A School History of the United States

by John Bach McMaster

Then the usefulness of the invention was at last appreciated, and in 1808 a line of steam vessels went up and down the Hudson. In 1809 Stevens sent his Phoenix by sea to Philadelphia and ran it on the Delaware. Another steamboat was on the Raritan River, and a third on Lake Champlain. In 1811 a boat steamed from Pittsburg to New Orleans, and in 1812 steam ferryboats plied between what is now Jersey City and New York, and between Philadelphia and Camden.[3]

[Footnote 3: On the early steamboats see McMaster's History of the
People of the United States, Vol. III., pp. 486-494.]

%286. The Currency; the Mint.%—Quite as marvelous was the change which in five and twenty years had taken place in money matters. When the Constitution became law in 1789, there were no United States coins and no United States bills or notes in circulation. There was no such thing as a national currency. Except the gold and silver pieces of foreign nations, there was no money which would pass all over our country. To-day a treasury note, a silver certificate, a national bank bill, is received in payment of a debt in any state or territory. In 1789 the currency was foreign coins and state paper. But the Constitution forbade the states ever to make any more money, and as their bills of credit already issued would wear out by use, the time was near when there would be no currency except foreign coins. To prevent this, Congress in 1791 ordered a mint to be established at Philadelphia, and in 1792 named the coins to be struck, and ordered that whoever would bring gold or silver to the mint should have it made into coins without cost to him. This was free coinage. As both gold and silver were to be coined, the currency was to be bimetallic, or of two metals.[1] The ratio of silver and gold was 15 to 1. That is, fifteen pounds' weight of silver must be made into as many dollars' worth of coins as one pound of gold. The silver coins were to be the dollar, half and quarter dollar, dime and half dime; the gold were to be the eagle, half eagle, and quarter eagle. Out of copper were to be struck cents and half cents. As some years must elapse before our national coins could become abundant, certain foreign coins were made legal tender.

[Footnote 1: The first silver coin was struck in 1794; the first gold, in 1795; the first cent and half cent, in 1793.]

%287. "Federal Money."%—The appearance of the new money was followed by another change for the better. In colonial days the merchants and the people expressed the debts they owed, or the value of the goods they sold, in pounds, shillings, and pence, or in Spanish dollars. During the Revolution, and after it, this was continued, although the Continental Congress always kept its accounts, and made its appropriations, in dollars. But when the people began to see dollars, half dollars, and dimes bearing the words "United States of America," they knew that there really was a national coinage, or "Federal money," as they called it, and between 1795 and 1798, one state after another ordered its treasurer to use Federal money instead of pounds, shillings, and pence; and thereafter in laying taxes, and voting appropriations for any purpose, the amount was expressed in dollars and cents. The merchants and the people were much slower in adopting the new terms; but they came at last into general use.

%288. Rise of the State Banks.%—Had the people been forced to depend on the United States mint for money wherewith to pay the butcher and the baker and the shoemaker, they would not have been able to make their payments, for the machinery at the mint was worked by hand, and the number of dimes and quarters turned out each year was small. But they were not, for as soon as confidence was restored, banks chartered by the states sprang up in the chief cities in the East, and as each issued notes, the people had all the currency they wanted.

In 1790, when Congress established the National Bank, there were but four state banks in the whole country: one in Philadelphia, one in New York, one in Boston, and one in Baltimore. By 1800 there were twenty-six, in 1805 there were sixty-four, and in 1811 there were eighty-eight.

In that year (1811) the charter of the National Bank expired, and as Congress would not renew it, many more state banks were created, each hoping to get a part of the business formerly done by the National Bank. Such was the "mania," as it was called, for banks, that the number rose from eighty-eight in 1811, to two hundred and eight in 1814, which was far more than the people really needed.

Nevertheless, all went well until the British came up Chesapeake Bay and burned Washington. Then the banks in that part of the country boxed up all their gold and silver and sent it away, lest the British should get it. This forced them to "suspend specie payments"; that is, refuse to give gold or silver in exchange for their own paper. As soon as they suspended, others did the same, till in a few weeks every one along the seaboard from Albany to Savannah, and every one in Ohio, had stopped paying coin. The New England banks did not suspend.

%289. No Small Change.%—The consequences of the suspension were very serious. In the first place, all the small silver coins, the dimes, half dollars, and quarter dollars, disappeared at once, and the people were again forced to do as they had done in 1789, and use "ticket money." All the cities and towns, great and small, printed one, two, three, six and one fourth, twelve and one half, twenty-five, and fifty-cent tickets, and sold them to the people for bank notes. Steamboats, stagecoaches, and manufacturing companies, merchants, shopkeepers—in fact, all business men—did the same.