viding a gold supply sufficient to redeem the notes. It also removed the restriction which had previously rested on the volume of the national bank currency, and provided that when additional bank notes were issued an amount of legal-tender notes equal to 80 per cent. of such issues should be retired. The fear of contraction which had dictated a bill to repeal the entire Resumption Act, which failed only through the President's veto, succeeded in May, 1878, in abolishing this retirement provision, but not before the volume of notes had been reduced to $346,681,016, at which point the issue stands to-day. Much trepidation was felt lest resumption should not succeed and lest the applications for the redemption of notes should exhaust the reserve provided. But these fears proved groundless, and resumption was effected quietly and without difficulty. From 1879 the notes have been convertible into gold upon demand. No fixed reserve of gold for this purpose was prescribed by law, but the practice of the Treasury has been to keep on hand nominally at least $100,000,000 for this purpose. Whenever the reserve fell below this limit, grave concern was felt, and more than once resort was had to the issue of bonds to sustain the reserve. The law of 1900 provides a reserve of $150,000,000 for the redemption of these notes, and provides more effective and more expeditious means for its replenishment.
Before 1862 the centre of interest and discussion in our monetary circulation lay in the notes of banks. It was then transferred to the paper issues of the Government, and after 1876 to silver. During the Civil War period the United States began to produce silver as well as gold in considerable quantities, but as all our money was paper this did not affect the monetary circulation. In 1870 a revision of the coinage laws was undertaken with the purpose of codifying existing law. One of the features of the codification was the omission of the silver dollar from the list of coins. The measure was an executive one and there was considerable difficulty in securing for it the attention of Congress, which listened impatiently while its provisions were being explained. Between 1870 and 1873, when it became a law, it had been thoroughly discussed in Congress and should have been well understood. The omission of the silver dollar made the United States theoretically a gold standard country. This law which effected the demonetization of silver was the famous ‘crime of 1873,’ concerning the passage of which the wildest statements were current at a later date. The simple fact is that at the time no one was aware of the significance of the demonetization of silver.
The agitation for the resumption of specie payment brought forward the contest between contractionists and inflationists. The latter failed in their efforts to balk the resumption policy, but the general feeling on which their argument rested, that a healtliy currency must expand with the needs of the country, had to be reckoned with. This led in 1876 to the appointment of the Monetary Connnission (q.v.), whose report presented in 1877 favored the free coinage of silver and thus began the long battle for that ideal. Germany had adopted the gold standard and was selling silver, the mines of the United States continued to increase their output, and silver was falling in the market below the legal ratios established by long usage in bimetallic countries. A bill for the free coinage of silver passed the House of Representatives in 1878. The Senate, however, was unwilling to accept for the United States alone the whole burden of the rehabilitation of silver, and a compromise resulted in the Bland-Allison Act, which was passed over the President's veto, February 28, 1878. It provided that not less than $2,000,000 worth of silver nor more than $4,000,000 worth should be purchased monthly and coined into standard silver dollars (412½ grains of silver 900 fine), which should be a full legal tender for all debts, public and private, without exception. It also authorized the President to call an international conference for the adoption of international bimetallism at a common ratio to be agreed upon. It also permitted the issue of silver certificates in sums of $10 and upward for standard silver dollars deposited in the Treasury. No relief came from the international conference, and the coinage went on increasing in volume as the price of silver fell. Soon embarrassment was caused by the tendency of these dollars to return to the Treasury, as less than $60,000,000 were absorbed by the circulation. There was no difficulty, however, after a law of 1886 permitted the issue of certificates in denominations of $1, $2, and $5. While the number of dollars in circulation is not large, there is no obstacle to the circulation of silver certificates.
Under the law of 1878, which continued in force until 1890, $378,000,000 were coined. The price of silver continued to fall and with it the price of other commodities. International bimetallism as a remedy for falling prices continued to gain favor among economists, and the agitation for free silver coinage in the United States grew in strength. In 1890 again the House of Representatives passed a free coinage bill, but a compromise worked out in the Senate was finally accepted and became law. This provided for the purchase of 4,500,000 ounces of silver monthly and the issue of Treasury notes for the cost price thereof. These notes were a legal tender, and the privilege was given to the Treasury Department to coin the silver thus purchased and replace the notes with silver certificates. The embarrassments of the Treasury and the difficulty of keeping the growing mass of silver money at a parity with gold led in 1893 to the repeal of the compulsory silver purchase provision. Under this law 168,000,000 ounces of silver had been purchased and Treasury notes to the amount of $155,000,000 issued. The repeal of the act in 1893 took place only after a severe struggle, and the friends of silver did not give up the fight. The Presidential contest of 1890 was fought out on the free coinage question and resulted in the signal defeat of the Silver Party. In 1900 a new currency law was passed which squarely defined the gold dollar as the standard of value in the United States. It provided, as already stated, a larger reserve for the redemption of the legal-tender notes. The attempt to make silver dollars redeemable in gold was, however, unsuccessful. The same measure favored the expansion of the national bank note issues by permitting note issues to the amount of the par value of the bonds deposited and by reducing the tax upon the circulation of banks.
See articles Bank, Banking; Bimetallism; Currency; Foreign Money; Gresham's Law;
