Introduction

Many people claim that sliver was demonetized in 1873 when Congress enacted the Coinage Act of 1873. This claim is not true. Congress did not demonetize silver. It ended the silver standard and took the first step in demonetizing the dollar.

Silver continued to be used as money until 1970. Silver was used as money in subsidiary coins (dimes, quarters, and halves) under the greenback standard between 1873 and 1879. It was used as subsidiary coins under the gold standard between 1879 and 1933. Under the federal-reserve-dollar standard, it was used between 1933 and 1964 for dimes and quarters and until 1970 for halves. In 1986 Congress again authorized silver as money when it ordered the mint to coin one-ounce silver eagles, which have a legal tender value of one dollar.

Between 1878 and 1900, silver was used as money in its own right in the form of the silver dollar. However, unlike the silver dollar before 1873, which was commodity money, the silver dollar between 1878 and 1900 was fiat money. Congress and the Secretary of the Treasury decided how many silver dollars to issue. Moreover, the value of silver in a silver dollar was less than its monetary value.

Under the silver commodity monetary standard, the people decide directly how many silver dollars are needed by the quantity of silver that they bring to the mint for coinage. Furthermore, the value of silver in the coin equals its monetary value. If the value of silver in coins rises above the coin’s monetary value, coins are melted until the coin’s monetary value equals the value of the silver that it contains. Conversely, if the value of silver in coins drops below the monetary value of the coin, people will bring silver to the mint for coinage until the two values are brought back into equilibrium.

Those who claim that Congress demonetized silver in 1873 agree with Plato, the German economist George Knapp, and the American Monetary Institute: Money is a legal fiction. Money is whatever the law declares to be money. It is an abstraction that has no value beyond what the law gives it. The material of which it is made is irrelevant and is whatever the government arbitrarily chooses for its own benefit. All this may be true for fiat money, which the government’s military might protects and forces on the people. It is definitely not true of genuine commodity money.

This notion that governmental decree gives money its value was illustrated during the debate on the Bland-Allison bill. Some Congressmen believed that Congress could by edict raise the value of silver. If Congress decreed that 371.25 grains of fine silver had the value of 23.22 grains of fine gold, the market value of silver would rise such that 16 ounces of silver would have the value of one ounce of gold. Senator Allison’s comment illustrates this ignorance or arrogance: “Legislation gives value to the precious metals, and the commercial value simply records the condition of Legislation with reference to the precious metals.”[1] Congress’ failed attempts to decree the value of 16 ounces of silver to equal one ounce of gold should be enough to convince anyone that the government cannot regulate the value of money by edict or otherwise. Unfortunately, it has not.

Those who claim that the law gives money its value believe that the U.S. government can issue an irredeemable aluminum disk with “Congress and the President of the United States decree that this coin is equal to and identical with one ounce of gold” stamped on it automatically has the value of one ounce of gold. A person can go to a gold bullion dealer and buy one ounce of gold with this aluminum coin. They actually believe that the bullion dealer would accept the aluminum coin in exchange for one ounce of gold without the government forcing him to accept it under the penalty of law. (If a governmental decree really does give money its value, then no force should be necessary for it to circulate at the decreed value. If force has to be used, then the government’s threat of death and not its proclamation makes the coin acceptable at the decreed value.)

Silver was not demonetized in 1873. The Coinage Act of 1873 was the first step toward demonetizing the dollar. In 1933, the second step occurred with the end of the gold-coin standard. The final step took place in 1971 when the gold exchange standard ended.

Constitutionally speaking, the United States is still on the silver standard though they statutorily abandoned that standard in 1873. The “dollar” as used in the Constitution means the weight of silver in the Spanish milled dollar. Without amendment of the Constitution, any other definition of the dollar is unconstitutional.

With this introduction, we will now investigate the use of silver as money between 1873 and 1900. Four major laws affecting silver as money were enacted between 1873 and 1900. They were the Coinage Act of 1873, the Bland-Allison Act in 1878, the Sherman Act or the Silver Purchasing Act of 1890, and the Gold Standard Act of 1900.

