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Some perspective on US gold coin circulation after 1850.

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We tend to think of the various US mints as supplying gold coins for the country, and for its domestic and foreign commerce. That they did.

 

But did you also realize that coins from the US mints were the standard and in daily use in all of North America above the Rio Grande River? While California is well known for its historical use of gold coins (in exclusion to paper money), the entire continent west of the Rockies used the coins made in San Francisco. Everywhere from Alaska, Yukon Territory, British Columbia, Washington, Oregon, Idaho, California, Nevada, Utah, Arizona, and Baha California was on the same gold standard and US coins were legal tender. This lasted from about 1840 to 1914 when the Dominion of Canada suspended its gold standard due to WW-I.

 

For almost 75 years, our mint produced a uniform continental gold currency eclipsing anything save for possibly the combined British London and colonial mints.

 

(Yep - Mexico was on it's own standard - but Baja was a long way from the capital, and folks did what worked for them.)

 

Just something to ponder. (Now back to your regularly scheduled ebay tirade)

 

;)

 

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I'm curious what percentage of the population in the who US would have had contact with gold coinage? With over 95% living on farms for most of the 1800s, going into town infrequently and spending money, would it not be quite small? Were there many hardcore 100% hard money men in business who insisted on only gold and silver as payment, never paper money, as many now refuse to take a check but only cash?

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While it depends on which specific time period you're talking about, most people in the 19th century not only didn't see gold, they didn't see much cash money at all.

 

Especially before the Civil War, many people didn't work for cash wages. Also, people in rural economies (most of the country, really) only had the opportunity to see cash money once a year - just after harvest.

 

Most commerce was conducted by IOUs - retailers gave them to their wholesalers and they sold to their customers on credit.

 

Currency, either state-chartered banknotes (before the Civil War) or Greenbacks (after the Civil War) were what most people used as money.

 

Gold was most frequently used to pay customs duties or by travellers ('49ers, for example) or was exported to pay foreign creditors.

 

It really wasn't until the 1880s or so that most people worked for cash wages (and got paid in cash) and were therefore able to spend cash money.

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West coast residents & transients used gold coins almost exclusively until about 1910. Farmers and rural town people rarely saw or used gold - it was too valuable to carry around. Business did not like physical gold because it generated no income. True financial investors, like Hetty Greene, delt in bonds, mortgages and other securities - these were convertible into gold when needed. Anecdotally, some wealthy people considered a pocket of gold coins to be an sign of a poor businessman - wads of large denomination bills were more impressive and easily hidden.

 

Bankers usually carried only what was required by Treasury regulations. Except, very large banks (J.P. Morgan and others) that were involved in gold point trading.

 

Demands for gold coin or bars usually appeared in domestic commerce during financial hardship and for payment of new gold deposits. Even there, the larger mining companies and dust buyers preferred Treasury notes on New York to lugging around thousands of pounds of metal coins.

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Were there many hardcore 100% hard money men in business who insisted on only gold and silver as payment, never paper money,

Quite possibly, especially before 1862. The paper money in circulation before that time was issued by banks, some state chartered some not and also by some large businesses (railroads come to mind). This paper was often of very questionable, and fluctuating value. None of it was legal tender so any of it you accepted might only be accepted at a discount or refused altogether at any time. Often if accepted each note would have to be looked up in a monthly publication to see what the "current" value of the note was, and if it was from a distant bank, or one that was listed as being questionable it would be discounted from that listed value. (You might also find that the paper you took last week is now listed as worthless.) The gold and silver (usually silver) was of much more stable value and acceptable everywhere. Given those choices which type of currency would you want to be paid in?

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Were there many hardcore 100% hard money men in business who insisted on only gold and silver as payment, never paper money, as many now refuse to take a check but only cash?

 

 

Yes, there were. In fact, many contracts written in the 19th and early 20th centuries called for payment in gold coins of the same weight and fineness as existed at the time the contract was made.

 

This "gold clause" was the subject of substantial litigation after Pres. Roosevelt took the US off the gold standard and reduced the gold content of the dollar in 1933. I believe that the litigation went to the Supreme Court, which found against requiring payment in gold coins.

