That act lowered • the weight of the gold coins by decreasing' the amount of pure metal in the eagles from 247.5 to 232 grains, and that in the other gold coins proportionately thus changing the mint ratios between gold and silver coins from 15 to 1 to 16 to 1. The bullion ratio of that time being about 15.73 to 1 gold coin was slightly overvalued at the mint and, therefore, was restored to circulation, but for the same reason, silver disappeared. and a new problem was created, namely that of sup plying the country with small change. That problem was solved in 1853 by an act which reduced the half-dollars, quarters and dimes to the status of subsidiary coins by diminishing the amount of metal in them by 7 per cent, by taking away from private persons the privi leges of having silver bullion transformed into them at the mint, and by providing that here after they should be manufactured only on government account and sold to private persons at par for gold and that in the future they should be legal tender only for sums not exceeding five dollars. The silver dollar was not affected by this act, but its coinage was unprofitable because the bullion necessary to manufacture it was worth considerably more than a dollar.
The acts of 1834 and 1853 together with the increased production and failing value of gold occasioned by the discoveries of new mines in California and Australia gave the country for the first time an adequate supply of specie. The greater part of the circtflatino. medium even during this period, however, was.supplied by the state banks, which increased apidly in number, especially after the removal of the competition of the second United States bank in 1836. This portion of the currency was de fective on Acout.t of wide differences in the character of the banks which'were issuing notes. There was no uniformity in the laws passed in the various States for the regulation of banks, nor in the practices of the banks themselves. The notes of most banks, therefore, enjoyed a local circulation only and the country lacked a uniform credit medium.
The Civil War inaugurated a new era in American monetary history. In February 1862 an act was passed authorizing the government to issue legal tender inconvertible notes in denominations suitable for circulation as money and within a few months these notes had de predated to such an extent that gold and silver of all denominations disappeared from circula tion. The National Banking Act, passed in 1863, provided another form of currency in the form of national bank not secured by government bonds. These notes, being re deemable in the depreciated legal tender notes of the government, shared their depreciation.
State bank notes were forced out of circulation by a 10 per cent tax levied on them in 1865 and have not formed an element of our cirr culating medium that time. This com bination of government and national bank notes constituted the currency of the country until 1879, on 1 January of which year specie pay ments were resumed by the government in pur suance of an act passed in 1875.
While the problem of, resuming specie pay ments was being considered in Congress two important coinage acts were passed. That of 1873 dropped the silver dollar from the list of coins authorized to be manufactured, thus com pletely depriving private persons of the privi lege of transforming silver bullion into silver th coin at the United States mints, that privilege in the case of half-dollars, quarters and dimes having been taken away from them by the Act of 1853. Silver having fallen greatly in value in 1876 and subsequent years on account of greatly increased production from recently discovered mines in Nevada, the loss of this privilege seriously affected the profits of the owners of these mines, and agitation for the restoration of the free coinage of the silver dollar was started by them in combination with the opponents of the resumption of specie pay ments, politicians and speculators who saw in the free coinage of silver an opportunity to further their own ends. This combination was not strong enough to force through Congress the free coinage act they wanted, but it was strong enough to force the passage of a com promise measure in 1878 known as the Bland Act which compelled the Secretary of the Treasury to purchase each month not less than two and not more than four million dollars worth of silver bullion and to coin it into silver dollars. This act also originated the sil ver certificate which has been an element of our currency since that date.
Like all compromises, the Bland Act was unsatisfactory to both parties to the controversy. The advocates of free silver continued their agitation both in and out of Congress, and in 1890 secured a further concession in the form of the Sherman Act, which directed the Secre tary of the Treasury to purchase each month 4,500,000 ounces of silver and to pay for it in Treasury notes redeemable on demand either in silver dollars or gold coin at the ,option of the Secretary of the Treasury. However, sauce the act declared it to be the policy of the United States to maintain a parity between the two metals at the existing legal ratio, the Secretary was practically compelled to redeem these notes in gold so long as the mint ratio remained above 16 to 1.