Some interesting comments about US gold coins in 1834

[DaveG]

In 1834, a Frenchman, Michael Chevalier, was sent to the US by the French Minister of the Interior to inspect our public works. The US was building canals (and railroads) like crazy at the time and Europeans were interested in our engineering and technology.

 

M. Chevalier, like his more famous countryman, Alexis de Tocqueville, seems to have had the idea: "Well, if I'm going there anyway, I might as well write a book about my experiences." His book, "Society, Manners and Politics in the United States" was sufficiently popular that it went through three editions in French and appeared in English in 1839.

 

Fortunately for us numismatists, he noticed and commented on the money situation in America.

 

In one of his first letters, dated January 5, 1834, he says: Since I have been in the United States, I have not seen a piece of gold except in the mint. No sooner is it struck off, than the gold is exported to Europe and melted down.

 

I think he perfectly captures the situation that had existed since the beginning of US gold coins in the early 1790's: The US coinage laws undervalued gold in terms of silver, so gold was exported to Europe to pay for imported goods and almost never seen in circulation in America.

 

As we know, this situation was the subject of continued arguments in Congress and was substantially addressed by the Act of June 28, 1834, which reduced the size of US gold coins by about 6%.

 

As we also know, the subject of money was a potent political football - President Jackson was opposed to banks (especially the Bank of the United States) and banknotes and in favor of circulating gold coins.

 

In a letter dated August 24, 1834, Chevalier writes:

 

Gold is called Jackson money; the United States mint has been actively employed in striking gold coins, half-eagles and quarter-eagles. The principal journals of the Jackson party pay the daily wages of their journeymen printers in gold; the warm friends of the Administration affect to carry gold pieces in their pockets, and as paper [money] only is generally used here in business transactions, even of the most trifling amount, you may be certain that a man who is seen with gold in his hands, is a Jacksonman. The President lately made a visit to his seat in Tennessee, and paid his expenses all along the road in gold, and the Globe, his official organ, took care to inform the public of it. At a dinner, given in honour of him by the citizens of Nashville, he proposed this toast: 'Gold and silver, the only currency recognised by the constitution!'

 

 

So, for those of us who study numismatic history, we see that it's not just about the mint's facilities, or the supply of gold and silver, it's also about politics - and pretty much always has been; and, for those who think coins are "boring", you can tell them that there was a time when people used the money they spent to advertise their political affiliations (and probably got in fights about it, too)!

 

For anyone who's interested in the book, it's available in digital form through the magic of Google Books . The quotations are from pages 63 and 147.

[wdrob]

 

That creates an interesting perspective, now, when viewing a circulated gold coin. Far removed from my prior assumptions.

 

 

 

[RWB]

As more people become involved in "academic" numismatic research, we find that many of the old notions about money and events were incorrect, presumptive or plain falsehoods.

 

I wish there were a way to encourage what these folks do - and I refer to tangible rewards in addition to the occasional award plaque and pat on the back.

[BillJones]

Here are examples of the coins in question.

 

This 1834 Capped Bust, Reduced Diameter half eagle is the most common date and variety of its type, and yet it has been estimated that less than 50 of these coins are known out of a mintage of just over 50 thousand coins. Most all of them were exported to Europe and melted.

 

 

And here is an example of "Jackson's money" an 1834 Classic Head $5 gold piece. These coins were also known as "yellow jackets" and "metallic currency" by their detractors. Yet, the issuance of these coins made a lot of sense because they put U.S. gold into domestic circulation for the first time in many years.

 

[JJSingleton]

The mint act of 1792 which in essence set the silver to gold ratio at 15 to 1 set the course for gold to not circulate in the US. Gold found itself either being held by the population or being exported over seas. The US became a de facto silver economy. Even with gold being mined in NC and GA there was little chance of it being coined and circulating as it was worth more in export trade or being sold to jewelers and the like. This was a serious problem for Jackson who vetoed the rechartering of the 2nd Bank of US in 1832 in favor of hard money. To get the US back on a Gold and Silver economy they had to get the ratio changed, which was accomplished in the Mint act of 1834 which changed the ratio to 16:1. This was one of the steps leading up to the Branch Mint act of 1835 which brought the branch mints to the gold fields and the import center in New Orleans.

