Coinage Act of 1873

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Caricature from Puck magazine, 1900.

The Fourth Coinage Act or Mint Act of 1873 was enacted by the United States Congress to demonetize silver. Western mining interests and others who wanted silver in circulation years later labeled this measure the "Crime of '73"[1]. Gold became the only metallic standard in the United States, hence putting the United States de facto on the gold standard.

Legislation[edit]

H. R. 2934 was a lengthy bill, written in 67 sections which filled 35 pages in the House Journal on May 27, 1872. It ended the purchase of silver at a statutory price, as well as the production of the silver dollar, although it authorized a "trade dollar" intended for foreign commerce. It also ended production of three minor coins, the half dime, the silver three-cent piece, and the two-cent piece. Both the half dime and three-cent piece had been replaced by other coins.

The act placed the United States Mint within the jurisdiction of the United States Department of the Treasury, and specified four United States mints at Philadelphia, San Francisco, Carson City, and Denver, and two assay-offices at New York and Boise City, Idaho.

text of the Coinage Act of 1873

President Grant promptly signed it into law on February 12, 1873.

Political results[edit]

As countries abandoned silver and bimetallic standards in favor of gold, the supply of silver not being used for coinage increased. Coupled with the fact that more silver was being discovered, this caused the world's silver-to-gold price ratio to fall.

The U.S. government eventually capitulated to the pressure from western mining states and agreed to the Bland-Allison Act of 1878, which directed the Treasury to purchase silver at a high price. It was replaced in 1890 by the Sherman Silver Purchase Act. The Bland-Allison Act (named for Richard P. Bland, DMo., and William Allison, RIowa) required the U.S. Treasury to buy between $2 million to $4 million of silver per month at about double the market value, with a ratio of silver to gold at 16:1. President Grover Cleveland forced the repeal of these laws in 1893, which ruined his popularity among many Democrats.

After 1893, Western miners and wheat and cotton farmers rallied to the silver cause with the slogan the "Crime of '73"[2], and the movement became known as Free Silver. The silverite movement took control of the Democratic Party in 1896 under the campaign of Democratic presidential candidate William Jennings Bryan.

The politics of the 1896 and 1900 presidential elections focused on silver and gold, as exemplified by the "Cross of Gold" speech made by Bryan as a nominee at the 1896 Democratic National Convention in Chicago on July 6, 1896. Bryan expressed in populist terms the hope that common people would not be oppressed by a bank- and creditor-friendly adoption of the gold standard, which he symbolized as being "crucified upon a cross of gold." Bryan clinched the nomination in 1896, but lost the election to the Republican candidate, William McKinley, an advocate of gold. Bryan was re-nominated in 1900 to once again challenge McKinley, but was once again defeated.

The U.S. did not actually adopt the gold standard de jure until 1900. By this time, most major nations had moved to a gold standard. By 1908, the silver-to-gold price ratio had reached 40:1.[3] The only major nation that continued on the silver standard into the 20th century was China. China and Hong Kong abandoned the silver standard in 1935.

Impact on exchange rates[edit]

Silver dollars (worldwide) fell in value against the US dollar, the Canadian dollar and the Newfoundland dollar. Canada had already been on the gold standard since 1853, as had Newfoundland since 1865.

The change in exchange rates did not affect the Spanish dollar accounts used in British territories in the Eastern Caribbean because these were paper units used in conjunction with sterling coinage at a fixed rate of $1 = 4s 2d. However, silver dollar coins, which had largely disappeared in the West Indies following the discovery of gold in Australia in 1851, returned to circulation, threatening the gold standard which had been in effect since 1704. By 1876, British West Indies territories began to pass legislation to demonetize the silver dollars.

In the Far East and in Latin America, silver dollars dropped in value against the US unit. By 1900, they had dropped to exactly one half of their pre-1873 gold value. The Mexican peso, the Philippine peso, and the Japanese yen were now worth only 50 US cents. In the Philippines, the 2:1 exchange rate continued until November 1965, on the eve of the reign of President Ferdinand Marcos.

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