Coinage Act of 1873

Based on Wikipedia: Coinage Act of 1873

The Crime That Wasn't—Or Was It?

In 1876, silver miners trudged up to the United States Mint with their precious metal, expecting to walk away with freshly minted silver dollars. They were turned away. Somewhere along the line, the rules had changed, and most Americans had no idea when or how.

The accusation that followed would echo through American politics for a quarter century: Congress had committed the "Crime of '73."

What actually happened was both less sinister and more consequential than the conspiracy theories suggested. A dry, technical revision of mint regulations—the kind of legislation that puts reporters to sleep—had quietly ended a monetary system that dated back to the founding of the republic. The United States had stumbled onto the gold standard almost by accident, and the fallout would reshape American politics.

Two Metals, One Dollar

To understand what Congress did in 1873, you first need to understand what money meant in early America.

The Mint Act of 1792 established something called bimetallism—a system where both gold and silver served as the foundation of the dollar. A dollar was simultaneously defined as a specific weight of silver and a specific weight of gold. If you had gold bullion, you could bring it to the Mint and have it coined into money. If you had silver, same deal.

This sounds elegant. It wasn't.

The problem with bimetallism is that gold and silver prices fluctuate relative to each other on world markets. If gold becomes more valuable in Europe, American gold coins become worth more as metal than as money, so people melt them down or ship them overseas. The same happens in reverse with silver when its relative price rises. For the first four decades of the American republic, hardly anyone saw American gold or silver coins in everyday commerce. Most circulating coins were foreign.

Congress tried to fix this in 1834 by adjusting the ratio between gold and silver, making American coins less profitable to export. It worked well enough that lawmakers decided to completely overhaul the mint regulations three years later, producing the Mint Act of 1837. This law established something practical: a bullion fund that let depositors receive their coins immediately rather than waiting for their specific metal to go through the coining process.

Then came the California Gold Rush of 1849, and everything broke again.

When Silver Got Too Expensive

The gold rush flooded the market with gold, which made silver relatively more valuable. Suddenly, the silver in a silver dollar was worth more than a dollar. Predictably, silver coins vanished overseas to be melted down.

Congress responded in 1853 with a clever workaround. It reduced the silver content in small coins—the half dime, dime, quarter, and half dollar—making them "subsidiary" coins worth less as metal than their face value. These could now circulate without anyone wanting to melt them. But depositors lost the right to have their silver struck into these smaller denominations.

They could still bring silver to be made into dollar coins. But why would they? A silver dollar contained more than a dollar's worth of silver. Selling to jewelers and manufacturers paid better.

This effectively put the United States on a gold standard, even though the law still technically allowed bimetallism. The silver dollar existed in law but barely in practice.

One future president objected vocally to these changes. Andrew Johnson, then a Tennessee congressman, fought against reducing the precious metal content in coins. He lost that battle, but his instinct—that ordinary Americans would suffer when currency policies favored creditors over debtors—would prove prophetic.

War, Chaos, and Vanishing Money

The Civil War scrambled everything.

When confidence in the federal government wavered, people hoarded anything with intrinsic value. Gold coins vanished first, then silver. Eventually even the humble copper cent—worth only what the government said it was worth—commanded a premium. Commerce ground down as money literally disappeared from circulation.

People improvised. Merchants issued their own tokens. The government printed "fractional currency"—paper money in denominations smaller than a dollar. Starting in 1864, Congress authorized base metal coins that no one would want to hoard. The bronze cent replaced the heavier copper one. A two-cent piece appeared, then a three-cent nickel, then the five-cent nickel we still use today.

The two-cent piece, initially popular, faded quickly. Americans preferred the smaller nickel coins. This pattern—introducing coins and watching the public verdict—would matter when Congress later debated which denominations to keep.

The war also created the greenback: paper currency backed by nothing but the credit of the United States government. This was revolutionary and controversial. After the war, politicians fought bitterly over how quickly to withdraw these greenbacks and return to "hard money" backed by precious metals.

Treasury Secretary Hugh McCulloch believed the answer was "as fast as possible." He aggressively withdrew greenbacks from circulation until Congress stopped him, convinced his tight-money policies were strangling the economy. This battle between "sound money" advocates and those who wanted looser monetary policy would define American politics for decades.

The Silver Boom Nobody Saw Coming

Meanwhile, out west, something significant was happening underground.

The Comstock Lode in Nevada, discovered in 1859, was proving to be one of the richest silver deposits ever found. Other major silver mines opened across the western territories. By the late 1860s, more silver was coming out of American mines than ever before, and the price was starting to fall.

