Author Topic: How and when were the last silver coins withdrawn from circulation?  (Read 6756 times)

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Offline davidrj

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Re: How and when were the last silver coins removed from circulation?
« Reply #15 on: February 25, 2015, 05:30:07 PM »
The introduction of copper-nickel is itself interesting, early use was as an alternative to bronze rather than silver.

Offline bgriff99

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Re: How and when were the last silver coins removed from circulation?
« Reply #16 on: February 25, 2015, 08:01:29 PM »



 In other words, it took 150 years to educate people on the role of coin metals. Amazing.

Peter



What you present in that sentence is a model for a situation, deliberately chosen to be provocative, and in reality, not realistic.   Note that we also had clunky near- if not full intrinsic copper coinages after 1816.   

Note also that the US did not even begin to go off bi-metallism until 1836, and was still politically wrangling going back to it legally into the 20th century.   And did actually issue a great deal of paper based on and redeemable in silver alone.   Without that it was redeemable in nothing.    All that silver in the treasury could not be coined and forced into circulation, so it effected an increase in the monetary supply which was still backed in specie.   Bimetallism once removed.   The government made a profit on it too.   That persisted until 1963, when all the silver notes were pulled.    Only shortly after that did we all go completely off gold.   When the silver notes were de-redeemable-ized, the next step was to wait a bit, then auction all the mint bags of silver dollars from the 1870's-1920's in the treasury as numismatic pieces.   LOTS of scarce CC material (which often WAS scarce because it was ALL in the treasury.)   They ended up getting an average near $30 apiece for all that!   

I often talk about "evolution of currency", mainly because the reality is more critical now, and less anchored in stuff like gold and silver, than ever before.   I also talk about the necessary "conservatism of money", that is, because it must store value permanently, it must be seen to change very little if at all.   These things are intertwined.   It is permitted to discuss why the Royal Mint did not just issue gold coin, and all the rest tokens after 1816.   It is also permitted to ask why do the world's central banks hew to the principles of today's system, knowing full well they will be much different in 100 years.   Why not just jump ahead 100 years and be done with it?    Because in 100 years, there will be new old principles, and a new 100 year look ahead.    Life and society and evolution of all kinds operate in replicating what is there now faithfully, and only timidly changing when absolutely necessary.   Or when the existing system has been unfortunately smashed beyond repair.

Offline bgriff99

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Re: How and when were the last silver coins removed from circulation?
« Reply #17 on: February 25, 2015, 08:50:14 PM »
The introduction of copper-nickel is itself interesting, early use was as an alternative to bronze rather than silver.
There's a great break away thread in that, but first I want to jump on it as illustration of evolution and conservatism.   When did England, that (until recently) most conservative of nations first use nickel in coins?    Canada was also late.   And it had intrinsic value, with some issuers using it pure (eg. Canada).

Nickel replaced both copper and silver.   Fitting nicely in that gap between a too big 1d bronze, and too small 3d silver.   Or in the US, briefly in the too-large cent, and then between the cent and dime.   In India the 1 anna denomination could not be made at all until nickel bridged the gap, and that was not until 1906.

It tended to appear in coinage in conjunction with other changes.   That is, using them as cover.   Such as when the US large cent had to go.  And when a new more voluminous 3 cent issue was needed, in conjunction with the war-expanded nickel industry paying bribes to Congressmen.   The silver 5 cent was also disliked because it was too small.  Many changes used the Civil War as a window when people would not be so freaked by money changes because it all had been so disrupted already in the conflict.   

Germany issued cupro-nickel upon unification.   In the denomination range previously filled with billon.
« Last Edit: February 25, 2015, 09:05:27 PM by bgriff99 »

Offline EWC

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Re: How and when were the last silver coins removed from circulation?
« Reply #18 on: February 26, 2015, 09:00:28 AM »
What you present in that sentence is a model for a situation, deliberately chosen to be provocative, and in reality, not realistic.   

Yes.  Does it make much sense to talk about there being a real version of how monetary matters should be arranged?  There seems to me to be a spectrum of alternatives on offer.  I would see it this way:

To the far left – somewhere beyond Michael Hudson – we have a system when the Central Banks act like Egyptian Pharaohs – money is a state held ledger – almost a religion - where “original debt” replaces “original sin”.

To the far right – not far from Rothbard – we have a system of pure silver coins – privately issued – regulated only by mining and hoarding

Both of these ideas seem to me to seek traction in myths about the pre-history of money.

