The Silver Dollars of 1878-1935, Part One

In case you didn’t already know it, the Morgan and Peace silver dollars so loved by collectors today were mostly a nuisance in their own time. Only the western states and territories used them in daily commerce, though there is anecdotal evidence suggesting that they likewise circulated to some extent in the South. Most, however, were simply put into storage as soon as they were struck, residing for years within mint vaults and in the sub-treasuries (precursors of the federal reserve banks). When the vaults became full, canvas bags full of silver dollars began to pile up in hallways and working areas within these buildings. It was understood by nearly everyone that the coins weren’t really needed and that they were produced solely to prop up America’s silver mining industry. Since the price of silver bullion nevertheless continued to decline, the only virtue of silver dollars was that their inflationary impact lessened the burden on farmers and other persons mired in debt. Thus, their unlimited production became a political issue during the presidential campaigns of 1896 and 1900.

The silver dollars coined from 1878 to 1935 were authorized by three major pieces of legislation and one minor one. The first of these was the Bland-Allison Act of 1878, which mandated that the Treasury purchase not less than two million dollars worth of silver bullion monthly to be coined into silver dollars. The Sherman Silver Purchase Act of 1890 repealed the Bland-Allison Act, but it continued the purchase of silver for dollar coinage in the amount of two million ounces per month.

This distinction between dollars and ounces is significant. With a silver dollar containing only about three-quarters of an ounce of silver, and the price of silver having fallen quite a bit between 1878 and 1890, the outcome of this new language was to dramatically increase the number of silver dollars being ordered. The situation only worsened as silver continued its plunge in value during the 1890s, and it was not until repeal of the Sherman Act on November 1, 1893 that the madness ended. Even so, the silver bullion purchased up to that time lasted into 1904, when the coining of silver dollars ceased, seemingly forever.

In 1918, however, Congress passed the Pittman Act. Under its terms, more than 270 million silver dollars were melted in 1918-19 and then replaced during 1921-28 with ones coined from newly mined bullion. Were the replacement coins needed for commerce? Of course not, but then the support of western congressmen and senators was necessary for other important bills, so their constituents had to be pacified. Nearly all of these coins languished unwanted in vaults, as had their predecessors. It seemed then that further coining of silver dollars was dead once and for all, but this judgment once again proved premature.

The Great Depression of the 1930s saw the adoption of many government measures that seemed quite radical at the time. President Roosevelt’s “alphabet soup” of new federal agencies and legislation included the Agricultural Adjustment Act, which sought to provide relief to farmers devastated by collapsing prices for their products. Tacked onto this bill was the Thomas Amendment, which included a provision for the purchase of silver bullion from American miners at subsidized prices. A subsequent executive order mandated that this bullion be coined into silver dollars, resulting in the brief emission of Peace dollars dated 1934-35. As the coinage provision was completely unnecessary, it was soon repealed. The Treasury responded by revising the silver certificate notes issued in conjunction with the coins so that their stated redemption would be in “silver” rather than specifically in “silver dollars.”

This fine distinction in terms was driven home some thirty years later, when a run on the Treasury’s supply of silver dollars began early in 1964. Speculators were lined up around the block at the Treasury’s headquarters building in Washington, DC to buy all the bags of silver dollars they could carry. What kicked off this feeding frenzy was the recent discovery of previously rare issues that could be sold to dealers for an immediate profit. With no new silver dollars coined since 1935, the gradual reduction of the Treasury’s supply had finally culled out all of the common later pieces. As the deepest recesses of the vaults were being exposed, lucky buyers were finding ever more rarities from the Carson City Mint. These were coins that had been extremely rare uncirculated, since nearly their entire mintages had gone into storage decades earlier.

Invoking its right to redeem silver certificate notes in silver bullion of any form, the Treasury suspended the payment of silver dollars in March of 1964. Thereafter, until the redemption of silver certificates ended altogether in 1968, those presenting the notes in exchange for silver received their bullion in the form of bars or granules, the latter being used to make exact change. The era of the silver dollar as a circulating coin was over, though a small mintage of 1964-dated pieces was made in 1965 and never released. These coins were subsequently destroyed.

Next month, I’ll take a look at the actual usage of Morgan and Peace Dollars in commerce, as well as the role they played in our culture.

David W. Lange's column, “USA Coin Album,” appears monthly in Numismatist, the official publication of the American Numismatic Association