Some Treasury officials saw the implications clearly. As silver prices dropped, the old option of bringing silver to the Mint and having it coined into legal-tender dollars would become attractive again. If that happened, silver might flood the monetary system, driving out gold entirely—a phenomenon predicted by something called Gresham's law, which holds that "bad money drives out good." When two forms of money circulate at the same face value but one is worth more as metal, people spend the cheaper money and hoard the more valuable kind.

The worry was real. Silver dollar mintages had already risen considerably in the late 1860s as the price dropped. Each silver dollar was fully legal tender—you could pay any debt with them. If silver became cheap enough, every debtor in America might start paying their obligations in depreciated silver while creditors watched their gold-backed investments lose value.

The Forgotten Standard

Here's the strange thing: by the late 1860s, many Americans had forgotten that their country was technically on a bimetallic standard. The gold standard seemed like the natural order of things, adopted by sophisticated nations like Great Britain in 1816 and the newly unified German Empire in 1871. Surely the United States was on that standard too?

Many assumed it was. The silver dollar, after all, had been largely theoretical for years—legal but rarely seen.

In 1867, an international monetary conference in Paris proposed a radical idea: standardize gold coins across nations. With slight adjustments, the British gold sovereign, the American half eagle (five-dollar gold piece), and the French franc could all be made interchangeable. Twenty-five francs would equal one sovereign would equal five American dollars. Gold would become truly international.

Nothing came of this proposal. But it reflected the growing consensus that gold should be the sole monetary standard. The following January, Ohio Senator John Sherman introduced legislation to formally put the United States on the gold standard, eliminating silver as legal tender.

Sherman's bill failed to pass. But the idea didn't die.

The Man Who Wrote the Law

John Jay Knox was a Treasury Department functionary—the kind of meticulous bureaucrat who notices when accounting procedures aren't being followed.

In 1866, Treasury Secretary Hugh McCulloch sent Knox to investigate troubling losses at the San Francisco Mint, nearly $250,000 worth. Knox found chaos: sloppy transfers of bullion between officers, inconsistent records, missing receipts. He couldn't determine who was responsible because the paperwork didn't exist.

Three years later, Knox's successor George Boutwell sent him to examine other Mint facilities. At the New York Assay Office, Knox found similar problems—severe irregularities, large government losses, and staff who couldn't locate copies of their own regulations.

Knox had recommended a thorough revision of mint laws back in 1866. In January 1870, Secretary Boutwell finally instructed him to draft one.

Knox wasn't working alone. He had help from Henry Linderman, a former Mint Director who held a "roving commission" for the Treasury Department. Linderman would later become the first director of the newly created Bureau of the Mint. Knox also consulted former Mint directors, former chief coiners, and various monetary experts.

The resulting bill was comprehensive and, to most eyes, boring. It proposed to:

• Eliminate the standard silver dollar (replacing it with a lightweight version having limited legal tender)
• Move the Mint Director's office from Philadelphia to Washington
• Eliminate the coinage charge—the fee the Mint charged to convert bullion into money
• Abolish certain positions and streamline operations
• Create a Trade dollar for Asian commerce
• Discontinue the two-cent piece, three-cent piece, and half dime

The bill was submitted to Congress in April 1870. What followed was nearly three years of debate, revision, confusion, and political maneuvering—with the silver dollar elimination somehow slipping through almost unnoticed.

Three Years of Debate Nobody Noticed

Senator Sherman introduced the bill on April 28, 1870. As chairman of the Senate Finance Committee, he was well positioned to shepherd it through, but he didn't push for passage that session—Congress was busy with other financial legislation.

The bill attracted almost no newspaper coverage during its nearly three-year journey through Congress, though monetary experts watched closely. When Sherman brought it to the Senate floor in January 1871, senators focused not on the silver dollar but on the coinage charge.

This was a big deal for Western senators. Eliminating the coinage charge affected what mining companies and refiners could get for their gold. Sherman offered an amendment to retain the charge, but Western senators attacked it as an unjust tax on miners. The amendment failed 26–23.

On January 10, 1871, the bill passed the Senate 36–14. Sherman, remarkably, voted against his own legislation—apparently because his coinage charge amendment had failed.

The bill then went to the House of Representatives, where it promptly got stuck.

The Pennsylvania Contrivance

The House Committee on Coinage, Weights, and Measures was chaired by William D. Kelley of Pennsylvania. Kelley had a problem: he was too closely connected to Joseph Wharton.

Wharton was an industrialist who owned a nickel refinery in Camden, New Jersey—just across the river from Philadelphia. The Mint purchased much of its nickel from Wharton's company without competitive bidding. When the bill proposed making the cent from nickel alloy (in addition to the existing nickel coins), Wharton's interest was obvious.