Talk about money is full of myths.  Calling British 1816 silver “tokens” seems bizarre to me.  They carried a 6% seigniorage.  The same sort of rate all British coins carried, or more in practice, except for a fairly sort period after 1696.  18th century France levied an 8% seigniorage – do collectors of 18th century French issues call them “tokens” – I never noticed it.  Roman Republican denarii and Anglo Saxon pennies seem to carry much higher seigniorages – should we call them tokens too?

As I understand it British silver became more like tokens after the Franco Prussian war, and associated moves in the USA – when silver dropped from 16:1 to 35:1 against gold.  But that drop was not to any “true” value of silver.  It was what silver was worth given that India and China continued to designate it a coining metal – as did Britain etc – but here under the guise of calling it “token”.

Seems to me in science you strip away the myths to get at reality.  In economics its more like you strip away the realities to get at the myths…………….

Offline Figleaf

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Re: How and when were the last silver coins removed from circulation?
« Reply #19 on: February 26, 2015, 12:28:14 PM »
Calling British 1816 silver “tokens” seems bizarre to me.

A History of Money by Glyn Davies, 1994 ISBN -708313515, page 303
A History of Currency in the British Colonies by Robert Chalmers, rep. 1973, page 21

I am surprised you are ignorant of the British coinage act of 1816. I tried to find the text on the net for you. I failed.

They carried a 6% seigniorage.  The same sort of rate all British coins carried, or more in practice, except for a fairly sort period after 1696.  18th century France levied an 8% seigniorage – do collectors of 18th century French issues call them “tokens” – I never noticed it.  Roman Republican denarii and Anglo Saxon pennies seem to carry much higher seigniorages – should we call them tokens too?

This may be the root of your misunderstanding. The distinction is between "standard" and "token" coins. I could have used the US favourite "fiat money", but that term includes paper money, so it is not well suited to this discussion. Both terms carry elements of fiction and are used for analytical purposes. While seigniorage is an element in the distinction, it is secondary to free minting and melting: a standard coin must have a small seigniorage. A token coin can, as argued, be of any more or less suitable material, including silver. In a gold standard system such as GBP after 1816, a gold coin (and its multiples and divisions) is designated as standard coin, making all others token coins. In a double standard system, such as the LMU, a gold and a silver coin (the LMU used the 5 francs) are standard, automatically making all other silver coins token coins. Don't get mad at me. I didn't invent the terminology.

Collectors do use the term, though it is confusing, as it does not refer to tokens as collectors see them. A search on this site produced 53 hits, not all of them correct, though.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: How and when were the last silver coins removed from circulation?
« Reply #20 on: February 26, 2015, 02:01:54 PM »
I am surprised you are ignorant of the British coinage act of 1816. I tried to find the text on the net for you. I failed.

Always glad to assist – the full text seems to be in Google books here:

The Justice Law of the Last Five Years, Viz. from 1813 to 1817, William Dickinson RASTALL, 1818,  pp 187-191

Careful readers of it may wonder who is ignorant here, since as far as I can see it does not use the word “token” at all, and indeed – it makes provision for the free coining of silver as a standard!

This may be the root of your misunderstanding. The distinction is between "standard" and "token" coins.

I have yet to grasp why you think I misunderstood anything?  You cite Glyn Davis page 303 – a book I already have been very critical of - but leaving that aside – but he does not use the word “token” there on either

Sargent in TBPOSC does use the word “token” in this context - on page 304. 

 I am calling that usage bizarre. 

I call it bizarre because I do understand it, not because I don’t.

Alongside books by people like Glyn Davies I suggest you read Adam Smith, Alexander del Mar, and William Cobbett.  I recall William Jennings Bryan did not think a gold standard was an exactly topping idea also…….

No sign of me getting mad by the way – just trying to be helpful   ;)

PS there is an awful lot wrong with the Sargent book IMO

https://www.academia.edu/3556314


Offline Figleaf

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Re: How and when were the last silver coins removed from circulation?
« Reply #21 on: February 26, 2015, 03:36:49 PM »
Thank you for the link. A mix of paraphrasing and legal texts, but that's OK also. I have attached the relevant paragraph, which is abundantly clear on the status of silver. Also, if you go back in the historical description, you will find that the key point Mr. Dickinson Rastall is making is always free minting and melting of silver.

As for your non-acceptance of terminology, that is your choice and I respect it, but it is not my problem.

BTW, I met Glyn Davies many years ago as the book had just come out in print. A delightful person with a sharp mind.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: How and when were the last silver coins removed from circulation?
« Reply #22 on: February 26, 2015, 04:54:23 PM »
Thank you for the link. A mix of paraphrasing and legal texts, but that's OK also. I have attached the relevant paragraph, which is abundantly clear on the status of silver.

