What Was the Crime of 1873?
The "Crime of 1873" was the notable omission of the standard silver dollar from the coinage law passed by Congress on February 12, 1873, and signed into law by President Ulysses S. Grant. This omission subsequently paved the way for the United States' adoption of the gold standard, which was highly controversial at the time, especially for those no longer able to turn their silver into legal tender.
- The Crime of 1873 refers to dropping silver dollars from official coinage by act of Congress in that year, setting the stage for the adoption of the gold standard in the U.S.
- The gold standard is a fixed monetary regime under which the government's currency is fixed and may be freely converted into gold, but this law notably left out the conversion of silver coins.
- The law was labeled a "crime" by those who were left holding relatively worthless silver coins, as well as those who opposed the gold standard as monetary rule.
History of Coinage Law and Reasons for Abandoning Silver
Coinage law oversees the coinage and legal tender that circulates in the United States and sets the standard for the relative worth of each form of tender in use. The first Coinage Act, passed in 1792, established the U.S. Mint and set the dollar as the official standard unit of money in America and legal tender.
The Coinage Act of 1873 revised the laws of its predecessor to pivot the country toward the gold standard and away from silver. Section fifteen of the Act specified the exact silver coins to be minted in the future and their respective weights, but the standard silver dollar was not included. Section seventeen stated that "no coins, either of gold, silver, or minor coinage, shall hereafter be issued from the mint other than those of the denominations, standards, and weights herein set forth." This meant that only the coins explicitly included in the Coinage Act would be legal tender from that point forward.
Earlier in the century, the United States had essentially adhered to a silver standard, but gold rushes such as the infamous California Gold Rush brought gold back into the equation. Subsequent silver rushes in places such as South Africa increased silver production in the 1860s and threatened to push gold out of circulation. The United States saw the gold standard as the only rational economic approach and pushed through the Coinage Act in 1873. The gold standard was officially adopted in 1900.
Criticism of the Coinage Law and Reasons for Calling It a Crime
Until 1873, the United States used a system of bimetallism, which used both gold and silver as comparison points for the relative value of legal tender and set a fixed exchange rate between the two. When the Coinage Act of 1873 removed silver from the equation, people who owned large amounts of silver were no longer able to turn that silver into money.
Many critics argued that this monometallism would have negative consequences for the economy, including unstable prices and a lower amount of money circulating in the economy. They also claimed that the law was pushed through corruptly, although no evidence confirms this. However, industrial advances and a few gold rushes, including the South African and the Klondike rushes, pumped more gold into circulation and provided economic reassurance.
The Modern Economic World
The gold standard was officially abolished in 1971. Since then, most modern economies are based on fiat money — or money whose value and the inflation rate is assigned by a government rather than an inherent worth — instead of relying on gold or silver. One example of fiat money is the U.S. dollar.