THE UNITED STATES' SILVER EXPERIMENT.

61. By the coinage revision act of February 12, 1873, the silver dollar of 412% grains of standard silver was dropped from the list of coins to be executed at the mints.' Little attention was then given to this fact for two reasons. The first was that, at the time, neither gold nor silver was in use as money in the United States-where for more than a decade depreciation of the paper currency had driven specie out of circulation. The second reason was even more important. For forty years the silver dollar had been at a premium as compared with gold, and

The coinage act of 1873 provided for the coinage of a "trade dollar" of 420 grains of standard silver. This was never intended for circulation in the United States, but was designed for use in the trade with China and the East. The coin was really intended to be only an ingot of a particular weight and fineness to compete with the Mexican dollar in the Eastern trade. The cost of coinage was borne by the person bringing the bullion to the mints for coinage. It appears, however, that unintentionally the trade dollar was made a legal tender to the amount of five dollars equally with subsidiary coins. By 1876 silver had fallen in value to such an extent that the 420 grains in the trade dollar were worth less than $1.00 in gold. It thus came about that on the Pacific coast, where coin was in circulation, there was a profit in putting these trade dollars into circulation, and considerable amounts of them were so used. This called attention to their status, and the legal tender quality which they had possessed was taken away by the act of July 22, 1876.

In the Eastern states, where the currency was a depreciated paper, it was not until 1877 that the trade dollar became worth less than $1.00 in currency. When this occurred, however, large numbers of trade dollars appeared in circulation throughout the East whereupon their further coinage was discontinued by order of the Secretary of the Treasury.

Before this, however, $35,959,360 had been coined, and although most of them had been exported, considerable numbers were scattered over the country. Congress by the act of March 3, 1887, which became a law without President Cleveland's signature, provided for the redemption at par of all those presented within six months. Speculators had reimported some of them from China in the expectation that this would be done, and with those gathered up throughout this country, $7,689,036 were presented and redeemed.

These have since been melted and converted into subsidiary silver coin and into standard silver dollars. In the coinage of standard silver dollars, 4,365,631.12 ounces of trade dollar bullion, costing the United States $5,020,361.61, were used being coined into $5,078,472.

even before the legal-tender paper had displaced both metals, the silver dollar had long been too valuable to circulate as money. In the entire 81 years since the establishment of the mint, only 8,031,238 silver dollars had been coined—and most of these for use by jewelers or for exportation. People had long since ceased to use in the payment of debts silver dollars worth $1.03 to $1.05 in gold, and much more in currency.

A few years later, however, when those who had opposed the resumption of specie payments, and had favored the continuance of the legal-tender paper upon a depreciated basis, found themselves temporarily vanquished, the fall in the price of silver by 1876 appeared to open another way to a cheaper dollar. The forces of paper money inflation joined those of "the friends of silver," and under the guise of reëstablishing a coinage system which had long existed, renewed the fight for cheap money. In 1876 the current had turned strongly in this direction. Numerous bills for the free coinage of silver were introduced into Congress and discussed.

A bill providing for the free coinage of the old silver dollar of 4121⁄2 grains of standard silver (3714 grains of fine silver) was passed by the House of Representatives, December 13, 1876, by a vote of 167 to 53, but was not acted upon by the Senate. A similar measure introduced by Mr. Bland of Missouri was again passed by the House on November 5, 1877, by a vote of 163 to 34. In the Senate the bill was reported from the Committee on Finance by Senator Allison with important amendments, the chief of which was the abandonment of the free coinage provision, and the substitution therefor of a section requiring the Secretary of the Treasury to purchase and coin each month not less than $2,000,000 and not more than $4,000,000 worth of silver bullion. The standard silver dollars coined therefrom were to be full legal tender for all debts public and private, "except where otherwise expressly stipulated in the contract." Certificates of denominations not less than $10 were authorized to be issued against deposits of the coined dollars. The act passed the Senate on February 15, 1878, by a vote of 48 to 21, and though unsatisfactory to the silver men in

the House, was accepted by them as the best they could hope to get at that time. The measure was returned by President Hayes on February 28 with a veto message expressing his objections. On the same day the House passed it over his veto by a vote of 196 to 73, and the Senate by a vote of 46 to 19.

62. Under this act the purchase of silver bullion and the coinage of silver dollars were at once resumed, the amount of silver actually purchased being kept by each Secretary of the Treasury practically at the minimum, $2,000,000, per month. The following table shows the purchases of silver under this act in each fiscal year and the coinage of standard silver dollars therefrom:

AMOUNT, COST, AND AVERAGE PRICE OF SILVER PURCHASED UNDER THE ACT OF FEBRUARY 28, 1878, AND COINAGE OF SILVER DOLLARS THEREFROM.

