Reminiscences of Sixty Years in Public Affairs, Vol. 2

by George S. Boutwell

XXXIV THE MINT BILL AND THE "CRIME OF 1873"

Of the many measures of my administration of the Treasury Department, the Mint Bill of 1873 is the only one which has been made a party issue, and which has entered permanently into the policy of the country.

In the month of March, in the year 1869, I came to the head of the Treasury Department. At an early day my attention was directed to the disordered condition of the mint service, which was then, as it ever had been, without a responsible head. The proceedings at the mints were unsystematic, and I resolved upon an attempt to codify the laws and to place the administration in the hands of a recognized, responsible officer. President Grant appointed John Jay Knox comptroller of the currency. For many years Mr. Knox had held the office of deputy comptroller. He had been a careful, constant student, and he was already a recognized authority in financial matters.

I appointed Mr. Knox commissioner to codify the mint laws and to suggest alterations. He was assisted by Dr. Linderman, then an eminent expert in the theory and practice of coinage, by Mr. Patterson, superintendent of the mint at Philadelphia, and by others.

When the codification of the laws relating to the mint service had been completed the statute, as passed, contained seventy-one sections, including a number of new provisions. The political and personal controversy of twenty years and more was directed to a single section, which was in these words: "No coins, either of gold, silver, or minor coinage, shall hereafter be issued from the mints other than those of the denominations, standards and weights herein set forth." The coinage of the silver dollar piece was discontinued in the bill as prepared by the commissioners and the purpose to discontinue its coinage was thus announced in the report that was made to Congress:

"The coinage of the silver dollar piece, the history of which is here given, is discontinued in the proposed bill. . . . The present gold dollar piece is made the dollar unit in the proposed bill, and the silver piece is discontinued."

In 1873 I had come to believe that it was wise for every nation to recognize, establish, and maintain the gold standard. I was of the opinion then, as I am of the opinion now, that nations cannot escape from the gold standard in all inter-state transactions. The value of every article is resolved finally by the ascertainment of its value in gold. Silver or paper may be used for domestic purposes, but the value of that silver or paper is determined by its value in gold.

In America, as in England, all the attempts to fix a ratio between gold and silver coins and to maintain that ratio in business had failed, and hence it was that I determined to abandon the idea of a double standard, reserving in mind, however, the possibility that an agreement by commercial countries might overcome the difficulty. That possibility has now disappeared. The history of the United States is an instructive history. The coin ratio between gold and silver was fixed in Mr. Hamilton's time and with the concurrence of Mr. Jefferson.

In 1870 silver was at a premium upon the legal ratio between gold and silver coins, and such had been the fact from the year 1837, and probably from the year 1792. Indeed, there has never been a day, from the organization of the government, when the actual standard was silver. Until the act of 1878 was passed, silver coins had had no appreciable influence upon the volume of currency or the business of the country. The total coinage of silver dollars had been 8,000,000 pieces only. The coinage was suspended in 1805 or 1806, and the silver dollars had been exported or they had disappeared in melting pots. Such was the commercial demand for American silver coins that in 1853 Congress authorized the debasement of the subsidiary silver coins as the only means of securing their circulation.

It is quite doubtful whether in the year 1860 there was a person living who had seen an American silver dollar doing duty in the channels of trade. From 1806 to 1873 the business standard of the country was the gold standard. Silver had been recognized in the Coinage Act, but practically it had not played any part in the financial policy or fortunes of the country.

The choice of gold as the standard was not due to hostility to silver or to the silver mining interests, but to the well grounded opinion that gold was a universal currency, while in some countries, as in England and Germany, silver coins were not a debt-paying currency.

These—within the limits of a statement—are the reasons for the demonetization of the silver dollar and the adoption of the single gold standard. The measure was in accord with my policy, and it was in accord with the unbiased judgment of the commission.

It is a singular instance in legislative proceedings that a measure that had no active support and that was free from opposition at its enactment should be assailed vigorously after the lapse of years and through a long period of time. The measure was soon followed by the depreciation of silver and coincident with that change came the attacks upon the Mint Bill, and the denunciation of the "Crime of 1873."

The charges were two:

First: The authors of the change had been corrupted by English gold through one Ernest Seyd, a writer on economic topics. It was alleged that Seyd came to this country at the time when the measure was under consideration. Seyd was not living when the charges were made, but the fact of a visit to this country was denied by his son. Hon. Samuel Hooper was chairman of the Committee on Coinage. In the search for information Mr. Hooper invited Mr. Seyd to give him his opinion. Seyd was a writer, a man of good reputation, and a bimetallist. In a letter to Mr. Hooper, which is still in existence, and which is printed in the Congressional Record, Seyd condemned the demonetization of the silver dollar. His letter was dated at London, February 17, 1872.