New York Representative Clarkson Potter called the bill "this Pennsylvania contrivance" that would give "a monopoly to the gentleman in Pennsylvania." Another New Yorker, Dwight Townsend, tried to kill the bill entirely out of frustration with how long it was taking. His motion would have succeeded on a voice vote, but there wasn't a quorum, and it failed on a roll call.

Then Missouri Congressman James McCormick, representing nickel producers in his home state, introduced an amendment requiring competitive bidding for nickel purchases. Rather than accept this, Kelley sent the bill back to committee.

When it returned to the floor in April 1872, a different congressman was managing it: Samuel Hooper of Massachusetts, chairman of the House Banking Committee. Hooper went through the bill section by section and explicitly stated it would place the United States on the gold standard. Other representatives, including Potter and Kelley, demonstrated their understanding of this point in the ensuing debate.

The bill now included competitive nickel bidding, but it was withdrawn again after Kelley accused Potter of trying to benefit New York bullion merchants. The New York delegation turned hostile.

Finally, on May 27, Hooper presented a substitute bill and got it passed 110–13 without it even being read.

Let that sink in: Congress passed major monetary legislation without reading it.

The Trade Dollar's Strange Career

One innovation in the bill was the Trade dollar—a silver coin heavier than the old standard dollar, designed specifically for export to Asia.

This wasn't a new idea. American merchants trading in China had long faced a problem: Chinese markets preferred specific silver coins, particularly the Mexican peso (known in trade as the "Mexican dollar" or "piece of eight"). American silver coins weren't trusted or accepted the same way.

The Trade dollar was meant to compete directly with the Mexican peso in Asian markets. It contained slightly more silver than the Mexican coin, making it attractive to Chinese merchants who valued silver by weight. The new coin would be legal tender in the United States only up to five dollars—enough for casual transactions but not for paying large debts.

The Trade dollar's journey through Congress illustrated the confusion surrounding the entire bill. At various points, different versions proposed different legal tender limits. Some wanted unlimited legal tender (which would have created competition between the Trade dollar and gold). Others wanted no legal tender status at all. The compromise of five dollars represented an attempt to make the coin useful domestically while preventing it from flooding the monetary system.

In practice, the Trade dollar became a problem. When silver prices fell further in the late 1870s, the coin's five-dollar legal tender status was revoked—leaving workers who'd been paid in Trade dollars holding coins worth less than their face value and not legally redeemable.

February 12, 1873

The bill bounced between House and Senate several more times, with various amendments added and removed. The Senate insisted on some changes; the House rejected some of those; conferences were held; compromises were reached.

On February 12, 1873, President Ulysses S. Grant signed the Coinage Act into law. It would take effect on April 1.

The act accomplished many things: it created the Trade dollar, abolished the two-cent piece and half dime, reorganized mint operations, and established the Bureau of the Mint. It also quietly ended the right of silver holders to have their bullion coined into standard silver dollars.

For the moment, nobody cared much. Silver was still too valuable to bring to the Mint. The theoretical right to coin silver dollars had been worthless in practice for years.

That changed in 1876.

The Crime Discovered

By 1876, exactly what John Jay Knox and other monetary experts had predicted came to pass: silver prices dropped dramatically. The bonanza from the Comstock Lode and other western mines had flooded world markets. Silver that once traded above the Mint's purchase price now sold below it.

Silver producers suddenly had a very attractive option—or so they thought. Bring bullion to the Mint, have it coined into legal-tender dollars, and pocket the difference between the declining market price and the fixed monetary value.

Except they couldn't. The Coinage Act of 1873 had eliminated that right. The Mint was no longer authorized to strike standard silver dollars.

The reaction was furious.

Silver miners and western politicians accused Congress of deliberately demonetizing silver in secret, sneaking through legislation that destroyed the value of their product. They called it the "Crime of '73." The accusation implied corruption—that eastern bankers and creditors had bribed Congress to establish a gold standard that would protect their investments from inflation.

Was it a crime? The evidence is thin. The bill had been debated publicly for nearly three years. Multiple congressmen had explicitly acknowledged that it would establish a gold standard. The changes weren't hidden—they just weren't interesting to newspapers at the time.

But the accusation stuck, and for good reason: the effects were real and painful.

Deflation and Its Discontents

The gold standard that emerged from the 1873 act was, by its nature, deflationary.

Deflation means falling prices—which sounds good if you're a consumer but is terrible if you're a debtor. A farmer who borrowed $1,000 to buy land and equipment in 1870 might find by 1880 that his crops sold for half the price, but he still owed the same dollar amount on his loan. The real value of his debt had doubled.

This wasn't hypothetical. The decades after the Civil War saw persistent deflation as the money supply failed to keep pace with economic growth. Farmers in the South and West were devastated. They borrowed during good times, then watched prices fall while their debts remained fixed. Foreclosures swept through rural America.