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Well, inclusion of the "gold clause" was standard boiler plate for the period. I don't know how that translated into business people actually wanting to be repaid in gold. So long as the promise was present, I suspect that's all that was important. The papers of Hetty Greene and her children only occasionally refer to gold coins in quantity. $5,000 in double eagles weighed more than 250 troy ounces; $5,000 in gold certificates weighed a tiny fraction of an ounce and could be put in your suit pocket or a lady's glove.

 

Physical gold in substantial amounts was a pain to handle both in weight and security.

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It's true - "everyone" wanted physical gold until convertibility was restored in 1879 and then "everyone" decided that physical gold was awfully heavy and inconvenient.

 

I think the gold clause was like pretty much everything else - as long as one was confident that it would be honored, actually honoring it wasn't necessary. That belief (and the enormous expansion of the gold supply in the second half of the 19th century) was what allowed the Gold Standard to exist in conjunction with an expanding world economy.

 

But, as we know, a lot of gold was shipped overseas to make payments, so not everyone relied on paper. In this country, there were times and places when one needed cash to purchase goods, instead of credit.

 

About 12 years ago, I was talking to a friend of mine who was from Nebraska. He told me about his grandparents, who had homesteaded there about a century ago. He said that lumber, which had to be shipped from Chicago, was something for which a buyer had to pay cash on the barrelhead, that it was not available for credit (that is, payment sometime after deliver), whereas almost everything else was.

 

Also, as I understand, Hetty Greene was sufficiently careful to bank at Chemical Bank, which was known as "Old Fort Chemical" after it was the only bank not to suspend gold payments in 1857. Chemical Bank thereafter carefully tended its reputation for having larger-than-normal gold reserves.

 

edited to add: As you know, I collect references to specific forms of payment. Most of those references tend to peter out after about the 1880s. Even the banking instruction books from the late-19th and early-20th centuries refer to gold coins as something fairly unusual (except in California, of course).

 

But, to go back to the point of the OP, I have found references to American silver coins being used in Canada (especially during the Civil War) and American gold coins being used in Canada and South America throughout the 19th century.

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Most of those references tend to peter out after about the 1880s.

Possibly because around that time paper was solidly on par with gold and silver and people now had confidence that Federal paper could always be exchanged for hard money. With that confidence they now no longer had to carry the bulky metal and could now take the more convenient paper instead.

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RE: But, to go back to the point of the OP, I have found references to American silver coins being used in Canada (especially during the Civil War) and American gold coins being used in Canada and South America throughout the 19th century.

 

[Very short version] -- US gold coins were also legal tender in Brazil, Bolivia, Argentina (off and on), and several other Central and South American countries that elude my memory at the moment. They did not really "circulate" except between larger businesses/plantation owners and banks.

 

US silver was not officially legal tender in Canada but its quantity overwhelmed what little Dominion and British silver coins that were available. U.S. coins in Canadian circulation increased during the Civil War. U.S. Army agents used silver to purchase cattle and grain for the Union Army, and Canadian brokers imported large amounts of U.S. silver coins. Although not legal tender, the shortage of Canadian small change meant the U.S. coins were accepted at face value (at par) by merchants. Banks, however, discounted U.S. silver deposits and the merchants absorbed the difference in the interest of competition and traditional use of U.S. coins in Canada (mostly Ontario and Quebec).

 

Eventually Canada drove the U.S. silver (approx. $10+ million) out of circulation by allowing local banks to issue paper against the coins, and buying U.S. silver with gold at a discount and dumping it in New York for U.S. domestic circulation.

 

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While it depends on which specific time period you're talking about, most people in the 19th century not only didn't see gold, they didn't see much cash money at all.

 

Especially before the Civil War, many people didn't work for cash wages. Also, people in rural economies (most of the country, really) only had the opportunity to see cash money once a year - just after harvest.

 

Most commerce was conducted by IOUs - retailers gave them to their wholesalers and they sold to their customers on credit.

 

Currency, either state-chartered banknotes (before the Civil War) or Greenbacks (after the Civil War) were what most people used as money.

 

Gold was most frequently used to pay customs duties or by travellers ('49ers, for example) or was exported to pay foreign creditors.

 

It really wasn't until the 1880s or so that most people worked for cash wages (and got paid in cash) and were therefore able to spend cash money.