The second charge was secrecy. The answer to this charge was to be found in historical facts.

The evidence is this: Mr. Knox's report contained two specific statements that it was a purpose of the bill to prohibit the coinage of the silver dollar; the report of the Secretary of the Treasury for the year 1872 made a specific recommendation to that effect; the bill was printed six times; it was considered in each House during the Forty-first and Forty-second Congresses; the precise question in controversy was the subject of discussion, and two years and ten months were given to the consideration of the bill.

The bill was discussed in the House of Representatives. Mr. Reed has stated that the report of the debate covers one hundred and ninety-six columns of the Congressional Record. Senator Jones, in his report of 1876, as chairman of the Silver Commission, refers to the debate in these words: "In the brief discussion on the bill in the House of Representatives, the principal reason assigned in favor of those sections which interdicted the future coinage of the silver dollar was that its value was three per cent greater than the value of the gold dollar." Thus Senator Jones admits that the debate in the House of Representatives was upon the question of the abolition of the silver dollar, and he recognizes his knowledge of the fact of the debate.

Finally the bill passed the Senate without one dissenting vote.

The downfall of silver has not been due to any legislation in America or Europe, nor to any decrees or despotic policy in Asia, but to the inventive faculties of one Charles Burleigh, of Fitchburg, Massachusetts, the inventor of the power drill.

If through him many silver mines have been rendered valueless, so it is to him that the world is indebted for a new application of force by which mountains are penetrated and mining in all its forms is carried on at one fourth part of the former cost. Every step in civilization, every advance movement that we call progress, is a peril to many and a ruin to some. By one stroke of genius, and limiting our thoughts to one only of its many consequences we may say that Burleigh has made gold so abundant and cheap that all substitutes for a currency from wampum to silver must soon disappear.

There is historical evidence tending to show that the representatives of the silver mining interest had sufficient and worthy reasons for assenting to the suspension of the silver dollar. In 1872 silver was at a slight premium as compared with gold. Therefore the privilege of coinage of the dollar was of no advantage to the owners of bullion.

The Mint Bill had a new and attractive feature. It provided for the coinage of a dollar that was to contain 420 grains of standard silver, and was to be known as the trade dollar.

This passage may be found in my report to Congress for the year 1872:

"Therefore, in renewing the recommendations heretofore made for the passage of the Mint Bill, I suggest such alterations as will prohibit the coinage of silver for circulation in this country, but that authority be given for the coinage of a silver dollar that shall be as valuable as the Mexican dollar and to be furnished at its actual cost."

The dollar was coined and it was known as the Trade Dollar. It contained 420 grains of standard silver.

The Mexican dollar which contained about 416 grains, was then sold at a premium, and it was used extensively in the China and India trade.

It was my expectation and the expectation of all concerned, that the trade dollar, from its added value, would take the place of the Mexican dollar in the immense trade of the East. My own confidence was great. Indeed, the thought of failure never occurred to me. Unfortunately, the stolidity of the Chinese and the force of habit among that people were not considered by us. From long use they had become accustomed to the Mexican dollar. They refused our trade dollar, notwithstanding its greater weight.

We coined and put into circulation, at home and abroad, about 36,000,000 pieces, many of which were afterwards recoined as legal tender dollars under a special act of Congress.

With the failure of that undertaking came the crusade against the act of 1873. Whether the two events sustained to each other the relation of cause and effect, I cannot say.

The suggestion that Senator Stewart of Nevada was assenting to the demonetization of the silver dollar derives support from the fact that, in the month of February, 1874, he indorsed the gold standard in two speeches, delivered, respectively, on the 11th and 20th days of that month. On the 11th he said: "I want the standard gold, and no paper money not redeemable in gold." On the 20th he added: "Gold is the universal standard of the world. Everybody knows what a dollar in gold is worth."

It is certain that in the month of February, 1874, when the contents of the Mint Bill were in the public statutes, the demonetization of the silver dollar, and the recognition of the gold dollar as the unit of value, had not affected the judgment nor disturbed the sensibilities of the advocates of silver.

I dismiss this branch of the subject with the observation that the act of 1873 placed the United States in a commanding position in regard to the use of silver. If that metal had continued to maintain its supremacy upon the ratio then established between gold and silver coin, there could have arisen no demand for the coinage of silver. If, on the other hand, silver should depreciate, the government might, at its pleasure, use, or it might decline to use, that metal as coin.

I now pass to a part of the history of the controversy not heretofore considered in public discussions, from which it will appear that the trusted representatives of the silver interest put aside the most inviting opportunity, if not the only opportunity, for the adoption of the bimetallic system by the commercial nations of the world.

