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; it embraced the gold standard, and demonetized 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.

The U.S. did not actually adopt the gold standard de jure until 1900, following a lengthy period of debate that was made famous by William Jennings Bryan's cross of gold speech at the 1896 Democratic convention. By this time, most major nations had moved to a gold standard. 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.

The act (H. R. 2934) also 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

Finally, the act also ended production of three minor coins, the half dime, the silver Three-cent piece, and the Two-cent piece. None of these were still necessary, and both the half dime and Three-cent piece had been replaced by other coins.

H. R. 2934 was a very lengthy bill written in 67 sections which filled 35 pages in the House Journal on May 27, 1872. When presented to President Grant, he 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 gold-to-silver price ratio to rise. By 1908, the ratio had reached 40:1.[2]

The U.S. government finally capitulated to the pressure from the 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"[3], and the movement became known as Free Silver. The silverite movement took control of the Democratic party in 1896 under William Jennings Bryan. The 1896 and 1900 presidential elections focused on silver and gold, but both times, William McKinley, advocate of gold, won the election. This period is best remembered by the cross of gold speech that was made by William Jennings Bryan at the 1896 Democratic National Convention in Chicago on July 6, 1896, in which he expressed his hope that mankind would not be crucified upon a cross of gold.

Impact on exchange rates[edit]

Canada had already been on the gold standard since 1853, as had Newfoundland since 1865. The new coinage act of 1873 now put the USA onto the gold standard 'de facto', and, as mentioned, it had the effect of depressing the value of silver in relation to gold. As such, silver dollars (worldwide) fell in value against the US dollar, the Canadian dollar and the Newfoundland dollar. This did not affect the Spanish dollar accounts that were being used in the British territories in the Eastern Caribbean because these were merely paper units that were being used in conjunction with sterling coinage at a fixed rate of $1 = 4s 2d. It did however have the effect of making silver dollar coins return to the West Indies. Silver dollars had very much disappeared in the West Indies following the discovery of gold in Australia in 1851. The return of silver dollars to the West Indies after 1873 threatened the gold standard there that had been in operation since 1704, and so by the year 1876, the British West Indies territories began to pass legislation to demonetize the silver dollars. In the Far East and in Latin America, the silver dollars dropped in value against the US unit, and by the year 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, this 2:1 exchange rate continued right up until November 1965 on the eve of the reign of President Ferdinand Marcos.

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