Not in the context of your original (and I though rather OTT) criticism.  My point was about use of the word “token” – and it does not appear in the extract you cite. 

However - let me clarify what I meant by silver standard. 

Take a look at p. 180 of this book (google books again)

Great Britain and Her World, 1750-1914: Essays in Honour of W. O. Henderson  edited by Barrie M. Ratcliffe

The crucial matter for Chaloner and myself is not the legalities but the practicalities - whether the silver is coined freely (as I believe the act intends) or on government account (as actually happened).

Readers in the USA might be amused to see that, if their 1873 act was a swindle, well, it maybe followed a well trodden path…………..

~~~~~~~~~~~~~~

On Davis - Those interested in Chinese coins might wonder why he chose to prefer Lockhart’s chronology to Cribb’s (see p. 56).  But my own major criticism would concern his treatment of the 1666 act

Offline bgriff99

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Re: How and when were the last silver coins removed from circulation?
« Reply #23 on: February 26, 2015, 07:32:19 PM »
That 1873 swindle was temporary.   The money supply had to be expanded.   The silver boom was on, the next gold rush was unknown, 25 years away.   In 1878 silver dollars started coming in a flood, and they were legal tender with no limit.   The Carson City mint had been established in 1870.   In 1871 the copper and nickel coinages were made fully legal tender with no limit. 

This looking back and calling silver tokens as if it was a given to be permanently of lesser value is granting decades of hindsight to the participants.   The point of "demonetizing" silver was to PROTECT both metals from speculative melting.   Thereby allowing BOTH to remain in the money supply.    In the event, it was the silver price that initially fell (after 1870), precisely because of that silver boom.   Comes 1920 and it went the other way.    Not enough to drive it out in the US, and the price fell back down in the 1930's.

The driver to all this was merely the desire to have one single money unit.   The US screwed up in 1792, trying to be too progressive with too little experience.   The real and escudo went blithely on as before.   In Britain it was the desire to not have to separately account for guineas and pounds sterling.

So regarding the original premise that the royal mint could have issued tin crowns, shillings and sixpences, but because they promised to give out gold for them they ought to have been, in 1816, accepted:   How would people be "educated" to KNOW the future?    That catastrophe, failure, over production or swindle, could not make tin coins worthless by 1821?     Exactly at that time much paper money in the US had become worthless, and specie payment WAS suspended in the 1830's.   And 1860's.   And famously in 1935.

Britain used the patriotic cover of the World War to stop redeeming anything in gold.   It was the 100 year past "education" which put that over.   In the US the calling of gold was the realization of the worst nightmare predictions of 100% gold upholders, YET, because of seizing both an opportunity, and a catastrophe, there was no inflation immediately, and a very small amount for many decades. 

The "education" that I got, personally, circa 1965-1985 is that money is an ephemera, liable at any time to plunge in value.   Or rather, have its value appropriated by its very guarantor.   But I must use that paper which I don't like.

Offline Figleaf

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Re: How and when were the last silver coins removed from circulation?
« Reply #24 on: February 26, 2015, 09:23:00 PM »
What you present in that sentence is a model for a situation, deliberately chosen to be provocative, and in reality, not realistic.

Provocative? Yes, in the sense that I knew it would not be a universally shared sentiment and I could have predicted who would react (one is still missing). Unrealistic? How so? Inertia for 150 years is nothing new in coins. Well over a century after decimalisation, Dutch 1 gulden pieces still had the text "100 cent". Maybe there's more going on, but what?

Note also that the US did not even begin to go off bi-metallism until 1836, and was still politically wrangling going back to it legally into the 20th century.

I'd put that even later. In 1873, the US Congress discontinued silver coinage as the gold/silver ratio had gone to 1/16, while US law prescribed 1/20 for coins, driving silver out of circulation (BTW, a typical double standard problem), but lobbying for a silver coinage continued on a high level (silver purchase act, 1890-1893). It was only the defeat of Bryan (who campaigned on a strong silver platform) to McKinley in 1896 that opened the doors for the gold standard act of 1900. From 1900 on, minor US coins could be copper, bronze, silver, wood, soap, nickel, plastic or any other more or less suitable material. The fact that silver coins remained in circulation attests to nothing. The dollar was henceforth defined only in gold and silver had the same status as any other material.

So why the late conversion? Silver propaganda was orchestrated by silver mine owners. To them, it was all simple. If the US government bought their silver (as was foreseen e.g. in the silver purchase act), that amounted to a subsidy on their activities. If that silver would be coined, it would no longer be hanging over the market, but slowly dissipate by wear on coins. In the words of William Harvey, posing as Professor Coin:
Quote
