USA Coin Album: It’s the Law! Lesser-known Passages Relating to United States Coinage—Part Four
Posted on 1/16/2018
The sweeping Mint Act of February 12, 1873 eliminated four United States coin issues by simply omitting them from the stated roster of current coins. Gone were the two-cent piece, the silver three-cent piece, the half dime and the standard silver dollar; added was the trade dollar. This possessed a higher bullion value than its predecessor and would, it was hoped, compete successfully with the Mexican dollars in the Far East trade. The weights of the dime, quarter dollar and half dollar were raised an almost imperceptible amount so that they could be measured in metric figures (Congress was in one of its periodic flirtations with the metric system during the 1870s). Collectors are familiar with the opposed arrowheads added to these coins in 1873-74 to denote that weight change.
This legislation also created the Bureau of the Mint as a division within the US Treasury, and the Director of the Mint and his staff would henceforth be seated in Washington, DC, rather than Philadelphia. The former "branch mints" were now afforded full mint status and equality with the Philadelphia Mint, though all of the creative work and die production remained in that city alone.
Most of the above facts have been well recorded in books about United States coinage, but let's have a look at the more obscure passages. Our gold coins were 90% fine metal, with the balance being an alloy of copper and silver. The existing standard, in place since 1837, stated that up to half of this alloy could be comprised of silver, but depositors of gold ore and foreign gold coins had long complained that they were not being paid for the value of this residual silver. The new law limited the proportion of silver in alloy to no more than 10%. It also provided for payment of the silver value in deposits, but only when the proportion of silver was sufficient to make its separation affordable to the mint. This same exclusion applied to deposits of silver whenever gold was present as a by-product.
Also revised was the legal tender limit for minor coins. The cent was originally issued with a legal tender limit of 10 cents in any one transaction, but this had been reduced to just four cents by the Act of March 3, 1865, a clear indication that too many were then in circulation. The nickel three-cent and five-cent pieces were issued with legal tender limits of 60 cents and one dollar, respectively, but the Act of February 12, 1873 gave all three coins a uniform limit of 25 cents in any one transaction.
The new law assigned a legal tender limit of five dollars to all United States silver coins, but in so doing extended such status to the trade dollar, a coin not designed for domestic circulation. This may have been done inadvertently, but the problem it presented did not manifest itself until two or three years later. With the price of silver falling rapidly by the mid-1870s, trade dollars began appearing in American commerce in ever larger numbers. Because they were coined for depositors of silver at their bullion value, which was then below one dollar, this represented an instant profit when the coins were passed to the unwary as silver dollars. Congress acted to end this racket by passing a law July 22, 1876 that, among other provisions, terminated the legal tender value of trade dollars and limited their production to the number required solely for export. Unfortunately, this limitation was easily circumvented by speculators who simply maintained the pretense of overseas distribution while simultaneously passing trade dollars at face value in domestic commerce. The trade dollar crisis and its aftermath has been well reported in numismatic literature, so I won't expand on it here.
More interesting is another provision of the 1876 law. This was actually a follow-up to the Specie Resumption Act of January 14, 1875, which promised the return of gold coin circulation by 1879. It also authorized the Secretary of the Treasury to coin dimes, quarters and halves in numbers sufficient to redeem and retire all of the unpopular fractional paper notes of those denominations then circulating. The 1876 law further authorized the issue of up to ten million dollars worth of fractional silver coins for the purpose of redeeming a like value of legal tender notes (known to numismatists as United States Notes). The notes so removed from circulation were to be re-issued only upon the retirement of an equivalent value in fractional notes, which stubbornly remained at large.
So urgent was the desire to restore silver coins to circulation in place of the fractional notes that this law also permitted additional pieces to be struck beyond the numbers needed to retire paper currency. Up to 50 millions dollars worth of fractional coins and notes combined was permitted, and this accounts for the huge mintages of dimes, quarters and halves during the years 1875-77. As the price of silver continued to fall, however, the millions of existing coins hoarded or exported after 1861 began returning to domestic commerce, and this brought further production to a grinding halt early in 1878. This suspension has been attributed by most numismatic writers to the onset of heavy silver dollar production that year, but the two events were merely coincidental.
David W. Lange's column, “USA Coin Album,” appears monthly in The Numismatist, the official publication of the American Numismatic Association.
Want news like this delivered to your inbox once a month? Subscribe to the free NGC eNewsletter today!