Changes in the Coinage

Prices did fall very slightly in 1834 as -compared with 1833, taking them over 80 articles, but some advanced, and the fall on none was great. The aggregate amount of loans and of circulation in the country increased steadily all these years.* I have not been able to find any statement of the loans of 1833, but the circulation, even of the United States Bank, was not contracted in 1834, and, taking the whole number of banks, there was an increase. The business of the country was increasing quite as rapidly, and it is impossible to ascribe the fluctuations of prices to the sole action of the currency. The fears, real or manufactured, of a crisis on the winding up of the national bank, account for the decline which took place. CHANGES IN THE COINAGE. By the law of 1789 the exchange of sovereigns (IT of a guinea) for American coin was fixed at $4.44^. It is not known how this ratio was determined. The old exchange of a Mexican dol* See table, p. 107.

104 HISTORY OF AMERICAN CURRENCY. lar was 4s. 6d. sterling, but Gallatin says that there was no specimen of that coin which was worth this estimate. The coinage law under which coins were first struck in 1794 and 1795 fixed the ratio of gold to silver at 1 to 15, the silver dollar being 416 grains, 371.25 grains pure, and the gold dollar 27.0 grains, 24.75 grains pure, the alloy counting for nothing. The actual rate of gold to silver was at that time different in different countries, but in England it was 15.2 to 1. Gold was therefore underrated in the coinage, and it was easier for a debtor to get silver to the amount of one dollar than gold to the amount of one dollar. Silver accordingly became the real measure used, and gold bore a premium. The contents of a sovereign are 113.001 grains (full weight 123.274), supposing it to be up to standard, 916? in the 1000 fine. Our mint, in 1839 and again in 1863, declared it to assay only 916.5 in the 1000. At the ratio of 15.2 to 1, 371.25 grs. pure silver would be equal to 24.424 grs. pure gold, and a sovereign would be worth $4,626 of American silver. In American gold the same coin would be worth $4,565. In 1831 GalHISTORY OF AMERICAN CURRENCY. IC>5 latin took 15.6 to 1 as the existing ratio in England, at which rate a sovereign was worth $4.75 in our silver. The difference between the coinage rating and the true value of the metals was thus greater in 1830 than in 1795, and gold was at a premium, on the average, in 1830, of five per cent, selling price.

The figures above given show the par of the coins grain for grain, but coins are worth more than bullion, being manufactured, that is, an ounce of gold in coin must buy more goods than an ounce of gold in bullion. The difference is the cost of manufacture. Gallatin says that it took two months to coin bullion left at the mint, which involved a loss of one per cent, interest. There was no seigniorage or charge for coining. In England there was no seigniorage, and the loss of interest was represented by the difference between the mint price of bullion, £$ J7S- *o\d. per ounce, and the market price, which was then generally £3 ijs. 6d.,* that is, it cost 4~d. to get an ounce coined. If coins are exported they lose * Since 1844 the Bank is obliged by law to give its notes at ^3 17^. 9^ for all bullion offered, reducing the difference between coin and bullion. 5* IO6 HISTORY OF AMERICAN CURRENCY.

the value of their own coinage, and must pay that of the country to which they go. Freight and insurance must also be paid. The cost of coining here being one per cent., the cost of freight etc., one per cent, more, and the cost of English coinapre a slight addition, coin could not be exported unless exchange was a fraction over two per cent, above par. When an American had to pay $4,656 to discharge one pound sterling debt, he would ship gold. He could not ship silver to profit until he had to pay $4,845 for a pound sterling. From 1795 until 1821 exchange was almost always favorable to this country. After 1821 it often ruled adverse. Gold was shipped. The following table from Senate document 290, 1st Ses. 26th Congress, shows the movement from 1824-1833, the gold and silver not having been separated before 1824 in the returns. The figures are in thousands : HISTORY OF AMERICAN CURRENCY. IO7 1824 1825 1826 1827 1828 1829 1830 1831 1832 GOLD BULLION'. SILVER HULLION.

Excess of Imports II.9 IfJI.O IOO.5 82.4 55-9 85-3 104.6 144-5 94.4 21.4 Excess Excess of Excess of jf Ex Imports ports. 34-9 62.5 127.9 199.0 231.0 67.6 Exports. 189,8 229.0 133-5 16.1 Excess of lExces Imports, 'of E.-, ports. 3^9-4 357-9 436-9 4*9-3 422.4 623.2 1,025.1 482.7 480.9 297.8 SILVER COIN. \xcess of Excess of Imports. Exports. 998-9 3.127.8 7 478.9 2,612.8 5,553-5 1,102.6 4,438-4 349-3 144.1 The following table shows the amount of both metals coined in the same years, two figures being* omitted : 1824 1825 1826 1827 1828 1829 1830 1831 1832 1833 GOLD. •$93-2 156.3 99-2 131-5 140.1 295.7 643.1 714.2 798.4 978.5 SILVER. $i,752-4 1,564.5 2,002.0 2,869.2 i,575-6 1,994-5 2,495-4 3-175.6 2,579.0 2,759.0 The strong movement of metal to this country IO8 HISTORY OF AMERICAN CURRENCY. is apparent. In great part it was a real transfer of capital. Of all the gold which came in and was coined the Secretary of the Treasury said, 1836, that not over $1,000,000 remained in the country in 1834, "and of that small amount only a very diminutive portion was in active circulation."