Coinage Act of 1873

With the Coinage Act of 1873, which has often been referred to as the “Crime of 1873,” Congress ended the free coinage of silver, which ended the silver standard. It changed the definition of the dollar, the unit of value, to 25.8 grains of standard gold or 23.22 grains of pure gold. Thus, Congress statutorily changed the definition of the dollar from its constitutional meaning of the average weight of silver in the Spanish milled dollar, which Congress found to be 371.25 grains of fine silver. Furthermore, the mint ceased coining silver dollars. (As the Act did not specifically authorize the coinage of silver dollars, it prohibited their coinage.) This action ended the bimetallic silver-gold system and placed the United States on a monometallic gold standard. (Many contend that the United States were on the fiat greenback-dollar standard between 1862 and 1879. So in 1873 the country was not on a gold or silver standard or a bimetallic gold-silver system. The country did not return to a specie standard until 1879 when U.S. notes, greenbacks, became redeemable in gold.) Moreover, this act confused monetary matters by retaining all monetary laws previously enacted even if they conflicted with the act. Gnazzo argues that because of this retention clause, the Coinage Act of 1873 did not demonetize silver. The United States were technically (statutorily) on the silver standard and practically (in usage) on the gold standard.[2]

Laughlin supports Gnazzo’s claim. Laughlin writes:

It is, moreover, possible that the silver dollar was not “demonetized” in 1873, in spite of the prevailing impression to that effect. The legal-tender power of the silver dollar was not taken away by this measure. The coinage laws had not been revised since 1837, and in the act of 1873 occasion was taken to drop out the silver dollar from the list of coins which were thereafter to be issued from the Mint.[3]

Under the Act, silver dollars minted before 1873 were full legal tender in unlimited amounts. The Act merely prohibited the minting of additional silver dollars. (In the Revised Statutes of 1874, all existing silver coins, including silver dollars, were limited to $5.00 as legal tender.[4] Thus, this law limited the legal tender power of existing silver dollars. It did not affect other silver coins as the Coinage Act of 1873 already restricted their legal tender power.)

John J. Knox, Comptroller of the Currency, originally drafted and sent the bill along with his report to Congress in 1870. His report noted that the proposed bill eliminated the silver dollar. He recommended replacing the silver dollar as the standard unit of account with the gold dollar.

Most Congressmen and the public consider the bill as merely a minor revision or recodification of the existing coinage laws. They did not view it as making any significant changes. For many years, the silver dollar had not been in general circulation and for most years only a small number (less than 200,000) were minted. When Congress enacted the Coinage Act of 1873, the metal in the silver dollar was worth slightly more than a dollar in gold.

At that time the fiat greenback (U.S. note) functioned as the monetary standard. Except on the West Coast, gold was not being used as money. Silver was used only in subsidiary coins. As the bill did not address the greenback, most people gave the bill little thought.

Although Congress gave the bill some debate, it had little interest in it. Both houses passed the bill with almost no opposition. Except the silver dollar, the bill limited the legal-tender value of silver coins to $5.00. It did not authorize the coinage of silver dollars. However, it did authorize the free coinage of trade dollars. A trade dollar contained 420 grains of standard silver and had a legal-tender limit of $5.00. It was intended to be used for trade with the Far East.

Because of a rise in the value of U.S. notes and a decline in the value of silver, trade dollars began circulating domestically. Thus, the silver standard was reestablishing itself. In 1876, Congress stripped the trade dollars of its legal tender status. Apparently, the money interest did not want any competition from silver. Congress ended the minting trade dollars in 1878 although a few were minted between 1879 and 1885.

Opponents of the Act asserted that the bankers and others who owned U.S. government bonds wanted to eliminate bimetallism and the silver standard to drive up the value of gold. Thus, the money that they received in payment of interest and for their bonds at maturity would have greater value.

Moreover, they claimed that the elimination of the silver standard reduced the money supply and caused prices to fall. Thus, an injustice had been imposed on farmers, whose crops had lost half their value.

