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Numismatic History – “Crime of 1873” Creates Coinage Chaos

By Jim WellsThe California Numismatist (Reposted from CoinLink)….
America’s coinage has undergone many changes in over two centuries, with frequent modifications to denominations, varieties, metals, and designs. Perhaps the most activity occurred in 1873. After three years of deliberation, the U. S. Congress passed a comprehensive Coinage Act that was signed by President Grant on February 12, 1873. The Act was an effort to reform and consolidate the coinage system. It embraced the gold standard and demonetized silver, fueling the competition between the powerful mining interests. But its results, intended and unintended, caused the Coinage Act to be called the “Crime of 1873.”

John Gast’s 1872 painting American ProgressIllustration Note: John Gast’s 1872 painting American Progress was an allegorical representation of Manifest Destiny. An angelic Columbia, a personification of the United States, carries the light of “civilization” westward with American settlers, stringing telegraph wire as she travels. American Indians and wild animals fl ee—or lead the way—into the darkness of the “uncivilized” West.

As a partial result of the legislation, the year 1873 saw the minting of 20 different coin designs in 13 denominations. Struggles grew between the backers of gold, silver, and nickel coinage. Gold was the winner, so was nickel. Silver lost. New designs were created at the three U.S. Mints when arrows were placed beside the date on three silver denominations to indicate a weight change. Four coin designs were dropped, and a new coin type added. Nine coin designs continued without major change. A dozen coin designs also sport both an “Open 3” and “Close 3” in the date, yielding more varieties. A busy year! Of course collectors may not consider the results as a “crime,” but as a bonanza and a collection challenge. A one-year set of 1873 coins is still a worthy goal for many.

In 1873, Ulysses Grant was beginning his second term as President. The country’s continuing push for “Manifest Destiny” led pioneers across the West to populate the entire continent. The California gold rush was into the third decade of providing material for gold coinage. A new Mint building we now call the “Granite Lady” was about to open in San Francisco, which would make it the world’s largest mint at the time. The three-year-old Carson City Mint was producing gold and silver from Nevada’s Comstock Lode. And that year’s Coinage Act created chaos and confusion, even contributing to a national depression.

The Coinage Act of 1873: Good Intentions, Mixed Results

By the late 1860s, the U.S. coinage system was an illogical mix of denominations, designs, and types. The Mint was producing three-cent pieces in both silver and nickel, five-cent coins in the same two metals, and dollars in two metals: silver and gold. Some versions had clearly become superfluous. As the Government reviewed their coinage system, they concluded that the basic monetary law of 1837, as amended several times, was no longer adequate to serve the nation’s needs. The U.S. coinage laws needed streamlining and strengthening, and a proposal was drafted. The result was a lengthy bill, with mixed consequences.

When the Act of 1873 was passed, few considered it a “crime.” The term didn’t arise until several years later. Then the silver miners and their powerful friends in Washington, disgruntled by a decline in silver coin production, blamed the Act for all their troubles, mainly because it had abolished silver dollars.

Three Weights Changed to “Metric”

Coins weight - With ArrowsAs part of the 1873 coinage overhaul, the weights of the dime, quarter, and half dollar were increased by 5% to simplify their value stated in grams. This was part of Congress’ modest attempt to introduce the metric system into the nation’s coinage, following the standard used by European countries. But Mint tolerances were broad enough on all denominations that old planchets satisfied the new standards. There was no way to distinguish new and old planchets, and the weight standardization, then as now, did not improve public support of the metric system.

By the time the Act took effect, the Mint had already produced significant numbers of 1873 silver coins at the old weights. Officials decided to place distinctive arrows alongside the date on the new, slightly heavier coins. The Mint had used the same device in 1853 to denote a slight reduction in weight. This time, the arrows appeared for only two years and were dropped without comment at the end of 1874.

Four Designs Dropped

Four coin designs were eliminated by the Act of 1873, the most ever dropped in any one year. The Act omitted the two cent denomination, introduced in 1864 because of the coin shortages caused by the Civil War. Mintages dwindled after the war when fewer citizens and banks called for the denomination. No protests were heard. Also deleted were two silver coins being minted in parallel with nickel equivalents. Silver three cent coins had been minted along with nickel three cents since 1865, and in the final years many circulation issues were melted. The silver half dime had a similar counterpart: the nickel five-cent piece. Industrialist Joseph Wharton had been promoting nickel for coinage for decades; not surprisingly his empire monopolized nickel production. The writers of the Act of 1873 met his desires by continuing the nickel 3¢ and 5¢ versions instead of the silver ones.

Perhaps the biggest uproar was caused by the abolishment of the silver dollar. The silver dollar, like the silver three cent and half dime, competed with another similar-denomination coin: the gold dollar. Although silver dollars were the foundation of our monetary system, they did not comprise even 1% of circulating silver. The silver discoveries at the Comstock Lode and other mines had lowered the metal’s market value in relation to gold.

