What does "coined free" mean?

[Prethen]

I saw this term in "Selections from the Numismatist - United States Coins":

 

"From the beginning until 1853, all silver was coined free, the half dime, dime, quarter and half being in exact proportion to the dollar. Under the Act of 1853, only the dollar was subsequently coined free."

[BillJones]

Exactly what it says. If you brought silver to the U.S. mints prior to 1853 that was fairly pure, and you were willing to wait several weeks, the mint would turn it into coins free of charge. I use the term "fairly pure" because there was at least one instance in the early days of the first Philadelphia Mint that a depositor brought in some metal that was something like 40% silver. It cost the mint a fortune to purify it so after that, they charged you for converting low grade silver deposits. If you had to have your coins immediately, the mint made a small charge for that.

 

This was one of the reasons why the early U.S. mint lost money and was a drag on the early national government's budget. Mints usually make money for their governments through seignorage. (Seignorage - The difference between a coin's face value and the cost of producing it, including the metal and the manufacturing costs.)

 

In 1853 the mint lowered the weights of the half dime, dime, quarter and half dollar so that their metal content was slightly less than their face value. The reason for this was that the California gold discoveries had upset the value ratio between gold and silver to point when every U.S. silver coin that was then in circulation, except the tiny Silver Three Cent Piece, which was only 75% silver, melted for more than its face value. The weights were reduced to keep those coins in circulation.

 

In a misguided attempt toward preserving the integrity of the dollar, Congress decided not to change the weight of the silver dollar. As a result the coin continued to have a melt value of something like $1.02, which was one more reason why the coin did not circulate. The other was that people found it heavy and cumbersome to carry. The mint would still turn your silver into silver dollars, if you wanted them, but why do that when the coin was worth less than the value of the metal it contained?

 

[cpm9ball]

Maybe it had something to do with the seigniorage.

 

I like Bill's answer better!

 

Chris

[Prethen]

Thanks, Bill! Yep...now that term seems obvious to me.

[Conder101]

It means the depositor was not charged a fee for converting his bullion into coinage and he received back in coins a face value amount exactly equal to the value of the bullion deposited. This only held true if the depositor was willing to wait for his bullion to be coined. If he wished to receive coins immediately there was a fee. After the Act of Feb 21,1853 dimes, quarters, and halves were only coined on the governments account. Depositors could no longer have their silver coined into those denominations. They could have it coined into silver dollars. Gold deposited was still coined free of charge.

 

The Act of March 1795 also permitted a fee if the bullion deposited was below standard fineness.

 

The Act of May 19, 1826 allowed for a fee for the parting of gold from silver deposited.

 

The Act of Jan 18, 1837 allowed for a charge for the copper used to alloy deposits that were above standard fineness.

[DWLange]

Mint Director Snowden violated an important provision of the 1853 law in that he issued fractional silver coins in exchange for silver bullion. The law directed that these coins would be issued only in exchange for gold, so as to keep their numbers from becoming excessive. The Mint paid a slightly higher than market value for silver bullion, yet it still managed to make a profit on the reduced-weight fractional silver coins. While the silver was still coined to the government account, Snowden's policy created a de facto "free coinage" of silver.

 

Holders of silver bullion eagerly took advantage of Snowden's deliberate sidestep of the law, because the face value of the coins they received exceeded the value of the bullion sold to the Mint. This led to the very situation Congress had sought to avoid with the gold-only purchase provision, and Snowden was ordered to stop the illegal procedure in 1858. That's why the mintages of dimes, quarters and halves took a dip in 1859-60 after several years of record coining.

[johnny9434]

Maybe it had something to do with the seigniorage.

 

I like Bill's answer better!

 

Chris

i agree with bill as well

[RWB]

"..dimes, quarters and halves took a dip in 1859-60..." See, they used dip even way back then....

 

[cpm9ball]

"..dimes, quarters and halves took a dip in 1859-60..." See, they used dip even way back then....

 

 

And, as a result, they had a tendency to turn black.

 

Chris

[johnny9434]

its almost to bad that the mint did not put a nominal charge on something like that (illigal or not). i guess they had more pressing things to get done. just saying.

[BillJones]

its almost to bad that the mint did not put a nominal charge on something like that (illigal or not). i guess they had more pressing things to get done. just saying.

 

The idea was get U.S. coinage into circulation. Although many people think that the coins listed in Red Book are what was in circulation from the 1790s until the 1840s, that was not the case. When the first Philadelphia Mint closed its doors at the end of 1832, there were more citizens of The United States than half dimes, dimes and quarters in circulation. This piece of information is in the Red Book's introduction. The coins that took up the slack were foreign pieces, mostly Spanish empire pieces, that had legal tender status in the U.S.

 

The second Philadelphia Mint and the branch mint at New Orleans began to address that problem. The Charlotte and Dahlonega Mints produced so few (all gold) coins, that those facilities had no impact on the problem.

 

By the 1850s, it was coming close to being solved when this new problem with the price ratio between gold and silver cropped up. In essence nearly every half dime, dime, quarter and half dollar had to be replaced because they melted for more than their face value. It is for that reason that I would not censure Mint Director Snowden for exchanging coins for silver bullion. The need for more coins was great if U.S. coins were going to be the predominant coinage used in America.

 

Finally it appeared that the problem had been solved in 1857 when the U.S. Congress removed the legal tender status from foreign coinage. Unfortunately it started up almost immediately when the Civil War broke out and U.S. coinage was extensively hoarded or exported, thus creating the need for alternative currencies like tokens, merchant -script and Fractional Currency.

 

[DaveG]

In addition to the factors that Bill has mentioned, here are some others:

 

Up until the second third of the 19th century, the US was a primarily rural and agrarian nation whose population didn't really see or use all that much money. Most commerce was conducted using credit - manufacturers would sell to wholesalers on credit, wholesalers would sell to retailers on credit and retailers would sell to householders on credit. Accounts were generally settled monthly or quarterly.

 

Most of the "money" that was in circulation consisted of banknotes issued by state-chartered banks, some of which were good, solid banks (those in New York City or New Orleans, for example), but many weren't.

 

Up until 1846, the merchants who had foreign silver coins didn't need to send them to the Mint to be recoined into US coins, as they were accepted in commerce they way they were (most of them were very well worn from circulation). Gold coins were generally exported, as they were needed to pay for imported goods.

 

In 1846, the Independent Treasury Act required all business done to or with the US government to be conducted using gold and silver (not banknotes or IOUs). As a result, the customs offices (which received most of the Government's income) were required to deposit their revenues into the Mints for recoinage. You can see the jump in gold and silver mintages from 1847 onward.

 

The mintages of gold coins took another jump upward in 1849 with the discovery of gold in California. The price of silver rose in terms of gold and silver coins were melted in large numbers. When the size of silver coins was reduced (except for the silver dollar) in 1853, lots and lots of silver coins were minted and silver coins clogged the channels of commerce until the Civil War.