(Silver coins) mean work for the thousands who now tramp the streets...food and clothes for the thousands of hungry and ill-clad women and children...the restoration of confidence in the business world...the reopening of closed factories...hope instead of despair...life instead of death.
He forgot to mention it is also a cure for cancer, bad eyesight and the common cold :-\

This same lobby is still active today, twisting minds and selling lies. The truth is that the value of silver (and gold) rests not upon its utility (even less now that photo film has been replaced by electronics), but upon the trust that it will be in demand forever, regardless of its price. If you think paper money is speculative, silver is even more speculative, as its value rests on myth and lies. The fact is, that every time the gold/silver ratio changes, coins of one of the two metals are driven out of circulation and melted at a considerable social loss borne by the taxpayer and to the benefit of the mine owners.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: How and when were the last silver coins removed from circulation?
« Reply #25 on: February 26, 2015, 10:08:49 PM »
This same lobby is still active today, twisting minds and selling lies.

Sounds almost like a conspiracy      ???

Offline bgriff99

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Re: How and when were the last silver coins removed from circulation?
« Reply #26 on: February 26, 2015, 11:07:20 PM »
An 1834 US law reduced the weight of a gold dollar from its original specs.   The problem was that underweight silver Mexican coin was being exchanged for US gold coins that had too much gold in them.   New US half dollars were semi-protected by being held for bank reserves.     In 1792 the world ratio was 15 to 1.   In 1834 it was 15.75 to 1.   US gold coinage had been partly suspended, and overall was kept at a very low level from 1804 to 1834.    You are right.  That isn't going off bimetallism, just a belated exchange adjustment.   I should have said 1853.   At that point minor silver was made subsidiary in weight, but not the silver dollar.   The detachment from Mexican money came in 1857.

The dollar was minted in small quantities only, kept at full weight for trade purposes.   The 1873 law switched that to a non-legal tender trade dollar.   There was no discontinuation of silver coinage other than the dollar.   Quite the opposite.   In 1876 a hundredfold of minor silver was struck over what had prevailed annually a decade before.    In 1878 it was back to the regular dollar.   Lower silver prices made it in effect just another subsidiary coin.   The treasury tried but failed to force it into commerce to relieve deflation.   Then they issued paper notes and held the coin, and that worked perfectly.    It was still working when I was young, and I still have a small box of the blue seal dollar bills that were replaced by Federal Reserve notes in 1963.  They were mostly $1, but some $5 and $10 notes.  "Payable to the bearer on demand at the treasury of the U.S.A one dollar in silver coin."   Unlike an actual silver dollar in your pocket, that promise was cancelled.

The 1900 act did not make any silver coins less than fully legal tender.   True that the monetary supply could have been expanded by issuing tokens or more paper than there was any backing for.   Had such a law been passed authorizing it.   But that was perceived as a road to ruin.   Silver was accepted by the people, and so the political process grudgingly allowed it.   It's falling price was itself seized upon for token money.   By issuing vast quantities of it.
When the Federal Reserve was established in 1913, upon defeat of the Republicans, its mission was to incrementally print paper money in excess of the gold and silver backing it.    And here we are.  The usual story. 

Britain's story differs in detail of course, but had to follow the world situation overall. 


Offline EWC

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Re: How and when were the last silver coins removed from circulation?
« Reply #27 on: February 27, 2015, 11:35:33 AM »
Britain's story differs in detail of course, but had to follow the world situation overall.

True, but also I would tend to say that to a significant extent Britain was leading the direction of change in the 18th and 19th centuries, the USA tended to take over the reins in the 20th.  Most especially at Bretton Woods.

I sense we are to some extent at cross purposes – your focus being on the practical matter of maintaining a legitimate currency system.  My focus is more on telling a legitimate history of currency systems.  No contradiction of course, the two are intimately intertwined, just slight difference in focus.

As I understand it, England made silver legally good for all debts in 1666 – but then set up a seigniorage system, a central banking system and mint buy prices that completely contradicted that legal system, and allowed a wealthy elite to print rather a lot of high value paper backed by a rather limited amount of gold.

This system was loudly opposed by some who had strong democratic roots, such as Tom Paine and William Cobbett, and the sort of criticisms they made probably cast a longer shadow in the USA than they did in Britain.  Because the early political elite in the USA was itself deeply distrustful of central bankers in general, and especially the Brits.

When I was a schoolboy I was taught that attitudes deriving from the failure of the Latin Monetary Union around the time of the Franco-Prussian war directly contributed to WW1.  I wonder if such matters were still on the UK curriculum in Andyg’s schooldays?