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Change Comes to 1834-1837 Gold Coinage
By R.W. Julian

As collectors we look on the early gold coinage and perhaps wonder what people who lived in the 1790s and early 1800s thought of such coins. The truth is that they had very little opinion on this subject as U.S. gold did not circulate all that much. Those who did use gold normally had access to Spanish coins such as the 8 escudos (doubloon), which was worth $16 in American money.

The problem was not at the Mint but rather in the law passed in 1792 and the steps leading up to that legislation. During the 1780s a coin-starved public had repeatedly asked for a dependable national coinage.

In March 1790, less than a year into the new Federal government, Congress asked Treasury Secretary Alexander Hamilton to prepare a report on a mint and coinage. The secretary enlisted the aid of experts in order to amass as much information as possible and the 15,000 word report was submitted in January 1791 for both official and public scrutiny.

The task of formulating a system of coinage was not an easy one. The first decision was whether to use a bimetallic arrangement - where gold and silver carried an equal share of responsibility - or to go with either gold or silver as a single standard. In the end Hamilton chose the bimetallic standard as this was the more common European choice.

Once the decision had been made to go bimetallic, the secretary had to determine the proper ratio between gold and silver. The ratio had to be right as otherwise one metal or the other would be exported because it was undervalued. After a lengthy investigation, Hamilton arrived at the figure of 15 to 1, meaning that one ounce of gold was worth 15 ounces of silver.

Although all of Hamilton's suggestions were not adopted by Congress, the 15 to 1 ratio did pass muster and became part of the law. The Treasury secretary had determined that the average circulating Spanish dollar contained 371.25 grains of pure silver and it was on this basis that Congress determined the amount of gold that was equal to one dollar, 24.75 grains. There were no dollar gold coins mandated by the 1792 law, but eagles ($10 gold coins) were listed along with half and quarter eagles.

When Hamilton chose the 15 to 1 ratio he was actually very close to the international standard but within a few years these numbers had begun to drift toward 15.5 to 1, meaning that an ounce of gold would buy 15.5 ounces of silver. At first this did not mean much because the cost of shipping and insurance balanced out what little profit was to be made in sending our gold coins to Europe for recoinage.

By the early 1800s, however, the export of American coins was becoming a matter of concern to officials, especially Mint Director Elias Boudinot. Gold coins, in particular the eagle, were flying off to Europe while silver dollars were making the long trek to Canton in China, never to return. The director discussed this problem with key people at the Bank of the United States and they agreed that something needed to be done.

The result is well known to collectors, in that the striking of $10 gold coins and silver dollars was halted in 1804 on Boudinot's authority, although this was later formally approved by President Thomas Jefferson. There are eagles known with the 1804 date but the silver dollars made in 1804 used dies of 1803 or perhaps earlier.

The 1804 decision appeared to solve the problem but in reality did not. Gold coins, primarily half eagles - as quarter eagles were not struck from 1809 to 1820, also left the country though perhaps at a slower rate. Silver also was exported but now it was mainly half dollars going to Europe along with the gold coins.

The loss of silver was masked because half dollars continued to be struck by the Mint in heavy amounts after 1804, using deposits of Spanish dollars imported by American merchants. Gold continued its flight but this too was hidden from official scrutiny because of an influx of Spanish gold from mints at Mexico City and elsewhere.

United States gold coins were used by the public in the early 1800s, but this was mainly in the general area around Philadelphia and New York, whose merchants deposited the bullion necessary to make such coins. (Boston and Baltimore were also important, but not to the same extent.)

In 1814, due to the war with England that broke out in June 1812, banks were forced to suspend specie payments on their circulating notes. This led to widespread hoarding of both gold and silver coins, while even copper was under attack because of temporarily rising prices for this metal. During 1815 and 1816 the only coins seen by the public were worn Spanish silver pieces.

At war's end in late 1814 little changed. By mid 1816, however, trade had revived and pent-up demand in Europe for American products, such as high-grade cotton, meant that the balance of trade was in our favor for a change and both silver and gold flowed into the United States well into 1818. (As a result the banks were able to resume specie payments in early 1817.)

In January 1819, in what proved to be the opening volley in a long war, Representative William Lowndes of South Carolina introduced a measure to reduce the weight of gold coins and at the same time limiting legal tender for half dollars to $5. He also wished to reduce the weight of the silver coins, which meant that his claimed ratio of 15.6 to 1 was actually still about 15 to 1. The bill, if it had passed, would have achieved little or nothing but did call attention to the monetary problems soon to unfold.

The imports of foreign gold masked the virtual absence of American struck pieces. In mid 1820 the vault of one of the branches of the Bank of the United States was examined to see how much gold was on hand. There was more than $700,000 in specie available but only $1,200 of this was in gold; the American share of the latter was a mere $100.

By the fall of 1819 there was a growing concern that our monetary system was in trouble. Treasury Secretary William H. Crawford was well aware of this and prepared a comprehensive report in February 1820 on the state of the coinage in this country. One of his comments is especially telling with respect to just what coins were used in the marketplace. He noted that "Small change [i.e. U.S. coins], both of silver and copper, may be abundant in Philadelphia, the seat of the Mint, but it is not generally so elsewhere."

The Crawford report struck a chord in Congress and a committee was appointed in the House of Representatives to study the question and present possible solutions. A report was presented in February 1821, accompanied by draft legislation which got exactly nowhere.

