We take a close look at this legislation and its effects on scarcity in the rare coin market that still linger today.
Many articles regarding the history of Morgan silver dollars have made reference to the Pittman Act of 1918, under which 270,232,722 silver dollars were rendered into bullion. Typically, this figure is presented to justify the current scarcity of certain issues which had high mintages, and little more information is included regarding this remarkable piece of legislation. While the story of how the bill was prepared and enacted is of some interest, it is the way in which its terms were carried out that provides the subject of this month’s column.
In the course of researching my various books, one of the most useful documents has been the annual report of the director of the Mint. Still published today, recent editions have been quite skimpy and read more like shareholder’s reports, with the emphasis being mostly on the Mint’s marketing efforts and profitability. Earlier editions, however, particularly those from the 1890s through the 1920s, offer a wealth of historical and technical data. The 1928 edition includes a detailed summary of the Mint’s fulfillment of the Pittman Act, and much of this information is unknown to the majority of silver dollar enthusiasts.
Enacted April 23, 1918 and named for its primary sponsor, Senator Key Pittman, this law was titled “An act to conserve the gold supply of the United States; to permit the settlement in silver of trade balances adverse to the United States; to provide silver for subsidiary coinage and for commercial use; to assist foreign governments at war with the enemies of the United States; and for the above purposes to stabilize the price and encourage the production of silver.” It authorized the destruction of up to 350 million silver dollars, as needed, for the goals stated above.
Let’s look at this legislation and its effects one clause at a time: “… to conserve the gold supply of the United States…” World War I began in 1914, lasted through most of 1918, and, in some countries, was followed by two or three years more of civil unrest. Among the war’s first casualties was gold coinage. While the USA continued to coin and issue gold as late as 1916, most of the world’s nations were compelled to suspend their gold standards almost immediately. Pumped-up wartime spending had led to inflation and speculation in precious metals, and this prompted the discontinuance of gold coinage. Most European silver coins dated 1915-20 survive in uncirculated or just lightly worn condition, as they were immediately hoarded for their intrinsic value.
In the USA, the payment of gold coin was suspended in 1916, and for the next several years these coins could be obtained only at a slight premium. It was not until 1920 that the normal coining of gold resumed, but the everyday use of these coins in commerce, once a common sight in the Western states, had gone forever. The quarter and half eagles were seldom coined and remained premium pieces, while the higher-value gold coins were unknown to Americans other than bankers and coin collectors.
America’s entry into the war in April of 1917 required the same massive expenditures that were then ruining the economies of Europe. With its undeveloped armed services, the USA was heavily dependent on European arms, aircraft, etc. International payments were always made in gold, and this left our nation with a negative balance of payments. While this trend was ultimately reversed with America becoming the postwar banker to Europe, in the short term it created a drain on the USA’s gold supply. The Pittman Act thus attempted to address this concern by freeing idle silver dollars that were offered in lieu of the precious gold. Desperate for American money and military personnel, the nations of Europe were likely to comply with this compromise. Thus we find the phrase “to permit the settlement in silver of trade balances adverse to the United States” included as the second clause in the Pittman Act’s title.
“… to provide silver for subsidiary coinage and for commercial use …” As the melting of silver dollars commenced, 11,111,168 pieces were assigned toward the coining of subsidiary coins (after 1853, the half dollar, quarter dollar, dime and half dime had been coined at a lower weight standard than the dollar and were thus subsidiary to it). The reason for including this provision was that the U.S. Mint was coping in 1918 with an unprecedented demand for all coins, from cent through half dollar, due to the booming wartime economy. It was seen as a way of relieving this situation and partially compensating the Mint for its time lost in melting millions of silver dollars. The reference to “commercial use” was likely included to curb inflationary pressure on the price of silver, which was making its use in industry very difficult. By flooding the domestic market with silver, its price was almost certain to come down a bit.
Next month’s column will conclude this study with a look at the international application of Pittman silver and an examination of the actual destruction and subsequent replacement of more than 270 million silver dollars.
David W. Lange's column, “USA Coin Album,” appears
monthly in Numismatist, the official publication of the American Numismatic Association.