[DaveG]

I wish there were a way to encourage what these folks do - and I refer to tangible rewards in addition to the occasional award plaque and pat on the back.

 

 

Roger,

 

As you know, much of the problem is that the audience for deeper historical numismatic research is so small - perhaps only a couple of thousand people.

 

Perhaps as the numismatic publications solidify their electronic business models there will be sufficient revenue to pay for more "academic" articles.

 

In the meantime, at least we have the Journal of Numismatic Research - thanks to you!

[RWB]

(JNR might not be around much longer if I don't get some additional articles - and better funding.)

[wdrob]

 

I wish there were a way to encourage what these folks do - and I refer to tangible rewards in addition to the occasional award plaque and pat on the back.

 

Hell Roger - I bought two of your books already. What more do you want?

 

My wallet?

 

 

 

 

[wdrob]

This was a serious problem for Jackson who vetoed the rechartering of the 2nd Bank of US in 1832 in favor of hard money. To get the US back on a Gold and Silver economy they had to get the ratio changed, which was accomplished in the Mint act of 1834 which changed the ratio to 16:1. This was one of the steps leading up to the Branch Mint act of 1835 which brought the branch mints to the gold fields and the import center in New Orleans.

 

And wasn't that William Jennings Bryan's platform in 1896 as well.

 

 

 

[RWB]

No wallet. Just read and enjoy and think.

[BillJones]

And wasn't that William Jennings Bryan's platform in 1896 as well.

 

The periods in history are alike only from the fact that the 16 to 1 ratio figured in the discussion. In 1834 the 16 to 1 ratio was close to "right" one between silver and gold, but only for a brief time. In fact Jackson's Coinage Act of 1834 drove silver coins out of circulation. The prices for gold and silver are independent of each other, and there is not "magic" set of numbers that will work in the long run. Bottom line - bimetallism does not work or to be more precise is unworkable.

 

In 1896 "16 to 1" was a campaign slogan for Bryan that was way off base. In fact the ratio was more like 32 to 1. Bryan's plan would have driven gold out of circulation, resulted in massive price inflation and placed the United States out of step with most of the civilized world which was using the Gold Standard.

 

[DaveG]

Actually, as I understand it, Jackson was against paper money because it was a "cheat" upon the public. Paper money, at that time, was issued by state-chartered banks and many of them weren't very trustworthy, whereas gold was "good money" anywhere you went.

 

William Jennings Bryan, on the other hand, was in favor of silver instead of gold because it allowed indebted farmers to repay their loans with "cheaper" money.

 

Bryan, and others at the time, thought that that somehow millions of silver dollars sitting in the Mint's vaults increased the money supply.

 

Banks making more and easier loans would have increased the money supply, but coins sitting in the Mint didn't do anything for anyone.

 

 

edited: to insert a missing word

[Mr.Mcknowitall]

Actually, as I understand it, Jackson was against paper money because it was a "cheat" upon the public. Paper money, at that time, was issued by state-chartered banks and many of them weren't very trustworthy, whereas gold was "good money" anywhere you went.

 

William Jennings Bryan, on the other hand, was in favor of silver instead of gold because it allowed indebted farmers to repay their loans with "cheaper" money.

 

Bryan, and others at the time, that that somehow millions of silver dollars sitting in the Mint's vaults increased the money supply.

 

Banks making more and easier loans would have increased the money supply, but coins sitting in the Mint didn't do anything for anyone.

 

I have a question.

 

Exactly what is difference now, that should instill a level of trust in the metals we use today, compared to the Jacksonian view?

[DaveG]

I don't think I understand your question.

 

Today's economy is very different from that of Jackson's day.