They did report, however, on an 1820 effort of the Bank of the United States to bring gold back into daily use. The bank entered into a contract with a London banking firm for $2 million in specie, to be composed of equal amounts, if possible, of gold and silver. As noted in the committee report, "The amount was accordingly furnished, but not a dollar of it in gold."

If the situation looked bleak in 1819-1820 for gold, it was to get worse. More than 100,000 half eagles had been struck in 1818 1819 but virtually none remained in the U.S. Most were immediately sent to London or Paris. Which country received the bulk of our gold is not clear but England seems the more likely because the market ratio there was about 15.8 to 1 while France was 15.6 to 1.

Beginning in January 1821 the demand for gold in Europe got much stronger and even the 264,000 half eagles of 1820 barely caught their breath before being loaded on a ship bound for Europe. This strong demand also meant that many merchants no longer bothered bringing their gold to the Mint and simply sent their ingots or coins directly to Europe.

For the above reason gold coinages of 1821 through 1829 at Philadelphia were very poor and - after 1827 - were mostly from North Carolina gold. There were no refineries in that region and the North Carolina depositors simply used the Mint to verify the quality of their gold by striking coins; then it was shipped overseas.

In 1821 the Mint resumed striking quarter eagles but this was not due to any marketplace demand. There were in fact special mintages of quarter and half eagles until 1834 for Congressmen who wished to be paid in gold. The solons simply changed their gold coins for silver and made a quick 5 percent on their salary, an option not open to anyone else. Their gold coins also found their way to bullion dealers and were soon shipped across the Atlantic.

This massive outflow of gold in the 1820s is the principal reason that American gold coins of 1818 through early 1834 are very rare and difficult to find. The earlier coins (pre-1815) that have survived to the present day were scattered throughout the United States and made up small hoards of gold kept by families against hard times. There was not all that much pre-1815 gold around but it still exceeded that on hand from the coinages of 1818 and later.

Despite the flurry of official activity from 1819 to 1821, nothing was done. There was sufficient silver, though most of it was Spanish, to conduct normal business affairs. One estimate placed the amount of American silver coin in daily use at less than one-sixth of the whole, though this is perhaps too low. Whatever the true figure it is clear that Spanish silver coins carried the bulk of our everyday transactions.

There was a dramatic change of circumstances in the late 1820s. The North Carolina gold mining took a turn for the better, aided by discoveries in other Southern states, including Virginia and Georgia. The latter began producing gold in early 1830 and the bullion flowing in to the Philadelphia Mint soon became quite strong.

The year 1832 is perhaps as good an indication as any for the Southern bullion reaching the Mint. The total deposits of gold for that year were worth $800,000 and the share from the South amounted to just short of $680,000. The Mint had become, in some respects, little better than a factory coining gold for export to Europe.

Beginning in 1829 there had been a renewed series of official reports and inquiries about the gold crisis. In the latter part of 1833 the pace in Congress quickened and the Treasury pushed for a 16 to 1 ratio, which was slightly above the world market, in order to bring in gold. The Administration of President Andrew Jackson actually had a double agenda in that they wanted gold to circulate but also wished to get rid of small denomination bank notes.

In June 1834 Congress passed, and the President signed, a bill reducing the weight of the gold coins. The half eagle, for example, now weighed 129 grains, instead of 135 grains as before. It contained 116 grains of pure gold, giving the bizarre fineness of .8992248+.

The choice of 16 to 1 led, as expected, to a massive inflow of gold. Coupled with indemnity payments negotiated by the Jackson Administration with several European governments, especially France, over attacks on American shipping during the Napoleonic Wars of the early 1800s, the result was a flood of gold coins coming from the Philadelphia Mint from 1834 to 1840, though the quarter eagle mintages tapered off after 1836.

There was no particular demand from the public for quarter eagles but the large coinages of 1834 through 1836 at Philadelphia were at the direct order of Treasury Secretary Levi Woodbury, who shared the President's dislike of paper money. Woodbury also pushed for a gold dollar but mint officials were less than enthused and the idea had to wait until 1849.

When the new gold coins came out, the public had ready names for them. They were called "Benton Mint-Drops" (in honor of the Senator who had pushed the new legislation) and "Jackson Yellow Boys" for President Andrew Jackson.

Part of the new gold coinage came from deposits of the "old tenor" gold. From 1834 to 1861 about $1.5 million face value of the pre-1834 coinage was brought to the mints. If all in half eagles, this accounts for 300,000 pieces, though there were small amounts of quarter eagles and eagles in the recoinages. Some idea of the exports of our early gold coinage may be gathered from the fact that $10 million worth had been coined through 1834; this indicates that nearly 85 percent had been shipped abroad.

Critics of the new legislation had predicted that the 16 to 1 ratio would drive our silver from the marketplace. By early 1836 there were some indications that this was true and Mint Director Robert M. Patterson lobbied for a slight change of ratio. He asked that the gross weight of the gold half eagle, for example, remain at 129 grains but that the fineness be raised very slightly, to exactly .900. (He also requested that the silver be changed to .900 as well.)

The request met with opposition, primarily from those who did not understand what the changes were meant to accomplish. The new coinage law should have passed in the fall of 1836 but instead did not see the light of day until Jan. 18, 1837. The ratio was now 15.988 to 1 and this small change proved a correct one. For the next several years, until derailed by the massive quantities of gold that came from California after 1848, the bimetallic system of gold and silver coinage served the nation well.

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