The act of 1873 prepared the way for the use of silver by the commercial nations of the world, upon an agreed ratio with gold, if indeed, the possibility of such an arrangement ever existed. We were upon a gold basis; the balance of trade, by groups of years, was in our favor; we had a gold revenue from customs of about $200,000,000, and the excess of Treasury receipts over expenditures was nearly $100,000,000 a year.

If we had chosen to accumulate gold and postpone payments upon the
Public Debt, we could have brought the nations of the earth to our feet.

It was under circumstances thus favorable for negotiations for the use of silver that the Silver Commission of 1876 was constituted, and authorized, among other things, to inquire "into the policy of the restoration of the double standard in this country, and if restored, what the legal relation between the two coins of silver and gold, should be."

This authority opened a way for the introduction of a policy on the part of the United States looking to an arrangement for the use of silver by the states of Europe, and on that authority the commission dealt with the project of an international bimetallic system.

The commission consisted of eight persons. Senator Jones was the chairman, and Mr. Bland, of Missouri, was an influential member. It was my fortune to be of the commission and it was my fortune also to be alone in opinion upon the main questions that were treated in the reports.

The majority of the commission consisted of Messrs. Jones, Bogy, Willard, Bland and Groesbeck. They favored the remonetization of the silver dollar, and that without delay.

Of the points made in their report, I mention these. They said: "The supply of gold is diminishing, being now but little more than one half what it was in 1852, and is always so fitful and irregular from the method of its production that it is ill-suited to be a sole measure of value."

This statement as a statement of an existing fact was wide of the truth, and as a prophecy it was as fallacious as are the prophecies which predict the destruction of the world. From 1851 to 1855 the annual gold product of the world was 6,410,324 ounces. From 1876 to 1880 the annual gold product of the world was 5,543,110 ounces. The gold product of the latter period was eighty-six per cent of the gold product of the former period.

Far wide of the truth were the predictions of the majority in regard to the future product of gold. For the year 1894 the product was 8,737,788 ounces, or about thirty-seven per cent over the product of 1851-'55.

They, the majority, said: "No increase in the yield of silver in the immediate future seems upon the whole to be probable." The commission said further: "The exchanges of the world, and especially of this country, are continually and largely increasing; while the supplies of both the precious metals, taken together, if not diminishing, are at least stationary, and the supply of gold, taken by itself, is falling off."

Each of these two statements in regard to the precious metals was a serious error, and in their controlling influence upon the judgment of the commission they were fatal errors.

The gold product of the world in 1876 was 5,016,488 ounces. In 1894 the product had risen to 8,737,788 ounces, a gain of more than seventy-four per cent in the short period of eighteen years.

In 1876 the product of silver was 67,753,125 ounces, and in 1894 it was 167,752,561 ounces, a gain of about 147 per cent in eighteen years.

Upon these errors the majority of the commission based a policy by which the only opportunity that the country ever had for the establishment of a bimetallic system which should include the commercial nations of Europe, was put aside and forever lost.

If, in 1876, I had anticipated the immense increase in the product of silver, I might have hesitated, but in the view that I was then able to command I had great confidence that a bimetallic arrangement might be secured.

The majority of the commission favored bimetallism but they demanded, first, the remonetization of the silver dollar. On the other hand, I claimed that all thought of the further use of silver should be postponed until the attempt to secure the co-operation of other countries had been tried faithfully.

The policy of the majority of the commission prevailed, and it was consummated by the Statute of 1878, which was passed over the veto of President Hayes, and which authorized the coinage of the silver dollar.

When we had accepted silver, when we had abandoned the vantage ground that we had occupied, it was in vain that we solicited the co-operation of England, France and Germany. The adoption by the United States of a silver-using policy led the statesmen of those countries to anticipate the more extended and continuous use of silver leaving to them a monopoly of gold, while we should sink financially to the level of the degraded states of the world. That catastrophe we have escaped after an experience of twenty-five years, and then only by the combined efforts of the two great political parties.

I submit brief extracts from the report of the majority of the commission and from my individual report of 1876, that our relative positions may be understood.

The commission said: "We believe that the remonetization of silver in this country will have a powerful influence in preventing, and probably will prevent, the demonetization of silver in France and in other European countries in which the double standard is still legally and theoretically maintained."

Again the majority said: "It may be added that a legislative remonetization on the relation to gold of 15.5 to 1 accomplishes without delay all the objects of the proposition for an international conference, which is urged from various quarters."

That I may place myself where I stood in 1876 I present brief extracts from my report of that year.

First I said: "There can be but one standard of value in any country at the same time, and a successful use of gold and silver simultaneously can be effected only by their consolidation upon an agreed ratio of value, and by the concurrence of the commercial nations of the world.

"The undersigned is also of opinion that it is expedient for this Government to extend an invitation to the commercial nations of the world to join in convention for the purpose of considering whether it is wise to provide by treaties and concurrent legislation for the use of both silver and gold in all such nations upon a fixed relative valuation of the two metals; and, finally, that until such an agreement between this Government and other commercial nations can be effected, the United States should pursue the existing policy in regard to the resumption of specie payments."