Even if the free coinage of silver had remained, prices still would have fallen between 1873 and 1893 although probably not as much. In each year following 1873 until 1894, the purchasing power of silver was greater than it was in 1873 (see Table A-1 in the appendix [Editor’s note: This table has not been reproduced.]). The repeal of the purchasing clause of the Sherman Act (v.i.) and India’s ending the free coinage of silver in 1893 probably account for the significant drop in the value of silver after 1893.[5]

An important factor to the decline in prices during this era was the great increases in productivity caused by technological advances. Increasing productivity may have been more important than changes in the monetary system.

The Act’s opponents blamed the panics and depressions between 1878 and 1896 on a lack of money caused by abandoning the free coinage of silver. In American Business Cycles 1865-1897, Rendigs Fels argues that things other than money supply contributed to these panics and depressions. Excessive credit expansion and unwise capital investments are two of them. Other causes of depressions are a lack of investment opportunities, too much inventory, and natural cycles (e.g., Kondratieff, Juglar, and Kitchen).

Some claim that this Act was passed in secret. Several Congressmen who voted for this law claimed that they did not know for what they voted; they were deceived. Even President Grant, who signed it into law, claimed that he did not know what he was signing.

As for the secret enactment, Congress discussed the bill for three years. The proceedings were published in the Congressional Globe. The bill was printed 13 times. Congress discussed the omission of the silver dollar. Also, debated was replacing the silver standard with the gold standard,[6] that is ending the free coinage of silver and changing the definition of the dollar from 371.25 grains of fine silver to 23.22 grains of fine gold or from 412.5 grains of standard silver to 25.8 grains of standard gold.

Nevertheless, deception and parliamentary maneuvering appeared to have been used to get the bill enacted. Its supporters presented it as a minor bill that just recodified and cleaned up the monetary laws. It did not make any real change in the monetary system. It was presented in a way that a new silver dollar would be minted with reduced weight. The impression was given that the weight was to be reduced so that it would circulate. The real purpose of reducing the weight was to make it a subsidiary coin. (Later versions of the bill omitted the silver dollar altogether.) Parliamentary maneuvering was used to prevent the bill to be voted on from being read.

Although the Coinage Act of 1873 was not enacted secretly, deception was used in its passage. Apparently, a group of powerful men expected the price of silver to fall because European countries were beginning to move from the silver standard to the gold standard or to abandon bimetallism in favor of the monometallic gold standard. They also saw the supply of silver increasing from the newly discovered silver in the West. Senator Sherman, an ardent foe of silver, was their point man in the Senate. He was instrumental in getting this bill through Congress before the gold price of silver fell. Without the Coinage Act of 1873, the United States would have reverted to silver money.

About this law, Rothbard, who favors the monometallic gold standard that it brought about, writes:

It should be recognized that the silverites had a case. The demonetization of silver was a “crime” in the sense that it was done shiftily, deceptively, by men who knew that they wanted to demonetize silver before it was too late and have silver replace gold. The case for gold over silver was a strong one, particularly in an era of rapidly falling value of silver, but it should have been made openly and honestly. The furtive method of demonetizing silver, the “crime against silver,” was in part responsible for the vehemence of the silver agitation for the remainder of the century.[7]

Except the silver miners, most of the silverites were originally greenbackers. They favored low quality depreciating money. Originally, the inflation movement was urban. Only later in the 1890s did the agriculturalists join it.

When greenbacks were obviously going to be redeemed in gold at par (one dollar in greenbacks is redeemed in one dollar of gold), they turned to silver. By the mid 1870s, silver had fallen in value in terms of gold. The market ratio had fallen to around 18 to 1 (18 ounces of silver had the value of 1 ounce of gold). If free coinage of silver were allowed at the legal ratio of 16 to 1, silver coins would have driven gold coins out of circulation. More important, the dollar would have less purchasing power. This depreciation was for the benefit of debtors. It allowed debtors to pay their debts with cheap money.

