Before the first coinage act in the United States, citizens of the U.S. exchanged goods and services through the barter system. At this time no coins were available except for various foreign coins such as the widely traded and trusted Spanish real dollars. With the signage of the constitution and with a newly formed nation that allowed Congress to coin money, the first coinage act was proposed and passed Congress under the Presidency of George Washington. This article will cover a brief history of coins and events that surrounded changes made beginning in 1792 and ending in 2005.
The Beginning of U.S. Coinage
The first coinage act was passed April 2, 1792, and established the United States Mint to oversee all mint operations and manage the mint's first employees which included an engraver, an assayer and a chief coiner. All employees by law had to post a $10,000 bond to be considered for these positions. The first coins in the United States were minted using either gold, silver or copper, with engravings of words and inscriptions of liberty. The first coins minted with year of mint were the:
- $10 gold eagle with 270 grains (17.5g) of pure gold
- $5 gold half eagles with 135 grains (8.75g) of pure gold
- $2.50 quarter eagles with 67 and 4/8 grains (4.37g) of standard gold
- $1 dollars with 416 grains (27g) of pure silver
- Half dollars with 208 grains (13.5g) of standard silver
- Quarter dollars with 104 grains (6.74g) of standard silver
- Dimes, spelled "dismes" until the 1800s, had 41 and 3/5 grains (2.7g) of silver
- Half dimes with 20 and 4/5 grains (1.35g) of standard silver
- One cent with 11 pennyweights (17.1g) of copper
- Half cents with 5 and 1/2 pennyweights (8.55g) of copper;
The 19th Century
Dollars were minted in the tradition of the Spanish 8 reales. English speakers referred to the Spanish 8 reales as the Spanish milled dollar. The word "milled" referred to the fact that coin blanks called Planchets were "milled" on a milling machine to stay consistent with weights and sizes and prevent counterfeiting. The advanced milling process allowed these Spanish coins to be used in many countries worldwide.
The price of gold remained consistent at $19.39 an ounce from 1792 until a small spike to $21.79 in 1814 and $22.16 in 1815 then back to $19.39. By 1833, $19.39 gold would never be seen again so Congress reconciled the new value of gold with the passage of the 1834 Coin Act under the presidency of Andrew Jackson. A new regulation of weight and value of gold was adopted to bring the value of gold in sync with the marketplace and its relative value to silver. The act revised the ratio of gold to the dollar to the equivalent of $20.67 per ounce of gold, increasing the value of gold and increasing the ratio of gold/silver to about 1:16.
This act was also called the Crime Act by Western silver farmers because of a silver boom that enriched western states economies and because silver was dropped for the gold standard that would later be adopted by governments around the world. A powerful force called the Free Silver Movement was established that would be instrumental in the passage of the 1878 Bland Allison Act. This act allowed the Treasury Department to purchase $2-4 million a month of domestic silver to be coined into silver dollars for circulation. This act passed Congress after overriding the veto of President Rutherford B Hayes. The Sherman Silver Purchase Act passed in 1890 replaced this previous law and saw an increased purchase of 4.5 million ounces of silver bullion a month. President Cleveland later repealed this act in 1893 because the Treasury's gold reserves were being depleted by investors selling silver in exchange for gold. (For more information, take a look at The Gold Standard Revisited.)
Southern ministers encouraged Treasury Secretary Salmon P. Chase in 1861 to inscribe "In God We Trust" on coins and Congress approved and first used the phrase on the two-cent coin in 1864. The inscription was expanded to gold and silver coins with the passage of the 1865 Act. By 1873, all coins were approved with In God We Trust without further Congressional approval.
The 20th Century and Beyond
Under President Johnson, the 1965 Coin Act was passed that eliminated silver from certain coins due to a silver and coin shortage. Silver quarters and dimes saw complete elimination of silver content and half dollars' silver content was reduced to 40 % from 90%. Silver was replaced with alloys of copper, zinc, manganese and nickel. To prevent hoarding, a date freeze was also passed. All newly minted coins had a 1964 date for a period of time. Mint marks were also eliminated for five years. Mint marks are the letter on the coin that indicates which mint produced the coin. This served to remove any identification features of the newer coins and to prevent their removal from circulation.
The Coin Act of 2005 saw commemorative coins that recognized all prior presidents that began in 2007. Prior commemorative $1 coins would continue such as the Sacagawea $1 but will consist of no less than 1/3 the total of all $1 coins.
American coinage has come a long way since the barter system, and though it seems like it's been figured out, there will doubtless be more change to come.
For related reading, check out Common Questions About Currency Trading.