 

Today we have a national fiat currency instead of a commodity-based currency.

 

(Banknotes in Jackson's day were essentially IOUs for gold and silver and the quality of the IOU depended on who issued it.)

[Conder101]

Bryan, and others at the time, that that somehow millions of silver dollars sitting in the Mint's vaults increased the money supply.

Actually it would because all those millions of silver dollars sitting in the vaults were paid for by issuing silver certificates and more silver certificates could be issued than what was paid for the silver. (But they screwed that up with the Sherman silver purchase act when they paid for that silver with Treasury Coin notes that could be redeemed for either silver or gold. )

[DaveG]

Conder101,

 

That's actually something I've never looked into. I know that the Mint Annual Reports from the last few years of the 19th century reported on how silver dollars were being used, but I've never paid that much attention to those sections.

 

Have you compared the amount of outstanding silver certificates to the number of silver dollars struck to see what percentage of the silver dollars the silver certificates represented?

 

Also, I would have thought that silver dollars used to back silver certificates would have been transferred to the control of the Treasury rather than left in storage at the Mint. Have you been able to confirm where these silver dollars were stored?

 

I've never look at the Annual Reports of the Comptroller of the Currency to see it includes information on currency in circulation compared to currency printed. Have you looked into this?

[RWB]

There is an archive of Treasury journals that document to movement of silver dollars from 1878-1891. There probably once was one for 1892-1904, also.

[Conder101]

I would think that since the Mint was under the control of the Treasury, the dollars stored by the mint, or in other Treasury vaults, would be under the control of the Treasury as well.

 

And no I will admit I have not personally consulted those records.

[RWB]

"And no I will admit I have not personally consulted those records."

 

No one has for the past century. They are filed in a way that one could find them only by chance. I have not looked at them, but plan to do so next time I can get to NARA.

[DaveG]

Conder101,

 

When I said "control of the Treasury", I had in mind that the coins used to back silver certificates would have been stored somewhere other than the mint, like perhaps in one of the sub-treasuries.

 

As you would probably expect, it should have been appropriate to segregate coins that had been "monetized" from coins that were in storage at the Mint, waiting to be issued by the Cashier.

 

 

Roger,

 

Numismatic research doesn't always have to be hard - as you know, there are a lot of things available digitally.

 

For example, the Annual Reports of the Comptroller of the Currency are available via FRASER at the St. Louis Fed's website. Some of them are here.

 

There's a lot of great material in these types of Annual Reports (even if some of it isn't as accurate as we would like). I've skimmed a report or two - there's a lot of interesting information in them!

 

Here's one thing worth chasing down: Somewhere I came across a sentence the other day that made reference to the number of silver certificates that had to be destroyed because the silver dollars that had backed them were melted in the Pittman melts.

 

I don't think I've ever thought of silver certificate destruction as related to the Pittman melts.

 

I confess I haven't read your work on the Pittman melts. Did you address this?

 

While I'm not a currency guy, I don't think I've ever read about the silver certificate destruction in any numismatic publication. (Unless, of course, I've just missed it.)

 

I bet it's discussed in one of the Annual Reports of the Comptroller of the Currency!

[RWB]

The silver certificate problem is usually mentioned as a peripheral issue created by the Pittman Act. The other difficulty was retiring the 2% bonds that were sold to pay for the replacement silver (effectively a loan to Britain).

 

The certificate reduction was 1:1 per silver dollar destroyed, so Treasury preferred to cancel larger denomination notes to avoid inconveniencing users of low denomination paper.

 

My basic Pittman article is on the CD with production data daily, by mint for all of the Pittman coins. I've made an update for future use.

[DaveG]

By the way, I happened to be skimming through the Red Book of Peace Dollars and saw that you did, indeed, mention the withdrawal of silver certificates in connection with the Pittman melts.

 

"Because silver dollars in the United States were used as backing for Silver Certificates, an equal value of Silver Certificates (mostly $1 and $2 denominations) had to be destroyed." (page 3)