An argument that the proponents of the Coinage Act of 1873 used was that the silver dollar had not circulated since 1853 when the market value of silver in a silver dollar became worth more than a dollar. Perhaps only a few silver dollars did circulate between 1853 and 1873, but a large quantity, 5,413,249 silver dollars, was coined. Many of these coins still exist today.

Another argument that the proponents used (after the fact), was that without the Coinage Act of 1873, the United States would have been on the silver standard by the time redemption of the greenback began in 1879. This is true. According to Laughlin, “15 percent of all our contracts and existing obligations would have been repudiated.”[8] This is questionable. Laughlin seems to be using the gold value (price) of silver to derive his number. However, excluding contracts requiring payment in gold, most of these debts were made with the greenback and not gold. Many were made at a time when a greenback dollar was worth less than 90 cents in gold.[9] Thus, he greatly overstates the repudiation.

The opponents of the Act used the opposite argument to support their opposition. Debtors paid loans, many of which had not been made in gold, in gold that had more value when the loan was paid than when the loan was made. (Between 1862 and 1875 when the Resumption Act was enacted, the gold price of greenbacks averaged between 49 and 90 cents. Thus, using Laughlin’s reasoning creditors received a 13 percent bonus above what was due.)

If Congress had not ended the free coinage of silver in 1873, the country would have been on the silver standard in 1879. Greenbacks would then have been redeemable in silver instead of gold. Instead of rising in value toward gold after the greenback would obviously be redeemable in specie, it would have approached the value of silver.

Following Laughlin’s reasoning, almost no repudiation of debt would have occurred if the country were on the silver standard. From 1874 to 1877, the greenback was closer in value to silver than to gold.

In 1873, the gold price of the greenback was 88 cents as compared to the gold price of the silver dollar of $1.01. In 1874, the greenback was 90 cents, and the silver dollar was 99 cents. When the Resumption Act passed in 1875, the greenback stood at 87 cents and the silver dollar at 96 cents. For 1876, 1877, and 1878, the respective prices were 90 cents, 95 cents, and 99 cents for the greenback and 90 cents, 93 cents and 89 cents for silver. The noticeable disparity between the greenback and the silver dollar in 1878 results from the greenback becoming redeemable in gold at par on January 1, 1879. If the country were returning to the silver standard instead of the gold standard in 1879, the gold price of the greenback would have been at or below 93 cents in 1877 and 89 cents in 1878.

When Congress ceased the free coinage of silver, it defied the Constitution. The Constitution perceived the dollar to be the same as the Spanish milled dollar. The dollar contained the weight of silver of the average Spanish milled dollar.

Abandoning the silver standard with a bimetallic gold-silver system for a monometallic gold standard made the concentration and centralization of metallic money into the hands of the government and banks easier. This goal was fully achieved when President Franklin Roosevelt stole the people’s gold in 1933.

With the depression following the Panic of 1873, debtors began clamoring for a cheap dollar. Congress refused to increase the supply of greenbacks. Silver miners discovered that they could no longer get their silver coined, which was a major market for their product. Silver miners, debtors, greenbackers, and populists united in agitating for the free coinage of silver. Out of this agitation came the Bland-Allison Act.

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Endnotes

1. J. Laurence Laughlin, The History of Bimetallism in the United States (New York, New York: D. Appleton and Company, 1886), p. 197.
2. Douglas V. Gnazzo, “Gold & Silver: The Story Behind the Story,” July 2006, http://www.gold-eagle.com/editorials_05/gnasso070206pv.html, July 3, 2006.
3. Laughlin, p. 93.
4. Ibid., p. 94.
5. Joseph French Johnson, Money and Currency: In Relation to Industry, Prices, and the Rate of Interest (Revised edition; Boston, Massachusetts: Ginn and Company, 1905), p. 252.
6. Horace White, Money and Banking (Boston, Massachusetts: Ginn & Company, 1896), pp. 213-218.
7. Murray N. Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II (Auburn, Alabama: Ludwig von Mises Institute, 2005), p. 158.
8. Laughlin, p. 93.
9. Thomas Allen, “Analysis of Charles Norburn’s Monetary Reforms as Presented in Honest Money” (Franklinton, North Carolina: TC Allen Company, 2009), pp. 6-7. Johnson, p. 279.

