America & gold/silver politics

What is a dollar? Congress kept answering. In 1792 it said gold and silver both, at a fixed ratio. Andrew Jackson answered by killing a national bank. The Civil War answered with greenbacks — paper dollars made legal tender for the war — that floated below gold in New York until resumption. After 1873 the country argued over silver as if the Mint’s list of coins were a crime. In 1900 a statute defined the dollar in gold alone.

In the young republic, the unit was argued out in public law. Congress named a mint ratio (the official exchange between gold and silver coins), chartered or killed a bank, made paper legal tender, dropped a silver dollar from free coinage, then defined the dollar in gold. Markets answered with Gresham’s pattern — when law prices two monies wrong, the overvalued “bad” money stays in the till and the undervalued “good” money leaves — and with gold premiums and drains on the Treasury’s reserve.

Fifteen to one

The Coinage Act of 1792 wrote both metals into law at fifteen to one: bimetallism, gold and silver legal at a fixed ratio. The Spanish dollar, the silver coin Americans already carried, shaped the weight of the new silver dollar. When the mint ratio and the world ratio drifted apart, the undervalued metal left the country or went to the melting pot. Gold was the metal the law undervalued, and gold coin was the one that went missing.

In 1834 Congress cut the gold in the ten-dollar eagle and moved the ratio to roughly 16:1. Gold coin came back into domestic use. The general mechanics of two metals under one law are told in the silver chapter’s bimetallism article. The American arithmetic starts here.

A bank war before any central bank

Jackson and the Bank is the fight over the Second Bank of the United States: the 1832 veto, federal deposits moved to state “pet banks,” the Specie Circular that demanded gold or silver for public land, and the Panic of 1837. When the Second Bank’s federal charter ran out, the country went on without a federally chartered central bank for the rest of the century.

Jackson’s war was over a charter and the government’s deposits. It was not an argument about the Federal Reserve, which did not exist until 1913.

Paper dollars for a war

Union finance after 1862 needed more than taxes and bonds could raise. Greenbacks and the Civil War follows the legal-tender notes Congress issued to pay for it. They spent at face value in shops but floated below gold in New York, where a gold premium quoted the market’s doubt every trading day.

The Resumption Act set a date: 1 January 1879. By then the premium was gone, and the Treasury resumed paying coin for its notes. War paper had been a suspension, not a permanent theory of money.

The silver question

The Crime of 1873 was a Coinage Act that left the standard silver dollar off the list of coins the Mint would strike freely for anyone who brought metal. Officials called it a clarification toward gold. When silver prices fell and western mines kept producing, farmers and miners called it a crime against the debtor.

Free silver became a movement. The Bland–Allison Act and the Sherman Silver Purchase Act required the Treasury to purchase silver without restoring free coinage. William Jennings Bryan carried the cause into the 1896 presidential campaign and lost.

Back to gold

A Treasury that buys silver and pays gold needs enough gold. In the early 1890s holders who doubted the reserve presented their claims, and gold outflows became ordinary public-finance news. The panic year 1893 brought repeal of the Sherman purchases; the Cleveland administration sold bonds for gold to defend what was left.

The road back toward the gold standard runs from resumption in 1879, through that strain, to the Gold Standard Act of 1900, which defined the dollar as 25.8 grains of gold nine-tenths fine. Seven years later a run on New York trust companies opened the next argument: the Panic of 1907, and the central bank Congress built in answer to it.

Jackson’s bank is not the Fed

The American arguments over credit and paper are easy to fold into one. They were not one. Jackson’s bank war was a charter-and-deposit fight in the 1830s. Greenbacks were Civil War legal tender. The Fed was a 1913 answer to the trust-company panic of 1907. They share a question — who may create money, and on what promise — but not an institution or a century.

The same goes for the metal. 1873 was a Mint list. 1900 was a gold definition. 1971, when the gold window closed for foreign governments, belongs to a different world. The twentieth century picks up where the Gold Standard Act left off.