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All About the Coinage Act of 1873
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Friday, July 11, 2014

Before the United States settled on paper as the basic form of the dollar, there were many forms of currency used. As the country is a melting pot of various cultures and people from other countries, the U.S. actually used different nations’ currencies throughout the 1700s. But as a result of the Coinage Act of 1873, silver was demonetized and gold became the monetary standard. However, this act caused a lot of uproar among many citizens, including miners. Read on to find out why many citizens considered this government act a crime.

BACKGROUND
º  The United States Mint was created in 1792 to produce circulating coinage in the U.S. The Mint became a part of the United States Department of the Treasury as a provision of the Coinage Act of 1873. The Department of the Treasury produces all coinage, currency and postage stamps within the U.S.
º  Congress decided to pass the Coinage Act of 1873 as many other major nations were adopting gold as their monetary standard. 
º  The Coinage Act of 1873 also eliminated three coins: the half dime, the three-cent piece and the two-cent piece. Many people were not using these coins regularly, so there was no damage done by eliminating them.
º  Production of silver dollars and coins, like the Seated Liberty silver dollar, ceased.


OUTCRY
Numerous people were still heading out west in search of gold at this time. When the act was signed into law, new silver deposits were being discovered in Nevada. So, production of silver in the western states began to increase. But, this production didn’t see a lot, if any, profit because this lead to a decline in the price of silver. While the Civil War ended in 1865, many states still experienced economic downturns. Farmers saw no profits as agricultural prices were declining. Together, farmers and miners joined forces to eliminate the gold standard.

The two groups worked together because miners desired more silver production, along with an increase in the demand for silver, and because of the plummet in agricultural prices. Farmers were simply supporting the movement because they felt if silver were brought back, it could increaser the supply of money in the U.S., which in turn would help the recovery of agricultural goods and prices. Together, they pressed for unlimited coinage of silver at a ratio of 16-1, silver to gold. This ratio was declared because before the Coinage Act of 1873, the U.S. government had coined silver at a ratio of 16-1, meaning there was 16 times as much silver in a silver dollar as there was gold in a gold dollar.

Because more and more silver was being discovered in western states, miners had a surplus of the mineral. With the surplus, the price of silver was going down, and miners weren’t making a profit. Silver miners and producers would have found it beneficial to go straight to the Mint with their goods, rather than try to sell on the market, as the gold-silver ratio had risen above 16-1 during the Coinage Act.


RESULT
Eventually, the government gave in to the demands of the people. In 1878, the Bland-Allison Act was signed. This act required the U.S. Treasury to purchase silver to be put into circulation as dollars and other coins. But, miners and other supporters of silver felt the Bland-Allison Act would not be sufficient in the unlimited coinage of silver. Plus, the government at the time was only purchasing the minimum amount of silver required by the Bland-Allison act.

With attempts at a bimetallic standard going on through the country, the price of silver dropped. Eventually the Sherman Silver Purchase Act was put into law in 1890. There wasn’t unlimited coinage of silver like several people wanted, but rather, this act increased the amount of silver the government was required to purchase. The new requirement was 4.5 million ounces of silver per month.

However, this wasn’t all good news for silver miners and supporters. The precious metal had been extracted in such vast quantities that it was still too high of a supply for such a low demand; the price of silver plunged. By 1895, U.S. mints halted all production of silver coins and banks discouraged people from using silver dollars.

While supporters of silver got what they wanted initially, it wasn’t enough to sustain silver on the market. Then there appeared to be more negatives to having a bimetallic standard in the U.S. than there were positives. Whether or not the Coinage Act of 1873 was actually deemed a crime doesn’t matter; the future of silver money in the U.S. wasn’t going to be sterling.





 
 
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