Copyright © 2010 by Thomas Coley Allen.

Some opponents of the gold standard reject it because they see it as part of the Jewish conspiracy to control the world. They cite the Protocols of the Learned Elders of Zion to support their claim.

The Protocols mention gold several times.

Protocol 2:

In the hands of the States of today there is a great force that creates the movement of thought in the people, and that is the Press. The part played by the Press is to keep pointing out requirements supposed to be indispensable, to give voice to the complaints of the people, to express and to create discontent. It is in the Press that the triumph of freedom of speech finds its incarnation. But the goyim [gentile, non-Jew] States have not known how to make use of this force; and it has fallen into our hands. Through the Press we have gained the power to influence while remaining ourselves in the shade; thanks to the Press we have got the gold in our hands, notwithstanding that we have had to gather it out of oceans of blood and tears. But it has paid us, though we have sacrificed many of our people. Each victim on our side is worth in the sight of God a thousand goyim.[1]

Protocol 4:

The intensified struggle for superiority and shocks delivered to economic life will create, nay, have already created, disenchanted, cold and heartless communities. Such communities will foster a strong aversion towards the higher political and towards religion. Their only guide is gain, that is Gold, which they will erect into a veritable cult, for the sake of those material delights which it can give. Then will the hour strike when, not for the sake of attaining the good, not even to win wealth, but solely out of hatred towards the privileged, the lower classes of the goyim will follow our lead against our rivals for power, the intellectuals of the goyim.[2]

Protocol 5:

Per Me reges regnant. “It is through me that Kings reign.” And it was said by the prophets that we were chosen by God Himself to rule over the whole earth. God has endowed us with genius that we may be equal to our task. Were genius in the opposite camp it would still struggle against us, but even so a newcomer is no match for the old-established settler; the struggle would be merciless between us, such a fight as the world has never yet seen. Aye, and the genius on their side would have arrived too late. All the wheels of the machinery of all States go by the force of the engine, which is in our hands, and that engine of the machinery of States is — Gold. The science of political economy invented by our learned elders has for long, past been giving royal prestige to capital.[3]

Protocol 20:

You are aware that the gold standard has been the ruin of the States which adopted it, for it has not been able to satisfy the demands for money, the more so that we have removed gold from circulation as far as possible.[4]

Protocol 22:

In our hands is the greatest power of our day—gold: in two days we can procure from our storehouses any quantity we may please.[5]

Of these, Protocol 20 is the most important with Protocols 5 and 22 adding additional enlightenment.

Anti-Jewish opponents of the gold standard focus on the above quoted paragraph from Protocol 20. With what the Jewish authors of this protocol write, they are in full agreement. Like the Jews behind the Protocols, they are convinced “that the gold standard has been the ruin of the States [countries] which have adopted it.” Also, like these Jews, they believe that gold has “not been able to satisfy the demand for money, the more so that we [Jews] have removed gold from circulation as far as possible.”

Anti-Jewish opponents of the gold standard promote governmentally issued fiat paper money, i.e., government notes. Like most proponents of governmentally issued fiat money, they cite paper money issued by the colonies to support their monetary system. (See my article “Massachusetts Notes: The Prefect Money” for the flaws and failure of this monetary system. Also, see my article “Assignat: The Nearly Perfect Money” for another highly flawed monetary system where the government issued fiat money.) Also, they cite Lincoln’s U.S. notes, greenbacks. (See my article “Analysis of Charles Norburn’s Monetary Reforms as Presented in Honest Money” for the flaws of this monetary system.)

Amazingly, these anti-Jewish opponents want to take control of the monetary system from the hands of the people and give it to the government. The gold standard gives control of the monetary system directly to the people. The fiat money system promoted by these anti-Jewish opponents places the control directly in the hands of the government. What is more amazing about this proposal is that the anti-Jewish opponents claim that Jews control the government. Jews likewise make this claim. In Protocol 20, Jews assert that they control all governments (also see Protocols 2 and 10). Thus, under their proposed replacement for the gold standard, the anti-Jewish opponents give the Jews direct control of the monetary system.

