury to purchase at market prices $2 to $4 million worth of silver bullion each month, and to coin the bullion; but the act did not require the coins to placed into circulation — not exactly a return to free coinage. Coins were minted containing the previous 371.25 grains of silver and the act restored the legal tender status of silver coins.

The act introduced for the first time silver certificates. The certificates essentially were receipts acknowledging deposits; were legal tender for the payment of customs, taxes, and all public dues; and were convertible to silver on demand.

Generally silver coins were not placed into circulation for the simple reason that the market price of silver continued to drop. In short, Treasury agents feared that if placed into circulation the coins would be used by people for payments to the Treasury. Indeed, why would people pay in gold when they could pay in “cheaper” silver? Second, placing so much silver into circulation likely would have depleted government gold reserves because gold — the de facto standard — would be used to buy the silver. To avoid depleting gold reserves payments were typically tendered with silver certificates.

The act introduced what would later be known as the Morgan silver dollar.

May 31, 1878

Volume 20 Statutes at Large, 45th Congress Session II, Chapter 146, p. 87. Prohibited the Secretary of the Treasury from retiring additional United States notes.

1879

Colorado silver rush begins.

June 9, 1879

Volume 21 Statutes at Large, 46th Congress Session I, Chapter 12, pp. 7–8. Popularly known as the Subsidiary Coinage Act of 1879. Declared that holders of fractional dollar silver coins could convert those coins into “lawful money” and that all such coins were legal tender for amounts less than $10. The term “lawful money” meant any medium recognized at common law of defined by statute as a medium of exchange.

1880

U.S. political financial debt is approximately $2.1 billion.

February 14, 1880

Volume 21 Statutes at Large, 46th Congress Session II, Chapter 25, p. 66. Allowed members of national gold banks to convert to ordinary an ordinary bank status and provide related banking services.

1882

First gold certificates issued.

1884

Juilliard v. Greenman, 110 U.S. 421. Historically often included when referring to the Legal Tender Cases. Decided that Greenbacks issued during peace time were legal.

1884

The Financial Panic of 1884.

1886

Discovered as early as 1834 by Carel Kruger, gold mining in South Africa began in earnest.

1887

Cyanide extraction process (also known as the MacArthur-Forrest Process) for refining gold improved, thereby reducing the cost of mining and circulating gold. The improved refinement process, along with the increased gold mining in South Africa and subsequent Alaska gold rush, began to substantially increase the amount of gold in circulation as currency, which thereby contributed toward inflating prices in most goods and services experienced world wide throughout the turn of the century.

February 19, 1887

Volume 24 Statutes at Large, 49th Congress Session II, Chapter 396, pp. 634–635. Retired the silver “trade dollar.”

1890

U.S. political financial debt is approximately $1.5 billion.

July 14, 1890

Volume 26 Statutes at Large, 51st Congress Session I, Chapter 708, pp. 289–290. Popularly known as the Sherman Silver Purchase Act of 1890. The intent was to encourage silver coinage into circulation as currency.

Repealed the Bland-Allison Act of 1878. Silver continued to be mined in plenty, thereby dropping the market value further. That act required the Secretary of the Treasury to buy 4½ million ounces of silver every month, purchased with Treasury notes convertible on demand into silver or gold. All acquired silver was to be coined into silver dollars.

1890

The Financial Panic of 1890.

September 26, 1890

Volume 26 Statutes at Large, 51st Congress Session I, Chapter 945, p. 485. Discontinued minting the three-dollar and one-dollar gold coins, and the three-cent nickel coin.

March 1891

The Secretary of the Treasury imposed an excessive fee on the export of gold bars, which encouraged the exporting of gold coin, thereby inducing speculation of a shortage of coinage.

Spring 1893

The Financial Panic of 1893. A general economic depression follows.

November 1, 1893

Volume 28 Statutes at Large, 53rd Congress Session I, Chapter 8, p. 4. Popularly known as the Coinage Act of 1893. After the financial panic of 1893, repealed the Sherman Act. The act did not modify the legal tender status of gold and silver coins, but merely terminated the requirement to purchase silver bullion.

1896

Gold discovered in the Klondike River. The Alaskan gold rush soon begins.

1896

The Financial Panic of 1896.

Finis.

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