"Department of State, May 1, 1806. "Sir:—In consequence of a representation from the director of the Bank of the United States, that considerable purchases have been made of dollars coined at the mint for the purpose of exporting them, and as it is probable further purchases and exportations will be made, the President directs that all the silver to be coined at the mint shall be of small denominations, so that the value of the largest pieces shall not exceed half a dollar.
"I am, etc.,
"James Madison.
"Robert Patterson, Esq., Director of the Mint."
The coinage of the silver dollar at our mint was not resumed until 1836. The small and worn Spanish pieces, being legal tender, also drove from circulation our fractional coins coming bright and plump from the mint. Bank notes and these worn pieces furnished the circulation of the country.
The condition of the currency became so objectionable that in 1830 the subject was taken up by a special committee of the House of Representatives, appointed for the purpose. Three reports were submitted, in one of which the committee stated that of $37,000,000 coined at our mints only $5,000,000 remained in circulation. A bill was submitted to the House fixing the ratio at 15.625 to one, and was strongly urged. There appeared no special opposition to the measure for a time, but the feeling of opposition to the circulation of bank bills had become very strong among the people and was reflected by the administration.
In the Senate the opposition to bank bills was headed by Thomas H. Benton, who openly advocated so changing the coinage ratio that gold would circulate to the exclusion of the notes, and perhaps incidentally of silver also. The matter of providing for silver, however, received little attention. The ratio was changed to sixteen to one, John Quincy Adams and Daniel Webster joining with Calhoun and Benton in bringing it about. It was well understood at the time that the operation of this act would banish silver. The object of the change was distinctly stated, especially by Mr. Benton, who said:
"To enable the friends of gold to go to work at the right place to effect the recovery of that precious metal, which their fathers once possessed; which the subjects of European kings now possess; which the citizens of the young republics to the south all possess; which even the free negroes of San Domingo possess; but of which the yeomanry of America have been deprived for more than twenty years, and will be deprived forever, unless they discover the cause of the evil and apply the remedy to its root."
By the act of 1834, superadded to by the act of 1837, the ratio of sixteen to one instead of fifteen to one was adopted. The result was that gold coins were largely introduced and circulated; but as sixteen ounces of silver were worth more than one ounce of gold, the silver coins disappeared, except the depreciated silver coin of other countries, then a legal tender. To correct this evil, Congress, on the 21st of February, 1853, provided for the purchase of silver bullion by the government, to be coined by it and not for the owners of the bullion. That was the first time the government had ever undertaken to buy bullion for coinage purposes. It provided for the purchase of silver bullion and the coinage of subsidiary silver coins at the ratio of less than fifteen to one. No mention was made of the dollar in the act of 1853. It had fallen into disuse and when coined was exported, being more valuable as bullion than as coin.
As the value of the minor coins was less that gold at the coinage ratio, they were limited as a legal tender to five dollars in any one payment. They were, in fact, a subsidiary coin made on government account, and, from their convenience and necessity, were maintained in circulation. They were similar to the coins now in use, revived and re-enacted by the resumption act of 1875.
It was not the intention of the framers of this law to demonetize silver, because they were openly avowed bimetallists, but it limited coinage to silver bought by the government at market price. They saw, in this expedient, a way in which silver could be more generally utilized than in any other. Mr. R. M. T. Hunter, an avowed bimetallist, in a report to the United States Senate, said:
"The mischief would be great indeed if all the world were to adopt but one of the precious metals as the standard of value. To adopt gold alone would diminish the specie currency more than one-half; and the reduction the other way, should silver be taken as the only standard, would be large enough to prove highly disastrous to the human race."