Silver Coins and the Coinage Act of 1792

Silver and gold have been interwoven with United States coinage since the establishment of the United States Mint. This 1801 Draped Bust Silver Dollar embodies the Coinage Act of 1792 in tangible form and was the result of someone taking silver to the United States Mint to have it minted into this coin.

In his letter to the House of Representatives, “Final Version of the Report on the Establishment of a Mint,” dated January 28, 1791, then Secretary of the Treasury Alexander Hamilton recommended, among other recommendations (a) a bimetallic system of coinage based on a gold to silver value ratio of 15:1, (b) that the dollar unit of gold contain 24.75 grains of pure gold, (c) that the dollar unit of silver contain 371.25 grains of pure silver, and (d) that the United States provide “free coinage” where any private party – merchant, miner, banker – could bring silver bullion to the United States Mint to have it minted into coins free of charge. The weight chosen for the silver dollar was based on a survey of Spanish dollars in circulation at the time. Section 9 of the Coinage Act of 1792 provides:

And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denominations, values and descriptions, viz. Eagles – each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold. . . . Dollars or Units – each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver. . . .

Thus, an early silver dollar was 89.24% silver, establishing an implied price of $1.29 per troy ounce. Fractional silver coins were scaled in weight but maintained the purity and implied price. A $10 gold eagle was 91.67% gold and established an implied price for gold at $19.39 per troy ounce. Lesser-denomination gold coins were scaled in weight but maintained the purity and implied price for gold.

Early production of the United States silver dollar was not without its complications. As the gold-to-silver ratio was higher in parts of Europe, American merchants eschewed minting gold coins in the United States but instead used gold to acquire European goods. The United States silver dollar was used by American merchants to purchase goods in the West Indies and Asia.

There is a history myth that because the weight of the United States silver dollar was based on worn circulating Spanish milled dollars, that a freshly minted Spanish milled dollar was heavier and, that because it was accepted at equal value in the West Indies, merchants would take United States silver dollars to the West Indies, exchange them for Spanish milled dollars, and have those recoined by free by the United States Mint into United States silver dollars and head for the West Indies again. This was shown to be incorrect in a paper entitled “Alexander Hamilton and Silver Fineness“, published in February 2024, by Harry Salyards and Craig Sholley. The authors posit that early dollars disappeared from U.S. circulation simply because they were high value, easy to count, and readily accepted in the West Indies.

Whatever the reason, the United States Mint was minting silver dollars that were not being returned to circulation within the United States at a time when coin presses were driven by horses and human labor, and the Mint was unable to mint sufficient coins to meet the demands of the new nation. By 1804, the United States Mint director suspended production of the silver dollar, an action formalized in a letter from Secretary of State James Madison, dated May 1, 1806, on behalf of President Thomas Jefferson, directing the United States Mint to mint only fractional silver coins.

This post is the first in a planned series of posts on the United States Mint in the Modern Era as summarized here.