Further I said: "It is to be apprehended that the remonetization of silver by the United States at the present time would be followed by such a depreciation in its value as to furnish a reason against the adoption of the plan by the rest of the world, and that an independent movement on our part would increase the difficulties rather than diminish them."

These extracts shall suffice. I now repeat the assertion with which I introduced this topic, viz.: That in 1876 the majority of the Silver Commission put aside the most favorable opportunity, indeed the only opportunity, that the country has ever had for the organization of a universal system of bimetallism.

Of that majority, Senator Jones of Nevada, and Representative Bland, of Missouri, were the leading members. If in defence or in extenuation of the policy of the majority it shall be said that the United States has not remonetized silver, and that, therefore, the policy of the majority has not been tested, a partial rejoinder, if not, indeed, a satisfactory reply, may be deduced from the facts that between the years 1878 and the year 1893 the Government coined more than 400,000,000 silver dollars, and yet, in that period of time, silver bullion fell from 1.15 plus per ounce to .65 plus per ounce.

It is worthy of notice that the product of silver in the United States has increased with the demand for silver. Upon the passage of the Sherman Bill the product advanced from 45,000,000 ounces in 1888 to an average of 55,000,000 ounces from 1889 to 1893, inclusive. Upon the repeal of that act the product fell to 49,000,000 ounces in 1894.

It is not only probable, it is certain, that with every increasing demand for silver there will be an added supply. Consider what has happened since the appearance of the inventions of which I have spoken.

The world's annual product of silver from 1493 to 1865, inclusive, was 16,887,157 ounces. The largest annual product was from 1861 to 1865, when it reached 35,401,972 ounces. From 1866 to 1894 inclusive, the annual average product was 114,326,397 ounces. In 1894 the product was 167,752,561 ounces, which, as will be observed, was about nine times the annual product from 1493 to 1865.

From 1876 to 1894 the business of silver mining was increased 147 per cent. Can any one name any other business or pursuit in which there was a like increase? And is not the inference justified that the profits have been large and tempting, notwithstanding the demonetization of silver in some countries and the suspension of coinage in other countries?

I turn now to the future, and first as to the possibility of the further use of silver as currency.

I assume that in countries where the standard is gold there may be a considerable use of silver, as in the United States to-day.

An international bimetallic system, binding nations to each other for a definite term of years, is a proposition involving large responsibilities.

If in 1885 it was not practicable to secure the adoption of the bimetallic system, when silver was worth eighty-four cents per ounce, what is the prospect of its adoption when silver is worth only sixty- four cents per ounce, with an annually increasing product and a diminishing price?

What remains? This, possibly: That the nations may agree to purchase each a per cent of a fixed amount of silver as the product of each year. This scheme might prove, and probably it would prove, to be only a temporary expedient.

The enormous increase in the business of silver mining is evidence that the profits are far in excess of the profits that are gained in other pursuits. The increase in product is likely to be followed by a fall in price. Such are the resources of the earth that an increase in the demand for silver will be followed by an increase in the supply.

Gold mining is obedient to the same law. From 1876 to 1894 the product increased 74 per cent. That ratio of increase is likely to continue. The world is not in peril of a gold famine. Gold as a currency, passing from hand to hand, will be used less and less. Substitutes, for which gold can be obtained, will be preferred. The volume of currency in a country is not limited by the amount of gold that a country may possess. It may increase the amount of subsidiary coin very largely, and it may add to the sum of paper money, provided that that paper money is always redeemable in gold.

Nor does the quantity of gold in a country determine the price of commodities, except as that gold is a part of the total volume of the currency of the country. The volume of currency as a whole is the force by which the salable value of commodities is affected.

In truth, gold plays a small part only in actual business. It is a regulator of business rather than an active instrument for the transaction of business. It is not an exaggeration to say that the use of gold in business is limited to a small fraction of one per cent of the aggregate transactions in countries where gold is the standard.

It is not improbable that in the near future the world is to meet a surfeit of gold, as it is now meeting a surfeit of silver. Yet even then its capacity as a standard will not be affected. History does not carry us to a time when gold was not the recognized standard for the measurement of every other kind of property, and that not by one tribe or people only, but by mankind in every clime and in every stage of savageness or of civilization.

As the Mint Bill and the demonetization of silver have occupied the attention of the country for a third of a century, and as there may be a revival of the controversy at a time in the future I have thought it wise for me to make a record of the facts in the most enduring form at my command.

At the end this is my claim for the Mint Bill of 1873: It established the gold standard for the United States for all time. All the subsequent legislation has rested upon the fact that the Statute of 1873 made the gold dollar the standard of value in the United States.