In spite of the steady purchases of silver by the United States, which took from the market every year more than 250

some

"At the date of the passage of the act of February 28, 1878, there was son three million ounces of silver bullion on hand that had been purchased to provide a Bullion Fund, as required by Section 3545 of the Revised Statutes. There was also a balance of bullion purchased under the act of January 14, 1875 (The Resumption Act), for the subsidiary silver coinage. A part of this bullion was used in the manufacture of silver dollars, which will account for the number coined in excess of what the quantity of silver bought under the act of February 28, 1878, would produce.”— Letter of Director of the Mint, February 8, 1898.

times the average annual coinage of silver by the United States mints in the eighty years before 1873, the price of silver continued to fall. The bullion value of the silver dollar, which was about 90 cents when the act was passed, fell to 88 cents in 1881, to 82.3 cents in 1885, and to 72.3 cents in 1889.

63. It was soon found that there was no demand for more than 30,000,000 or 35,000,000 of silver dollar pieces in circulation as coins. But the provision for the issue of certificates made it possible for some time to force this stream of silver into the channels of circulation without serious difficulty, because, owing to the price of bonds, the national bank circulation began about this time to contract.

The banks, however, were not partial to the new currency, and objected to the use of silver or silver certificates in their clearing-house transactions; and though legislation in 1882 made it impossible for the banks thereafter to formally refuse to accept the silver or certificates for clearing-house balances, as a matter of fact in the larger clearing houses silver has not been used. Nor have the banks cared to carry any large proportion of their reserves in silver or silver certificates.

As the first certificates were not issued in denominations below $10, the Treasury soon found it difficult to force into the channels of circulation paper representing the $2,000,000 or $2,500,000 which were being coined each month. Consequently, an embarrassing amount of silver and paper representing it began to accumulate in the Treasury in spite of the most persistent efforts to force it out, involving the payment of express charges on vast sums in the years 1882-1886. In 1885 the Treasury inaugurated the policy of retiring the $1 and $1 United States notes in order to make a vacuum in the circulation to be filled by silver dollars. During the fiscal year 1886, the amount of United States notes of $1 and $2 outstanding was

I In this effort to force the silver dollar into circulation considerable expense has been incurred. An appropriation act of August 7, 1882, directed that the Secretary of the Treasury should transport, free of cost, silver coin when requested to do so by an applicant depositing an equal amount of coin or currency. Similar provisions have been contained in subsequent appropriation laws. Under this legislation the cost of transportation, down to the end of the fiscal year 1897, was $1,064,106.

reduced by $14,439,000. In the same period the silver dollars in circulation increased $13,998,000. Meanwhile the accumulation of silver in the Treasury had grown from $39,000,000 in 1884 to $64,000,000 in 1885, and to $93,000,000 in 1886,' at which time over half of the large available cash reserve in the Treasury was in silver dollars.

In 1886, the Treasury, for its protection against the threatening danger that it would itself have to accept and care for the entire further coinage of silver dollars, secured the enactment of legislation permitting the issue of silver certificates in denominations of $1, $2, and $5. By the use of these certificates it has since been possible to keep in actual circulation, irrespective of the bank reserves, the larger part of the silver coinage. There were on November 1, 1897, $372,838,919 of silver certificates outside of the Treasury. Of these only $31,593,302 were held (October 5, 1897) by the national banks, leaving $341,245,617, in circulation in other channels. From this temporary settlement in 1886 of the vexatious question of the disposition of the silver coinage, matters moved more smoothly until 1890. As the larger certificates were replaced by others of smaller denominations which were more easily absorbed into circulation, less silver dollars and certificates were forced on the government through payment for customs, and the troublesome accumulation in the Treasury melted away.

64. In 1890, however, the silver advocates saw an opportunity to go further, and the result was the act of July 14, 1890, commonly known as "the Sherman Act." This directed the Secretary of the Treasury to purchase monthly 4,500,000 ounces of silver bullion, to be paid for in Treasury notes redeemable in coin. Until July 1, 1891, 2,000,000 ounces per month were to be coined into standard silver dollars; after that date, only so much "as may be necessary to provide for the redemption of the Treasury notes" was to be coined. Under this act the amount of silver bullion purchased, the cost of the same, and the amount of silver dollars coined therefrom, are shown in the following table:

See Appendix I.

Act of August 4, 1886; see Appendix I.