 

Credit sales lasted well into the 20th century. I went to work for Coin World in late 1973. In the Spring of '74 I went out to explore the county, and stopped for a snack at a small grocery (IGA?) in the tiny burg of Russia, OH. The customer ahead of me put her groceries down, the cashier added it up on a brown paper sack, and then the cashier pulled out a ledger book and wrote the total in on that customer's account. My small cash purchase was rung up on the register.

 

TD

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Pay-day credit was common among small merchants back then. There was evidently much more of it well into the 1950s until fair trade laws were overturned.

 

 

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We still do credit sales today, we just use a plastic card and the owner of the card keeps the tab. Owner meaning bank, credit union, retail store, etc...

 

I never knew that not until the late 19th, early 20th century were most people paid in cash wages. Must have something to do with the industrial revolution.

 

Interesting account. Thanks.

 

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The small merchant credit sales I referred to were essentially pay-day advance loans in-kind from the local merchant to a local customer. This was a very informal arrangement and not like modern credit card, or the older department store accounts.

 

The merchant's advantage was in being able to move products consistently throughout the local pay period. It made inventory control and staffing easier, and avoided some of the problems of a rush of customers all wanting the same thing at the same time.

 

Some states encouraged it, others opposed it as a form of predatory loan sharking. Company stores in single-industry towns loved this because it was easy to garnish wages, and those who objected got to eat weeds until the next pay envelope.

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The small merchant credit sales I referred to were essentially pay-day advance loans in-kind from the local merchant to a local customer. This was a very informal arrangement and not like modern credit card, or the older department store accounts.

 

The merchant's advantage was in being able to move products consistently throughout the local pay period. It made inventory control and staffing easier, and avoided some of the problems of a rush of customers all wanting the same thing at the same time.

 

Some states encouraged it, others opposed it as a form of predatory loan sharking. Company stores in single-industry towns loved this because it was easy to garnish wages, and those who objected got to eat weeds until the next pay envelope.

 

I understood the premise of the local merchants and their lending habits. I was just remarking that we still buy things on credit today, but like most things, it's advanced in nature.

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OK. OK....I thought you were equating the two.....the joys of internet communicaion. :)

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Dave,

 

That's a very interesting article! I must admit, I've never really thought about the impact of American silver coins on the Canadian economy during the Civil War.

 

I am somewhat surprised that Union purchasing agents were able to buy supplies for silver, though. Considering that Canada should have been on the gold standard (as was the rest of the British Empire), I would have thought they would have only accepted gold.

 

I guess a seller takes whatever his buyer offers, but adjusts his price accordingly.

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Coinage was in short supply in Canada so the silver was welcome - at first - as was the extra revenue.

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I never knew that not until the late 19th, early 20th century were most people paid in cash wages. Must have something to do with the industrial revolution.

 

 

jpcienkus,

 

It did have a lot to do with the industrial revolution, in that, prior to the Civil War, the US was primarily a rural, agrarian nation in which most people lived on small farms or in small towns surrounded by small farms.

 

As a result, money (of any kind) was in short supply, as farmers (mostly) only saw money when they sold their harvest and, therefore, the small towns that depended on the small farms didn't see much money either.

 

So, the shopkeepers and craftsmen who sold things to the farmers had to take what they could get - food, for example, or else they had to extend credit.

 

I've linked to a very well-known story from colonial America in which a traveler recounts how a purchase would have been made in those days. Link (The link is to page 23, but the story starts on the bottom of page 22.)

 

Although the story is from 1704, I suspect that a similar story would have been told in just about any year up to the mid-1840's (and perhaps later in isolated areas).

 

It really wasn't until people worked in factories or offices that they received cash wages and doing that wasn't very common until after the Civil War (and perhaps even until the later 19th century).

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Dave G,

 

Thanks for the response and confirmation. I'm not a historian, but some aspects do interest me. The industrial revolution was the only thing that made sense to me. It was kind of an educated guess on my part.

 

I don't know if you've seen the movie Pale Rider. It's a good Clint Eastwood movie (kind of a remake of High Plains Drifter, or along those same lines), anyway I digress.

 

I think they did a good job of showing a glimpse of what commerce was like at the retail level in the country. Basically the dry goods store "sells" their wares on credit to the miners and they pay it back when they can. Of course, trust played a huge role.

 

thanks for the link.

 

Roger,

 

Yes, the internet back and forth can lead to some miscommunication. I didn't provide enough context in my original post.

 

Joe

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