Prior to the first currency law in the United States, American citizens exchanged goods and services through the barter system. At that time, no coins were available except for various foreign coins such as the widely traded and reliable Spanish real dollars. With the signing of the Constitution and with a newly formed nation allowing Congress to mint coinage, the first Mint Act was proposed and passed by Congress under President George Washington.
This article will cover a brief history of the coins and the events surrounding the changes made starting in 1792 and over the centuries since then.
Key points to remember
- The Coinage Act of 1792 (also known as the Mint Act) created the United States Mint to oversee the production of coins minted with gold, silver, or copper.
- The Coinage Act of 1834 increased the silver to gold ratio to around 16:1.
- The Coinage Act of 1873 (also called the “crime of 1873” by silver miners) demonetized silver, effectively causing the demand for and prices of silver to plummet.
- The Currency Act of 1965 eliminated silver quarters and dimes.
The beginning of American currency
The first act of striking was passed on April 2, 1792, and established the United States Mint to oversee all mint operations and manage the mint’s first employees, which included an engraver, assayer, and chief coiner. By law, all employees had to post a bond of $10,000 to be considered for these positions. The first coins in the United States were struck using either gold, silver or copper, with word engravings and freedom inscriptions. The first coins minted are as follows:
- $10 Gold Eagle with 270 grains (17.5 g) of pure gold
- $5 gold half eagle with 135 grains (8.75 g) of pure gold
- $2.50 Quarter Eagle with 67 and 4/8 grains (4.37 g) standard gold
- 1 dollar with 416 grains (27 g) of standard silver
- A half dollar with 208 grains (13.5 g) of standard silver
- Quarter dollar with 104 grains (6.74 g) of standard silver
- Dimes, spelled “dismes” until the 1800s, had 41 and 3/5 grains (2.7 g) of silver
- Half dime with 20 and 4/5 grains (1.35 g) of standard silver
- One cent with 11 pennyweights (17.1 g) of copper
- A half cent with 5 and 1/2 pennyweights (8.55 g) of copper
The silver/gold ratio was 15:1. Thus, one troy ounce of gold would buy 15 ounces of silver.
Although considered obscure by some investors, the silver/gold ratio represents a measure that helps traders discover unique profit strategies.
The 19th century
Dollars were minted in the tradition of 8 Spanish reales. English speakers called the 8 Spanish reales the Spanish milled dollar. The word “milled” referred to the fact that blanks of parts called planks were “milled” on a milling machine to maintain consistency in weights and sizes and prevent counterfeiting.The advanced milling process has allowed these Spanish coins to be used in many countries around the world.
The Coinage Act of 1834
The official US government gold price remained constant at $19.75 per troy ounce from 1792 until it was raised to $20.67 in 1834. In 1934 the price was raised to $35. In 1972 the price was increased to $38 and in 1973 it was increased to $42.22.
Congress reconciled the new value of gold with the passage of the Coinage Act of 1834 under President Andrew Jackson. New gold weight and value regulations were enacted to synchronize gold’s value with the market and its relative value to silver. The law revised the golden report to the dollar at the equivalent of $20.67 per ounce of gold, increasing the value of gold and increasing the silver-to-gold ratio to approximately 16:1.
The Coinage Act of 1873
The Coinage Act of 1873 has also been called the “Crime of 1873” by western silver miners. The act demonetized silver, thus ending a silver boom that had enriched the economies of Western states. The money was dropped for the gold standard which will then be adopted by governments around the world.
A powerful force called the Free Silver Movement was created and would be instrumental in passing the Bland Allison Act of 1878. This act enabled the Treasury Department to buy from 2 to 4 million dollars per month of domestic silver which will be converted into silver dollars for circulation. This law was passed by Congress after overriding President Rutherford B. Hayes’ veto.
The Sherman Silver Purchase Act passed in 1890 superseded the previous law and resulted in an increase in the purchase of 4.5 million ounces of silver bars a month.President Cleveland then repealed this law in 1893 because US Treasury gold reserves were depleted by investors selling silver in exchange for gold.
Southern ministers encouraged Secretary of the Treasury Salmon P. Chase in 1861 to inscribe “In God We Trust” on coins. Congress first approved and used the phrase on the two-cent coin in 1864. The listing was extended to gold and silver coins with the passage of the 1865 Act. In 1873, all coins were endorsed with “In God We Trust” without further Congressional approval.
The 20th century and beyond
Under President Johnson the Mint Act of 1965 was passed which eliminated silver from certain coins due to a shortage of money and coins.Silver quarters and dimes saw the complete elimination of silver content and the silver content of half dollars was reduced from 90% to 40%. Silver was replaced by alloys of copper, zinc, manganese and nickel. To avoid hoarding, a freeze date was also adopted. All newly minted coins had a date of 1964 for some time. Mintmarks were also phased out for five years. The mint marks are the letter on the coin that indicates which mint produced the coin. This served to remove all features that helped identify new coins and prevent their withdrawal from circulation.
The Presidential $1 Coin Act of 2005 authorized the Secretary of the Treasury to design and issue commemorative $1 coins for each of the former U.S. presidents and their wives.Earlier commemorative $1 coins would continue, such as the $1 Sacagawea, but consist of at least 1/3 of the total of all $1 coins.
American currency has come a long way since the barter system, and while it seems like it’s been figured out, there will undoubtedly be more changes to come. For many investors, interest in currency leads to interest in currencies and currency trading. In fact, the currency market, called the foreign exchange market or Change market– is one of the largest and most liquid markets in the world, with trillions of dollars changing hands every day.