The fact is certain that the law of the mint gave the country a silver currency only, and that gold was exported or melted. The par of exchange with Great Britain remained at $4.44, and this being taken as 100, exchange was quoted at 105, 106, etc. These circumstances had attracted attention at various times, and efforts had been made to change the law. Congress, however, hesitated to touch so delicate a matter as the coinage, especially as even experts could not tell accurately what the real ratio of gold to silver was. President Jackson, being determined to introduce 9 a specie currency, the matter was necessarily taken in hand. By an act of June 28th, 1834, the gold eagle was made to weigh 258 grs., standard .899225, that is, its pure contents were 232 grs., or 23.20 grs. to the dollar. Under this regulaHISTORY OF AMERICAN CURRENCY. IOg tion silver was to gold as 16 to i. This ratio was fixed upon in a blaze of exultation about the recent discoveries of gold in North Carolina, which, though known to exist since 1801, had only been developed since 1828, and extravagant hopes were entertained of finding "a. new Peru"

in the mountains of Georgia and the Carolinas. It was thought by some that it would "encourage the miners " to overrate gold in the coinage. In 1837 silver and gold were both made exactly nine-tenths fine, but the pure contents of the silver dollar remained the same as before, the gross weight being reduced to 412.5 grs. The gold dollar now contained 23.22 grs. fine. There were two different dollars after these changes, as much as before. The silver dollar remained as before, but the gold dollar was now worth less than before. The gold dollar had formerly been worth in the silver coinage $1,038, taking the true ratio to be 15.6 to 1, which was asserted by the best authorities to be the true one at that time. The new gold dollar was worth, at the same ratio, in the same coin, 97.5 cts. As before no one would pay a debt with gold dollars, HO HISTORY OF AMERICAN CURRENCY. so now no one would pay with silver dollars.

Silver went out of circulation and became the better metal to export, while, for the same reasons, gold became the better remittance this way. The only silver which could circulate here was that which was worn or clipped until it was not worth more than silver was rated at: in our coinage. All the worn-down Spanish pillar pieces came here, because they had a value here higher than anywhere else in the world. While the mint was coining fine American pieces, scarcely one was to be seen in circulation. The people were obliged to use the smooth shillings, which produced a quarrel at almost every exchange as to whether you could "see the pillars," until somebody "crossed" them, and they sank into unquestionable dimes. They were generally overrated at that. Thus, according to the great principle which has governed our fiscal legislation down to the present time, the discovery of gold in the United States was made, as far as the intention of the legislators could do it, to render gold more expensive to the people of the United States HISTORY OF AMERICAN CURRENCY, m than it had ever been before. The absurdity of attempting* to influence the price of gold must, however, be plain to every one. We might as well attempt to gain time for the American people by passing a law that all clocks should lose an hour a day.

Prices of goods adjusted themselves to the new dollar. The relations of gold to silver and to goods the world over remained unaltered, and the adjustment of values by the exportation of silver and importation of gold went on in spite of all laws. The experiment cost every creditor 2.5 cts. on every dollar due, and the wrong bore immense interest when this action of the government was made a basis of argument, in the legaltender cases, to prove that Congress had the constitutional right to issue legaltender paper, and interfere with existing contracts, because it had already debased the coinage—that is, in the middle of the nineteenth century the United States had committed the greatest wrong charged against the tyrants of the middle ages, and one which no modern despot had dared to repeat, and therefore it had a right to perpetrate H2 HISTORY OF AMERICAN CURRENCY. another folly which is not yet quite so thoroughly exposed.

The pound-sterling, being now reckoned in the current gold of this country, was worth $4.8665, if of full weight and standard. This dollar, 23.22 grains of gold, ninth-tenths fine, remains still the definition of "one dollar" in the United States. Other coinage laws, to be mentioned below, have never touched this. The par of exchange for the sovereign has also remained unchanged, but, as the coinage expenses must be lost by export, light coins which cannot be current in England are sent here as bullion. The mint, in 1863, reported sovereigns worth, when new, $4.8391 ; on the average, $4.8206. The old par $4.44, being retained, actual par was 1.09-^. The Chamber of Commerce of New York petitioned, in 1839, that this system of reckoning might be changed, and the exchange quoted in dollars and cents. This was never done until 1873, and January 1, 1874, the method of quoting 4.86, 4.87, etc., came into use. In 1853 the law imposed a seigniorage of onehalf of one per cent for coining. The par of $4.86 is "ideal." If the sovereign weighed and HISTORY OF AMERICAN CURRENCY, u^ assayed up to this, the seigniorage in this country for recoining would reduce its value to $4.84.

If the cost of transporation was one per cent., no sovereigns could come until they were down to $4.80. If the mint assay is to be taken, they could not come until they were worth only $4.78. For the same reasons American gold coin is worth onehalf of one per cent more in coin than as bullion. This is lost when it is shipped. Shipment costs something over one per cent. Taking these expenses all together at two per cent., if $4,866 of our coin is worth £ii no one will pay more than $4,957 for exchange before shipping. If $4.84, are worth one sovereign, coin will be shipped at $4,936, gold. In 1873 Congress fixed the Custom House valuation of a sovereign at $4.86. It will be seen that while we charge a seigniorage of onehalf of one per cent., the sovereign cannot be worth over $4.84, the old Custom House valuation. This change added onehalf of one per cent, to the invoice valuation of all English goods subject to ad valorem duties.