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Early US silver to gold ratio and coin export

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A long-standing dictum has been that early US gold and silver coins were exported due to the use by Congress of an obsolete ratio of silver to gold (~15.6:1).


I was wondering if members had some insights on this? True? False? Mixture or numismyth?


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In theory it took about 15.6 oz of silver to buy one oz of gold. (Right now, it's about 97:1)

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So basically what your stating is that for every 16 silver coins minted, the 17th coin was gold?


No what he means is that under the original Coinage Act of 1792, it was assumed under the bi-metallic system that one part of gold was equal in value to 15 parts of silver. In reality that number was headed toward a ratio of 16 parts of silver were equal to one part of gold. The bottom line was, the original coinage act placed too low of a value of gold relative to silver, or to put it another way the early gold coins continued too much gold relative to their face value.


In the early years, a lot of U.S. gold coins stayed in the U.S. Many of them sat in banks or private savings. Some were shipped abroad where they were usually melted, but enough gold coins remained here to provide a fair number of pieces available for today's collectors.


By the 1820s, however the first U.S. mint became not much more than a smelting operation for merchants who shipped gold abroad to pay for U.S. imports. Virtually entire mintages were whipped out as the mint made gold (ore, scrap, other coins) into coins for depositors who shipped the coins mostly to Europe. If you ever become a collector of early gold coins from the 1820s to early 1830s (The first part of 1834 to be exact.), You will find just how rare these coins are.


In 1834 at the urging of President Andrew Jackson the weight of U.S. gold coinage was reduced to the point where the ratio between silver and gold was set at 16 to 1. As a result the wholesale export of U.S. gold coins stopped, and the pieces were able to have an impact on the domestic economy for the first time.


Of course Jackson was responsible for some less than brilliant economic policies, such as doing away with the Bank of the United States which eliminated that institution as the one force that brought some order to the chaotic state banking system. He also issued the Specie Circular which forced buyers of U.S. land to pay in gold and silver. That caused a flow of gold to the west away from the eastern financial centers which caused a liquidity crisis. Add to that the usual problems of too much debt, some crop failures and lower demand for U.S. goods in Europe and you end up with a major economic depression, the Panic of 1837.


I've run on enough here, but perhaps this will be a start.


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Here is an example of one of the coins that was subject to extensive melting, an 1834 Capped Bust Left Small Diameter $5 gold piece. With a combined mintage of 668,203 one might example that this type which was made from mid 1829 to mid 1834 would not be that tough, but it is. Most of that mintage was melted, and a very limited number of these coins exist today.


Dave Bowers estimates in his type coin book that as many as 750 of these coins still survive. That works out to a survival rate of a little more than one tenth of one percent. I think that even number is too high. John Dannreuther estimated that less than 50 of these 1834 half eagles exist, and this is probably the most common variety.


I think that the design of this coin is kind of ugly, but when it comes to rarity she more than holds her own against some better known "rare" U.S. type coins like the Chain cent and the 1796 quarter.



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Although you've combined gold and silver coins when you shouldn't have, the problem(s) that may have resulted from the mis-valuation of gold and silver certainly was believed to have been true at the time.


To begin with, I heartily recommend Fractional Money by Neil Carothers to anyone who's interested in this subject. His book is almost entirely about coins of 50 cents and smaller, but it is all about how the coins were used in commerce, so he touches on silver dollars and gold coins.


If we limit ourselves to the pre-1835 period only:


The exportation of silver coins seems to have been limited to the practice of exporting silver dollars to the West Indies in exchange at par (one-for-one) for the heavier Pieces of Eight, which were then brought back to Philadelphia to be re-coined into more US silver dollars. At the time, this was perceived to be a sufficient problem that the Mint was directed to stop coining silver dollars.


As one can see from looking at mintages, however, not that many silver dollars were minted before 1804, so this trade couldn't have been all that big. (However, I did see a reference to a letter from one of the Baring family who came to America and participated in this practice at least once, so, although I haven't read the letter, I postulate that this trade did exist.)