The gold standard protected creditors—mostly eastern bankers and investors—at the expense of debtors. Every dollar repaid was worth more than the dollar originally borrowed.

Free coinage of silver would have reversed this. More silver coins in circulation meant more money, which meant inflation, which meant falling debt burdens. To indebted farmers, "free silver" wasn't an abstract monetary policy. It was survival.

To creditors and "sound money" advocates, free silver meant exactly the opposite: the government printing money to let deadbeats escape their obligations, destroying the value of honest investments, and debasing the currency.

A Quarter Century of Battle

The fight over silver dominated American politics from 1876 until 1900.

Congress passed the Bland-Allison Act in 1878, requiring the Treasury to purchase between two and four million dollars worth of silver monthly and coin it into dollars. President Rutherford B. Hayes vetoed it; Congress overrode the veto. The silver dollars circulated alongside gold, but the purchases weren't enough to significantly inflate the currency.

In 1890, the Sherman Silver Purchase Act (named for the same John Sherman who'd introduced the original coinage bill) increased government silver purchases dramatically. But it still didn't provide the unlimited free coinage that silver advocates wanted. The 1893 financial panic was blamed partly on uncertainty about whether the United States would stay on gold, and President Grover Cleveland pushed to repeal the Sherman Act.

The silver cause found its champion in William Jennings Bryan, the Nebraska congressman who electrified the 1896 Democratic National Convention with his "Cross of Gold" speech:

"You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold."

Bryan won the Democratic nomination but lost the general election to William McKinley. He ran again in 1900 and lost again. That year, Congress passed the Gold Standard Act, explicitly and permanently establishing gold as the sole monetary standard. The silver question was finally settled.

Or so it seemed.

The End of Gold

The gold standard that the 1873 act accidentally created, and that the 1900 act made explicit, lasted barely three more decades in its pure form.

In March 1933, in the depths of the Great Depression, President Franklin Roosevelt took the United States off the gold standard for domestic purposes. Americans could no longer exchange paper dollars for gold. The government even confiscated privately held gold, paying the official price and then immediately devaluing the dollar.

The international gold standard limped on until 1971, when President Richard Nixon ended the dollar's convertibility to gold for foreign governments. Since then, the United States has operated on a fiat currency system—money backed by nothing but the government's promise that it's money.

The free silver advocates, in other words, eventually won. Not through legislation, but through the abandonment of the entire framework they'd been fighting within. Gold and silver became commodities, traded on markets like oil and wheat, with no more inherent connection to dollars than anything else.

Was It a Crime?

Looking back, the "Crime of '73" accusation was both unfair and understandable.

Unfair because the bill was public. It was debated over nearly three years. Multiple congressmen stated explicitly that it would establish a gold standard. Newspapers didn't cover it much, but that's not the same as concealment. John Jay Knox and the other architects of the bill genuinely believed the gold standard was the right policy—they weren't sneaking anything through.

Understandable because the effects were devastating and the process was opaque. Most Americans had no idea the law had passed until they tried to coin silver and were turned away. Congress had made a decision that would reshape the economy, and hardly anyone outside monetary policy circles had noticed.

The bill passed the House without being read. Members voted on legislation they hadn't examined. The silver dollar's elimination was buried in a comprehensive technical revision that most lawmakers treated as routine. If that's not quite a crime, it's certainly a failure of democratic deliberation.

More importantly, the accusation of a "crime" gave voice to a real grievance. Whether or not Congress acted corruptly, it had acted in the interests of creditors over debtors, of eastern finance over western mining and southern farming. The gold standard redistributed wealth upward. Calling it a crime was how ordinary Americans articulated the injustice they experienced.

Lessons Unlearned

The Coinage Act of 1873 teaches several lessons that remain relevant:

Technical legislation can have enormous consequences that experts understand but the public doesn't. Knox and Linderman knew exactly what they were doing. Most congressmen who voted for the bill probably didn't. The public certainly didn't.

Monetary policy is never neutral. Every choice about currency—gold standard, silver standard, fiat currency, inflation rate, interest rates—creates winners and losers. The winners usually have better lobbyists.

Mistakes are hard to reverse. Once the silver dollar was demonetized, powerful interests had reasons to keep it that way. The gold standard protected creditor wealth. Unwinding it meant threatening that wealth, which meant facing enormous political opposition.

And finally: sometimes the boring stuff matters most. A bill revising mint regulations sounds like the most tedious possible legislation. It reshaped American politics for a generation and affected millions of lives. The technical details are where consequential decisions often hide.

The silver miners who showed up at the Mint in 1876 with their bullion had no idea what had hit them. In a sense, neither did Congress.