Q. David Bowers
The Coinage Act of 1853
Finally, in the winter of 1852-1853, Congress tackled the question of the monetary system as an entity. Treasury officials, officers of the Mint, and key congressmen understood with great clarity that the trime had led the way to a clear understanding of what had to be done. In February 1853 they passed a law which reduced the weights of silver coins from half dime to half dollar (the trime was brought into line with the other coins) while the dollar was left unchanged.
In reality the United States was simply adopting a system pioneered by Great Britain in 1816, following the end of the Napoleonic Wars. The English background was well known, but little talked about because of the always contentious Irish problem. Congressmen with large Irish constituencies could ill afford widespread discussion on this topic. The U.S. version did differ in certain respects from the British model, notably the retention of the dollar as a full-valued coin.
The reduction in weight for the minor silver coinage was only 6.9%, and there was a question in Congress if this was enough. However, there was also the political problem of reducing the weight too much; counterfeiting would have reared its ugly head had the difference between actual and face value been too great.
For political reasons Congress retained the dollar with the same pure silver content as had existed since 1792. There was certainly no economic or monetary justification for this action, as the silver dollar had never circulated widely anyway. (The gold dollar circulated heavily beginning in 1849, showing that the public would use coins of this denomination so long as they were not too bulky to carry around; the gold coin was criticized as being too small and too easily lost, however. In 1854 Director Snowden ordered Engraver Longacre to make new larger master dies for the gold dollar.)
It may also be that the silver dollar was retained as a sort of flagship for the silver coinage. Everyone understood that silver dollar coinage would be low so long as the current glut of gold continued, and there was certainly no one who believed that gold output would suddenly shrink.
The law specified that, for the first time since the creation of the Mint in 1792, depositors of silver bullion could no longer receive small silver coins in exchange for their metal. The depositor could obtain silver dollars for bullion but had to pay a coining fee (0.5%) for the privilege. However, as the metal contained in the silver dollar was, in the 1850s, worth more than face value, there had to be very special reasons for merchants or banks to need such coinage.
Because Congress realized that too many silver coins might be made, there was a provision in the 1853 law which stated that minor silver coins could be paid out by the Mint only for gold. In this way the marketplace itself would regulate how much silver was needed. The idea was well-suited to the American economy and, had it been adhered to, would have proved out in practice. Unfortunately, Philadelphia Mint officials ignored this provision.
Beginning in the spring of 1853 the Philadelphia Mint, strongly aided by the branch at New Orleans, turned out large numbers of subsidiary' silver coins. In 1853 alone, under the new reduced standard, roughly 50 million coins were struck for a public that quickly took most of them into the marketplace. There was also hoarding at, first, because many people did not believe that the new system would actually work and thus laid aside coins for another silver famine. Later they spent them. The tangible result to numismatists today: though 1853 coins with arrows are common in lower grades, they are rarely seen in Mint State.
In June 1853 James Ross Snowden had become director of the Mint following the death of his predecessor, Judge Thomas Pettit, who had served for less than two months, for reasons that are not entirely clear at present, Mint officials in May 1853 (just before Snowden became director decided to, circumvent the law requiring silver minor coinage to be paid out for gold only. They began to purchase silver bullion (ingots, coins, etc.) with subsidiary silver coin, at artificially high prices. This brought in a flood of bullion, with resulting high mintages.
Perhaps the illegal policy was justified for 1853, in order to produce great amounts of coinage within a relatively short period, but it was not a good idea in following years. Yet Snowden, believing that silver coins should be produced in large quantities as long as possible, kept the illegal system going, on his own authority. The country became flooded with minor silver coins. Even those who had hoarded the initial issues of 1853 turned them loose, adding to the excess.
The Late 1850s
By 1856 merchants and banks were complaining about too many, coins clogging the marketplace. Only a, few years earlier there had been virtually no silver coinage to be seen. It was famine to feast, and not everyone was happy with the banquet table. It was not until early in 1858 that the Treasury forced the Mint to adhere to the spirit and the letter of the 1853 law.
The source of the bullion for the heavy minor silver coinages of 1853-1857 is a thorny question. Part of it came from deposits of small, Spanish or Mexican silver coins that had formed a great part of coinage used in this country for decades. These Coins had not been bought up by bullion dealers nor had they been exported by merchants, as they were more trouble than they were worth to gather up. When the Flying Eagle cents were issued in 1857 and 1858 a considerable quantity of old Spanish silver was exchanged for the new cents. This continued, well into 1861 with the Indian Headcents as well.
Another part of the deposits must have come from the silver dollars struck in the 1840s; there was a profit to be made and some of these coins appear to have been melted in the 1850s. Most of the bullion, however, probably came from imports.
The political decision over the status of the dollar, which really satisfied no one, led to several at" tempts over, the next 20 years to abolish the denomination. Mint directors; in particular, urged this course of action on the Treasury and Congress but nothing was done until 1873,- when a new law abolished several denominations, including the silver dollar.
If is not generally realized, but the law of 1853 also' established a de facto gold standard in the United States. Because the minor silver coins were now struck on government account and paid out only for gold, silver had effectively been demonetized and was no longer a standard of value, The dollar was therefore anomalous in the system, as depositors could still bring silver to the mints and get silver dollars in exchange after paying the one half percent coining fee.
As long as the dollar did not circulate, the gold standard was in practical operation, but not legally. In 1873, by which time the silver dollar had begun to be coined in significant numbers because of the silver surplus, Congress took the only realistic option and abolished the standard silver dollar denomination. This clearly shows, that the intent in 1853 was for a show coinage of dollars and that the gold standard was the real intent. Had war not intervened in 1861, the rising surplus and large coinages of 1859-1860 would almost certainly have forced this same action within three or four years.