Coinage Act of 1853 (United States)

Coinage Act of 1853 (United States)

The Coinage Act of 1853 nudged the United States closer to single monetary standard based upon gold. It provided for the coinage of subsidiary silver coins to support small transactions without endangering the precedence of gold as the preeminent monetary metal.

The conditions that spurred Congress to approve the Coinage Act of 1853 grew directly out of the Coinage Act of 1834. That act had decreased the gold metal content of gold coins relative to face value, drawing gold to the mint for coinage at the expense of silver. At United States mint prices, 16 ounces of silver matched in value an ounce of gold, more ounces of silver than was needed to purchase an ounce of gold on the free market. The flow of silver to the mint fell to a trickle, and speculators melted down silver coins and sold them for bullion.

The proponents of the Act of 1834 had foreseen that the act would lift gold to preeminence as the primary monetary standard, and that overvalued gold coins would drive undervalued silver coins out of circulation. They did not anticipate that the disappearance of the small denomination silver coinage would impose a hardship on retail businesses. Under the pre–Civil War coinage system, the mint struck the gold eagle, gold half eagle, and gold quarter eagle in face values of $10, $5, and $2.50, respectively. In silver coinage the mint struck the silver dollar, the half dollar, the quarter, the dime, and half dime. Ten dimes had the same silver content as a silver dollar. As speculators sold silver coinage for bullion, merchants and consumers stood without the coinage to settle minor transactions.

The Coinage Act of 1853 reduced the silver content of the half dollar, the quarter, and the dime and half dime, but left the silver content of the silver dollar untouched. The silver content of a silver dollar remained at 371.5 grains of pure silver, but a dollar’s worth of half dollars, quarters, dimes, and half dimes dropped to only 345.6 grains of pure silver, about a 7 percent reduction. The Treasury continued to stand ready to accept unlimited amounts of silver for coinage into silver dollars, but the act authorized the Treasury’s purchase of only limited amounts of silver to mint subsidiary coinage, that is, half dollars, quarters, dimes, and half dimes. The act gave the Treasury the authority to decide the amount of silver to purchase for subsidiary coinage, an amount that would necessarily be less than holders of silver would want to bring to the Treasury at overvalued prices. The purpose of the act was to maintain gold as the primary monetary metal while furnishing the public with a subsidiary silver coinage. Theoretically, the United States remained on a bimetallic standard because silver dollars enjoyed a legal-tender status, but in practice no silver dollars were coined.

The act provided that subsidiary coinage was legal tender for amounts up to $5.00, raising issues that would surface later when the government made paper money legal tender. A flavor of how antagonistic feelings ran on this issue is echoed in the remarks of the bill’s major opponent, Andrew Johnson, later vice president, and then president upon the death of Lincoln.

I look upon this bill as the merest quackery—the veriest charlatanism—so far as the currency of the country is concerned. The idea of Congress fixing the value of currency is an absurdity, notwithstanding the language of the Constitution—not the meaning of it. If we can by law make $107 out of $100, we can by the same process make it worth $150. Why, Sir, of all the problems that have come up for solution, from the time of the alchemists down to the present time, none can compare with that solved by this modern Congress. They alone have discovered that they can make money—that they can make $107 out of $100. If they can increase it to that extent, they can go on and increase it to infinity, and thus, by the operation of the mint, the government can supply its own revenues.

(Watson, 1970)

The Coinage Act of 1853 achieved its purpose. Small coinage increased in circulation, and after 1857 foreign coins were no longer legal tender in the United States. After the outbreak of the Civil War, all metallic coinage went into hiding, and the United States turned to an inconvertible paper standard. In the last quarter of the nineteenth century, the battle between gold and silver was fought anew before the United States settled firmly on a gold standard, without even the pretence of a bimetallic standard based upon gold and silver.