The unit of value adopted in the act of 1792 mentioned above was a dollar of grains of pure silver—practically the Spanish dollar then current—or a gold dollar of 24.75 grains, thus providing a bimetallic system with free coinage of the two metals at a ratio of 15 to 1. There had not been for many :years any material change in the production of the precious metals. and the ratio adopted corresponded fairly well with the market ratio. While no great quantity of metal was coined in the mints of the United States for the first twenty years of our history, and as be fore the outbreak of the \Vat' of 1812 the tide of importation was in our favor, the system worked satisfactorily. With the war and the heavy importations of merchandise which followed an export of specie began and it was found that gold was favored. This change in the market ratio was largely dint to the outbreak of the re volt against the Spanish domination in South America and the slackening of supplies of silver from that region. Ag it a t ion began for a new ratio, which did not culminate in legislation un til 1834. At this epoch the United States mined no silver. while a certain amount of gold. eon siderable for that time. was being drawn from the Appalachian gold region. When, therefore. the. new ratio was adopted it was deemed wise 11) be 111)1)11 the side of favoring gold rather than sil ver. Laws of 1831 and I535 ehanging the weight and fineness of the coin" established the ratio of 15.988 to I. familiarly IG to 1. although the market ratio was 15.625 to 1. The divergence was, however, too slight to affeet materially the supply of silver, but in 15111 gold was discovered in California, resulting in a decreased value of gold as compared with silver. Moreover, a metal lie surplus appeared in own markets, and silver began to be exported. As all the silver In simulation was divisionary coin, it was feared that a dearth of small change would result. The exportation of siher had already seriously de pleted the stock of half dollars, the largest silver coin in use, and had begun to threaten the quar ter dollars when in 1853 Congress reduced the fineness of silo coins less than one dollar from 900 to 835 and made them tokens to lie issued only on Government account. In so doing it did not affect the status of the silver dollar, for which as before free coinage existed—an empty privilege, since the silver dollar had a higher bullion value than the gold dollar. From the establishment of the mint until 1850 the aggre gate coinage of the United States was $106,000, 000. and in this total gold and silver were about equally represented. In the next ten years, 1851 60. no less than $403,000,000 were coined, of which less than $48.000,000 were silver. Such a change denotes not only that gold predoniinated in the metallic circulation of the period, but also that the metallic circulation itself became a thing of moment in the community.
The Civil War introduced new elements into our monetary eireulation—laiwr money and the national bank note. Soon after the outbreak of hostilities specie payments were suspended. The 1:overnment seemed to have exhausted every device of borrowing when it grasped the danger ous expedient of paper issues. Treasury notes bearing interest had several times in the history of the nation been resorted to, but it was not until the net of February 25, 1862. was passed that non-interest-bearing notes were issued. One hundred and fifty million dollars of notes were authorized and they were declared a legal tender for all debts., public awl private. except ditties upon imports and interest upon the public debt. Subsequent issues in July. 1862, and March, 1863, brought up the aggregate amount author ized to $450.000.000. This tlood of paper money drove gold to a premium and swept away the silver subsidiary coinage. It became necessary to supply the platy of the latter. and small notes called postage and Wet- fractional currency were authorized in 1862 to the extent of $50,000,000.
From the highest denominations down to three cents, the monetary circulation of the nation was paper only, the issues of the United Stales Government and the issues of the banks. In 1863 the national banking system was organized. but few banks availed themselves of the privilege of a national charter until after March 31. 1805, when a tax of 10 per cent. on the circulation of State banks outstanding after August 1, 1566, was enacted. This doomed the State bank notes, and banks which (dung to the note-issuing privi lege organized under the national law.
When peace had been declared the condition of the currency attetttiou. The V111111110 of paper outstanding was reduced to $356,o00,00n before 1868. ln that year the fear of :I monetary stringency due to contraction of the eurreney eaused Congress to abandon this policy, and this !postponed the day if redemption. In 1873 ad ditional issues were made and the amount ont• standing raised to $382,000,000. which limit was fixed as a maximum. In 1875 the Resumption Aet was passed providing for a return to specie payments January 1. 1879. Some slig,ht progress toward a metallic basis had already been made by calling in the fractional currency. The Re sumption Act authorized the Secretary of the Treasury to sell bonds for the purpose of pro tiding a gold supply sufficient to redeem Clot notes. It also removed the restriction Ithich had previously rested on the volume of the national bank currency, and provided that when additional bank notes were issued an amount of legal tender notes equal to SO per cent. of such issues should be retired. The fear of contraction which had dictated a bill to repeal the entire Resump tion Act. which failed only thnnigh the Presi dent's veto, succeeded in .1lay, 1878, in abolish ing this retirement provision, but not before the volume of notes had been reduced to $:346,681,016, at which the issue stands to-day. Much trepidation was felt lest resumption should not succeed and lest the applications for the redemp tion of notes should exhaust the reserve pro vided. But these fears proved groundless, and resumption was effected quietly and without dif ficulty. From 1879 the notes have been con vertible into gold upon demand. No fixed reserve of gold for this purpose was prescribed by law, but the practice of the Treasury has been to keep on hand nominally at least $100,000,000 for this purpose. Whenever the reserve fell below this limit, grave eoncern was felt. and more than once resort was had to the issue of bonds to sustain the reserve. The law of 1900 provides a reserve of $150,000.000 for the redemption of these notes. and provides more effective and more ex peditious means for its replenishment.
Before 1862 the centre of interest and discus sion in our monetary circulation lay in the notes of banks. It was then transferred to the paper issues of the tlovernment, and after 1870 to sil ver. During the Civil War period the United States began to produce silver as well as gold in considerable quantities, but as all our money was paper this did not affect the circu lation. In 1870 a revision of the coinage laws was undertaken with the purpose of codifying existing law. One of the features of the eodi fieation was the omission of the silver dollar front the list of coins. The measure was an executive one and there was considerable difficulty in se curing for it the attention of Congress, which lis tened impatiently while its provisions were tie ing explained. Between 1870 and 1873, when it became a law, it had been thoroughly discussed in Congress and should have been well under stood. The omission of the silver dollar made the I'nited States theoretically a gold standard coun try. This law which effected the demonetization of silver was the famous 'crime of 1873,' con cerning the passage of which the wildest state ments were current at a later date. The simple fact is that at the time no one was aware of the signifieance of the demonetization of silver.