As it was evident that Congress intended to provide an aggregate issue of $50,000,000 of such coin and currency in circulation, I directed the further issue of silver coin, equal in amount to the currency estimated to have been lost and destroyed.
I recommended that the limitation upon the amount of such fractional coin, to be issued in exchange for United States notes, be repealed. The coin was readily taken, was in great favor with the people, its issue was profitable to the government, and experience had shown that there was no difficulty in maintaining it at par with United States notes. The estimated amount of such coin in circulation in the United States in 1860, at par with gold, was $43,000,000. Great Britain, with a population of 32,000,000, maintained an inferior fractional coin to the amount of $92,463,500, at par with gold, and other nations maintained a much larger per capita amount. The true limit of such coin was the demand that might be made for its issue, and if only issued in exchange for United States notes there was no danger of an excess being issued.
By the coinage act of 1873, any person might deposit silver bullion at the mint to be coined into trade dollars of the weight of 420 grains, troy, upon the payment of the cost of coinage. This provision had been made at a time when such a dollar, worth in the market $1.02-13/100 in gold, was designed for the use of trade in China, where silver was the only standard. By the joint resolution of July 22, 1876, passed when the trade dollar in market value, had fallen greatly below one dollar in gold, it was provided that it should not be thereafter a legal tender, and the Secretary of the Treasury was authorized "to limit the coinage thereof to such an amount as he may deem sufficient to meet the export demand for the same." Under these laws the amount of trade dollars issued, mainly for exportation, was $30,710,400.
In October, 1877, it became apparent that there was no further export demand for trade dollars, but deposits of silver bullion were made, and such dollars were demanded of the mint for circulation in the United States, that the owner might secure the difference between the value of such bullion in the market and United States notes. At the time the mints were fully occupied by the issue of fractional, and other coins, on account of the government. Therefore, under the authority of the law of 1876 referred to, I directed that no further issues of trade dollars be made until necessary again to meet an export demand. In case another silver dollar was authorized, I recommended that the trade dollar be discontinued.
The question of the issue of a silver dollar for circulation as money had, previous to my report, been discussed and carefully examined by a commission organized by Congress, which had recommended the coinage of the old silver dollar. With such legislative provisions as would maintain its current value at par with gold, its issue was recommended by me. I thought a gold coin of the denomination of one dollar was too small for convenient circulation, while such a coin in silver would be convenient for a multitude of daily transactions, and in a form to satisfy the natural instinct of hoarding.
I discussed the silver question to some length and said that of the metals, silver was of the most general use for coinage. It was a part of every system of coinage, even in countries where gold was the sole legal standard. It best measured the common wants of life, but, from its weight and bulk, was not a convenient medium in the larger exchanges of commerce. Its production was reasonably steady in amount. The relative market value of silver and gold was far more stable than that of any other two commodities—still, it did vary. It was not in the power of human law to prevent the variation. This inherent difficulty had compelled all nations to adopt one or the other as the sole standard of value, or to authorize an alternative standard of the cheaper coin, or to coin both metals at an arbitrary standard, and to maintain one a par with the other by limiting the amount and legal tender quality of the cheaper coin, and receiving or redeeming it at par with the other.
It had been the careful study of statesmen for many years to secure a bimetallic currency not subject to the changes of market value, and so adjusted that both kinds could be kept in circulation together, not alternating with each other. The growing tendency had been to adopt, for coins, the principle of "redeemability" applied to different forms of paper money. By limiting tokens, silver, and paper money, to the amount needed for business, and promptly receiving or redeeming all that might at any time be in excess, all these forms of money could be kept in circulation, in large amounts, at par with gold. In this way, tokens of inferior intrinsic value were readily circulated, and did not depreciate below the paper money into which they were convertible. The fractional coin then in circulation, though the silver of which it was composed was of less market value than the paper money, passed readily among all classes of people and answered all the purposes for which it was designed. And so the silver dollar, if restored to our coinage, would greatly add to the convenience of the people. But this coin should be subject to the same rule, as to issue and convertibility, as other forms of money. If the market value of the silver in it was less than that of gold coin of the same denomination, and it was issued in unlimited qualities, and made a legal tender for all debts, it would demonetize gold and depreciate our paper money.
The importance of gold as the standard of value was conceded by all. Since 1834, it had been practically the sole coin standard of the United States, and, since 1815, been the sole standard of Great Britain. Germany had recently adopted the same standard. France, and other Latin nations, had suspended the coinage of silver, and, it was supposed, would gradually either adopt the sole standard of gold, or provide for the convertibility of silver coin, on the demand of the holder, into gold coin.
In the United States, several experiments had been made with the view of retaining both gold and silver in circulation. The 2nd Congress undertook to establish the ratio of fifteen of silver to one of gold, with free coinage of both metals. By this ratio gold was under-valued, as one ounce of gold was worth more in the markets of the world than fifteen ounces of silver, and gold, therefore, was exported. To correct this, in 1837, the ratio was fixed at sixteen to one, but sixteen ounces of silver were worth, in the market, more than one ounce of gold, so that silver was demonetized.
These difficulties in the adjustment of gold and silver coinage had been fully considered by Congress, prior to the passage of the act approved February 21, 1853. By that act a new, and it was believed a permanent, policy was adopted to secure the simultaneous circulation of both silver and gold coins in the United States. Silver fractional coins were provided for at a ratio of 14.88 in silver to one in gold, and were only issued in exchange for gold coin. The right of private parties to deposit silver bullion for such coinage was repealed, and these coins were issued from bullion purchased by the Treasurer of the Mint, and only upon the account, and for the profit, of the United States. The coin was a legal tender only in payment of debts for all sums not exceeding five dollars. Though the silver in this coin was then worth in the market 3.13 cents on the dollar less than gold coin, yet its convenience for use in change, its issue by the government only in exchange for, and its practical convertibility into, gold coin, maintained it in circulation at par with gold coin. If the slight error in the ratio of 1792 prevented gold from entering into circulation for forty-five years, and the slight error in 1837 brought gold into circulation and banished silver until 1853, how much more certainly would an error then of nine per cent. cause gold to be exported and silver to become the sole standard of value? Was it worth while to travel again the round of errors, when experience had demonstrated that both metals could only be maintained in circulation together by adhering to the policy of 1853?