As a general matter, silver coins were exported. The Treasury did keep records (imperfect as they are) of the amount of silver and gold that was exported and imported (and, sometimes, in what form).


However, I don't believe that they were exported as a line of business. I have seen several articles in commercial journals of the time that explained how to calculate when it was profitable to export gold, but I've never seen such an article for silver coins. My view is that silver coins were more exported as a form of cash than as a trade good - if a merchant needed hard cash where he was going, he took silver coins (especially to China), but that merchant didn't have a business exporting silver the way he did gold.


Certainly, the people of the time thought that gold was mis-valued, otherwise, why reduce the gold value of the US Dollar in 1834?


However, I think that for anyone to have an informed opinion regarding the export of gold due to an imperfect gold/silver ratio, that one would have to start by gathering statistics on the value of exports and imports of the US of the time, so he would know if the US was a net importer and therefore had to come up with hard cash to pay for those imports.


Next, one would want to know if the US imported more specie than it exported (at least these statistics are available). If the US imported a lot of specie, then we could send it back to pay for imports instead of using US gold coins.


Next, one would want to know the relative amount of gold and silver in the US: did we send gold because we didn't have silver or because gold was mis-valued?


I haven't done this, but perhaps some economist has studied money flows of the early 19th century.


Edited to add: By the way, it's pretty clear that something happened to Old Tenor gold. About $12.1 million of Old Tenor gold coins were minted and only about $1.6 million (13%) was melted and re-coined at the Mint in 1834 and later years.



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Bill & Dave -


Some have said there was little export of gold from the U.S. from 1792 to 1821. Also, gold was paid out in preference to silver by banks until 1821 when England returned to specie payments and increased their demand (and thus the price) for gold.


How do these fit with the posted comments, above, if at all?


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Bill & Dave -


Some have said that there was little export of gold from the U.S. from 1792 to 1821. Also, gold was paid out in preference to silver by banks until 1821 when England returned to specie payments and increased their demand (and thus the price) for gold.


How do these this fit with the posted comments, above, if at all?


I think that it fits quite well.


Large numbers of old U.S. gold coins (1795 to August 1834, went the Coinage Act of 1834 took effect) were melted after the 1834 Coinage Act was enacted. There were almost no domestic coin collectors in those days to save them, and if one took 15 "old tenor" five dollar gold pieces to the mint for re-coinage, they got 16 new five dollar gold coins in return. The pieces minted in the 1820s and first part of the 1830s were exported in large numbers and not returned to the U.S., at least not in their original form as U.S. five dollar gold coins. There was probably more wholesale minting in the U.S. of the later date coins than the earlier pieces, but that still does not account for 99.9% of the mintage getting destroyed.


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Then, does that mean that until 1821, small silver coins were relatively less in circulation than large denomination gold? Thus, the ordinary yeoman farmer or artisan was in continual need for small change – possibly resorting to scrip or private bank issues – while the large merchant or tobacco planter could leverage his gold against bank notes?

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Although this is earlier than my main period of study, I can draw some inferences based on my reading.


(These are general comments regarding the antebellum period; specific comments will vary depending on the exact dates and the portions of the country under discussion.)


America was severely cash-poor, probably until the mid-1850s (when silver coins came into over-supply). This cash-poverty extended to all denominations of coins, but varied depending on where one lived. What most people used for money most of the time were banknotes issued by the (depending on the exact time period) many local banks. Today, we call these banknotes "obsoletes" or "broken banknotes."


In the rural and frontier areas, gold and silver coins basically didn't exist. From my reading of slightly later periods, cash entered the farming communities at exactly one time each year: just after harvest. Other than that, rural areas did all their business by credit or barter.


Money was more common in the cities. For example, Carothers, in Fractional Money[/i[ says that half cents and cents essentially only circulated in the cities of the eastern seaboard (essentially Baltimore and north). However, specie still essentially only functioned as bank reserves or was used to pay for imports; most people still used banknotes.