The Jews behind the Protocols were aware that a fiat monetary system gives them much more power and wealth than they could gain under the gold standard. These Jews outline their proposed monetary system in Protocol 20. They did so in the paragraph before and after the paragraph quoted above. These paragraphs read:

[Paragraph before:] The present issue of money in general does not correspond with the requirements per head, and cannot therefore satisfy all the needs of the workers. The issue of money ought to correspond with the growth of population and thereby children also must absolutely be reckoned as consumers of currency from the day of their birth. The revision of issue is a material question for the whole world.[6]

[Paragraph after:] With us [Jews] the standard that must be introduced is the cost of working-man power, whether it be reckoned in paper or in wood. We shall make the issue of money in accordance with the normal requirements of each subject, adding to the quantity with every birth and subtracting with every death.[7]

Thus, these Jews, like the anti-Jewish opponents, want to replace the gold standard with fiat paper money. Their criterium for issuing money is population — so many monetary units per person. With this criterium, many, perhaps most, anti-Jewish opponents would agree.

Furthermore, the Jews behind the Protocols want the government to be responsible for issuing the money. Although not explicitly stating such responsibility, the Protocols imply that the government should be responsible for issuing the money. Anti-Jewish opponents agree that the government should have this responsibility.

What is the difference between the two? Both want the government to control and issue fiat paper money. While using the Protocols to support their opposition to the gold standard, the anti-Jewish opponents support the monetary system that the Jews advocate in the Protocols. Are these anti-Jewish opponents really agents of the Jews behind the Protocols?

Like the Jewish authors of the Protocols, anti-Jewish opponents of the gold standard believe (or at least imply) that the gold standard is easily manipulated. These anti-Jewish opponents seem to believe that fiat money is difficult to manipulate — especially compared to gold. One could infer from the Protocols that the Jews also hold this belief. However, I doubt that these Jews are that stupid. They are smart enough to know that fiat money is easy to manipulate, much easier than gold. Manipulation is its reason for being. They prefer a system that is easy to manipulate to one that is difficult to manipulate (gold). (On the difficulty in manipulating gold, see my article “Is Gold Too Easy to Manipulate?”.)

Anti-Jewish opponents fear the power obtained by Jews withholding gold from the markets. Jews feed this fear by asserting that they have such power (Protocol 22). By hoarding gold, Jews create all sorts of economic havoc — so both the Jews and their anti-Jewish opponents claim. (See my article “Is Gold Too Easy to Manipulate?” for a refutation of this claim.)

Both the Jews behind the Protocols and their anti-Jewish opponents maintain that not enough gold exists to serve as money. Enough does exist. Enough gold exists to accommodate easily four times the annual gross world product. (See my article “There Is Enough Gold.” Also, see my article “Response to Dale’s Analysis of ‘There Is Enough Gold’” for more elucidation.)

A major difference between the supporters of the gold standard and its opponents is how they view money. Supporters generally think in terms of the quality of money. How much a unit of money will buy is more important than the number of monetary units. Conversely, opponents think in terms of the quantity of money. The number of monetary units is more important than how much a unit of money will buy. A person who thinks in terms of quantity would prefer ten million Zimbabwe dollars (July 2008 vintage) to one euro. A person who thinks in terms of the quality of money would prefer one euro because it had more purchasing power.

As shown above, regarding the gold standard, no important difference exists between the Jews behind the Protocols and the anti-Jewish opponents of the gold standard. Both favor replacing the gold standard with governmentally issued fiat paper money.

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Endnotes

1. Protocol of the Learned Elders of Zion, ed. Sergyel Nilus, trans. Victor E. Marsden (1905, 1922), p. 16.
2. Ibid., p. 21.
3. Ibid., p. 23.
4. Ibid., p. 56.
5. Ibid., p. 61.
6. Ibid., p. 56.
7. Ibid.