Coins weight - With ArrowsIn dropping silver dollars from the Mint’s production lineup, the Act of 1873 seemed to declare that large silver coins were seeing little use in the nation’s commerce. Initially, the silver interests didn’t put up much resistance, because the law provided an alternate outlet for their bullion with the newly authorized trade dollar. As the decade wore on, huge supplies of earlier U.S. silver coins, hoarded during the war, returned to circulation from their hiding places abroad. This forced the Mint to curtail production of new silver coins. The drastic reduction in coinage coincided with a dramatic increase in silver-mining activity. The silver interests were squeezed, and they screamed—belatedly but loudly—that a “crime” had been committed at their expense. Their efforts eventually resulted in the Bland-Allison Act in 1878 and the return to bimetallism. The Treasury was required starting in 1878 to purchase large amounts of silver, and Morgan dollars began production in earnest.

Something New: Trade Dollars

The mining interests did get a compromise: the trade dollar. The silver lobby hoped it would provide an outlet for silver, and open trade with the Far East in competition with Spanish and Mexican dollars. The 1873 Act authorized trade dollars at a greater weight— 420 grains—versus the standard dollar’s 412.5 grains. Nearly the entire 1873 mintage went to China, where it was considered better than pesos, and widely chop marked in approval.

To benefit the silver lobby, the 1873 Act gave trade dollars domestic legal-tender status up to $5. When silver prices fell in 1876, this status was revoked. Values fell further, and abuses and misuses mounted. Mintages for circulation lasted until 1878, but proofs of the controversial coin were made through 1883. Walter Breen delicately called the Trade dollar “an expensive mistake—its motivation mere greed, its design a triumph of dullness, its domestic circulation and legal-tender status a disastrous provision of law leading only to ghastly abuses … its recall a long overdue but very mixed blessing, and its collection a source of decades of frustration.” Did he dislike it?

Nine Designs Unchanged

Coins that were continued by the Act of 1873 included the nickel three cent and five cent pieces, which had survived over their silver counterparts, and the Indian Head cent.

Retained also in the 1873 Act were all six denominations of gold coins. The Act had effectively placed the United States on the gold standard, in practice, if not in law. The U.S. did not officially adopt the gold standard until 1900, following years of debate. The 1896 and 1900 presidential elections focused on silver and gold, with victory going both times to the champion of gold, William McKinley. The debates are best remembered by the famous ‘cross of gold’ speech by William Jennings Bryan, the Democratic presidential nominee at the 1896 Democratic National Convention. In his impassioned plea for bimetallism, he expressed his hope, “You shall not crucify mankind upon a cross of gold.”

More Changes! The Close 3 / Open 3 Debacle

Open and Closed 3 Coin DatesTo add more flavors to an already rich coinage year, varieties in the 1873 date itself were created purposefully by the Mint. Dies had been made in late 1872 for all 1873 coins. But Chief Coiner Archibald Loudon Snowden complained that the final 3 digit in the date (now called the Close 3 or erroneously “Closed 3”) could easily be mistaken for an 8. Mint engravers under William Barber prepared new dies with a different (Open) 3 for all coins. The three new designs “with arrows” all received the Open 3 design. But the old dies were used to produce many Close 3 products, and in the end twelve coin designs struck at Philadelphia and two from San Francisco have
both Open and Close 3s.

In general, the newer Open 3 is more common than the Close 3 variety; the half dollar is a notable exception. Did the Mint know what effect this would have on future collectors?

“The Act” is Called “The Crime” and Leads to “The Panic”

The Coinage Act of 1873 changed the United States policy with respect to silver. Before the Act, the United States had backed its currency with both gold and silver, and it minted both types of coins. The Act moved the United States to a “de facto” gold standard.

The Act had the immediate effect of depressing silver prices. This hurt Western mining interests, who labeled the Act “The Crime of 1873.” The coinage law also reduced the domestic money supply, which hurt farmers and anyone else who carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last. This perception of instability in United States monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds.

In late 1873, the American economy entered a crisis. This followed a period of economic overexpansion that arose from an extended railroad boom. It came at the end of a series of economic setbacks that had started with the Black Friday panic of 1869, when Jay Gould tried to corner the gold market.

In September 1873, a major cornerstone of the U.S. banking establishment declared bankruptcy, setting off a chain reaction of bank failures and temporarily closing the New York stock market. Layoffs and depression followed, and panic was felt across the nation. This “Panic of 1873” led to business failures and labor tensions, leading to the Long Depression. See what a few changes to the coinage system can wreak?

The Result: an Array of 55 Varieties

The coinage output of 1873, summarized in the table on the adjacent page, included 17 different designs, plus three more varieties with arrows at date. The Open 3 and Close 3 varieties add 12 more to the list. If a collector wants a coin from each mint and Open/Close combination, 23 more are needed, for a total of 55 coins. But extensive melting of some issues at the branch mints render several issues unique, rare, or unknown to exist. All of this coinage chaos—criminal or not—left 1873 as one of the most colorful years in American numismatics.

Sources:

Bowers, Q. David. The Expert’s Guide to Collecting & Investing in Rare Coins. Whitman Publishing, Atlanta, 2006.

Breen, Walter. Water Breen’s Complete Encyclopedia of U.S. and Colonial Coins. Doubleday, New York. 1988.

Sumner, William Graham. The Crime
Of 1873 – The Forgotten Man and Other Essays. 1876. Website: The OnLine Library of Liberty at http://oll.libertyfund.org/

The History of United States Coins.
Website at http://www.coinsite.com/default.html

Yeoman, R. S. (edited by Kenneth
Bressett.) A Guide Book of United States Coins. Whitman Publishing, LLC. Atlanta, Georgia, 62nd Edition dated 2009.

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