Large merchants may have had ready access to specie, the large planters, however, were routinely in debt to their factors (merchants who also acted as bankers for the planters). Thomas Jefferson is but one example of the over-extended planter class.


For those who are interested in a quick overview of how commerce was conducted in the 19th century, I recommend my chapter (Chapter 2) of the second edition of Doug Winter's Gold Coins of the New Orleans Mint.


If you don't have a copy and can't wait to read it, much of the book (including my chapter) is available on Google Books.

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It took me a while to truly comprehend the important role that "broken bank notes" played in the American economy of the first half of the 19th century. Given the number of survivors and the small role they play in the current collector market, we forget that these notes were the most commonly seen pieces of money for many Americans.


Another factor, long noted in the Red Book is that when the second Philadelphia mint opened in 1833 there were more people in The United States than there were U.S. coins in circulation. That statistic alone shows how insignificant of a role the early coins, which many of us greatly admire, played in the U.S. economy.


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The discussion on this topic is interesting. I am on a trip at present, and do not

have access to my papers, but the following general points can be made:


1) Gold coins began to be exported heavily from about 1819. Prior to that time

they were sent abroad but only when Spanish gold coins, usually doubloons,

were not available.


2) Mint officials in the 1820s and early 1830s repeatedly commented that the Mint

was little better than an assay office for the gold deposits. Much of the gold came

from the Carolinas and Georgia and, once struck into half eagles, went directly from

the Mint to a shipping agent and then Paris or London.


3) Spanish gold was less available in the 1820s and later, forcing the use of American

gold coins.


4) The question of silver coinage is a complicated one. Frontier areas did have a

limited supply of American silver and small Spanish pieces. Half dollars, for example,

came as a result of treaty payments to the Indian nations. These coins were in turn

spent at frontier stores. Paper money was the dominant currency, however. The belief

that half dollars were used solely as bank reserves is not true.


5) It is often stated that the Philadelphia Mint did not provide enough small silver coins.

This is only partly true because there were large numbers of small Spanish and Mexican

silver coins in daily use. In 1838, for example, a New York study stated that only about

one-sixth of the silver coins in banks and the marketplace were American, the rest being

mostly Spanish and Mexican.


6) it is true that American silver dollars went to the Caribbean in exchange for Spanish

dollars but this had nothing to do with deposits for coinage at the Mint. These Spanish

dollars were needed for export, to pay for goods obtained abroad. The long-held belief

that Spanish dollars were worth more than American is true but only in a technical sense.

The Philadelphia Mint considered Spanish dollars in bulk to be worth about 100.3 cents

each, which was less than the cost of transportation.


7) The coinage of dollars was halted in 1804, at the instigation of Mint Director Elias

Boudinot, because they were being shipped to India and China. The coinage of eagles

was halted at the same time but because gold was essentially going to Europe.


8) Numismatic myths to the contrary, American silver dollars did not go to the Orient

in the 1850s or 1860s. Mexican dollars did.

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One estimate was that in 1811 the U.S. population of 7.5 million required $7 to $8 million in circulating gold and silver for internal commerce. By 1830 it was estimated $49 million in bank notes and $25 million in specie in circulation.


How does this fit with previous comments? – if it fits, at all…..


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I think you're just stirring the pot!


It's hard to say how much specie the US "required" for internal commerce because so much of it was actually done with financial documents - bills of credit, banker's drafts and checks.


Depending on where one lived, other than small change, one could conduct almost all of one's business without physical money, except for expenses while traveling, paying obligations to the Federal government (import duties, postage, etc.) and paying for goods overseas. (Even then, bills of exchange were more efficient instruments for paying an overseas obligation than bags of coins.)


p.s., it's hard to know what "circulating" money was, anyway. Specie most likely spent most of its time in bank vaults, even if it was the basis for reserves for the banknotes issued by the bank, or used to clear checks or pay bills of exchange.

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