27 November 2015
Today the US dollar is known as one of the strongest currencies in the world, but in the early days of the USA there wasn’t such confidence, as Brett Hammond explains
The thirteen states who fought during the American Revolution raised funds for war supplies by issuing paper money.
Due in part to the British flooding counterfeits of the same into the country via New York, this paper currency became worthless by the end of the war. The painful experience of runaway inflation and the collapse of paper money prompted the authors of the United States Constitution to insert a gold and silver clause that barred individual states from coining or printing money, or from using anything but gold and silver coins as legal tender in payment of debts.
One of the most pressing necessities for any fledgling nation is the issuing of its own sound and respected currency.
Denied that fulfillment under British rule, the Colonists had adapted their economies to function around barter, paper promissory notes and the use of foreign coins including the Spanish-American silver 8 reales, or piece-of-eight, or Pillar dollar as it was named from the Pillars of Hercules depicted in its design.
Up to 1767 Colonial paper money used English pounds, shillings and pence as its denominations; but in that year the Maryland colony printed paper dollars for the first time.
When the First Bank of the United States of America received its charter in 1791the pillar dollar was used as a model for the American silver dollars authorized for production at the first US Mint.
Shortages of silver bullion coupled with the problems of underweight coin presses severely restricted initial output of the first dollars.
The coins depicted on the obverse a profile bust of personified Liberty with free-flowing hair beneath the word ‘LIBERTY’, and with a date below the bust. The reverse had a small eagle in foliage and the legend: ‘UNITED STATES OF AMERICA’.
The coins also had edge lettering: ‘HUNDRED CENTS ONE DOLLAR OR UNIT’, with ornaments between the words. These Flowing Hair silver dollars proved extremely popular with collectors of the day. Demand always exceeded the supply which began to trickle from the mint in October,1794. The entire first coinage of 1,758 dollars was distributed as souvenirs to government and foreign dignitaries. A regular queue of visitors to the mint throughout the first year bought much of its output.
In late 1795 the wild-haired Liberty was superseded by a more dignified Liberty with much tidier hair. The artist who engraved the new design, Gilbert Stuart, remarked at the new coin’s launch: ‘Liberty on the other coin had run mad. We have bound up her hair and thus render her a steady matron.’
The new Draped Bust silver dollar’s reverse was initially similar to that on the Flowing Hair type, but it altered to an heraldic eagle and shield design in 1798. All silver dollars from this period are highly prized by coin collectors and are exceptionally valuable. Hand engraving of each die resulted in dozens of minor varieties.
The fledgling US government soon encountered a difficulty with the new silver dollar. From its introduction the coin traded 1:1 with the Spanish 8 reales piece which was marginally heavier. Profit seekers soon took to shipping US dollars to the Caribbean and exchanging them for the heavier Spanish coins which went back to the USA for melting and minting into dollars, the speculators retaining the difference in silver bullion. This led to such a shortage of dollars in the USA that old and foreign coins began to circulate once again.
Drastic action by President Thomas Jefferson halted dollar minting. Instead the mint concentrated on turning out half-dollars which were less acceptable to traders in the Caribbean and further afield because checking two half-dollars demanded double the work. This ploy reversed the tide of US dollars flowing out; instead exports were more often purchased with Spanish silver. As a result the half-dollar became the highest denomination silver coin in general circulation. On those dated 1807-1839 Liberty wears a Capped Bust. They became very popular as coins in everyday use throughout the USA.
More than thirty years went by before silver dollars came back into circulation. President Andrew Jackson lifted the embargo in 1831 though production did not begin immediately because of fluctuating silver bullion prices and other uncertainties. The design for the new coin depicted a Seated Liberty, seen initially in 1836 and continuing until 1873; used on dollars, half-dollars, quarters, dimes and half-dimes of the period. She is seated on a boulder and holding a Cap of Liberty on a pole. The eagle on the reverse changed from a natural-looking bird on the 1836-1839 coins to an heraldic eagle from 1840. In 1866 the words In God We Trust were added the reverse.
In 1873 the US government introduced the Trade dollar which was 0.5g heavier than the regular circulation Seated Liberty dollar. The new coins were introduced to enable the USA to compete in Asian markets, where their weight and purity proved highly popular. They depicted a left-facing seated Liberty, who extends her hand, bearing an olive branch, over the ocean. On the reverse the coin’s weight and purity were boldly stated. Initially these dollars did not circulate in the United States where they were legal tender only up to $5.
However, in 1876 the price of silver fell sharply, making the trade dollar worth more at face value than its silver content. They could be bought for 80 cents in Asia and spent at $1 in the United States. This prompted Congress to revoke their legal tender status, and restrict their use to export markets only. However, this did not stop unscrupulous employers from buying trade dollars at bullion value, and using them for wages paid to unsuspecting migrant workers. The coins were redeemed by the United States Treasury in 1887 when approximately 8 million were turned in.
In 1878, production resumed with the Morgan dollar, named after its designer, George T Morgan, and arguably the single most widely collected US coin due to its beautiful obverse and reverse designs which depict Liberty’s left-facing profile and an eagle with outstretched wings. They are collected today throughout the world, especially in Asia where silver is highly prized. Struck from 1878 to 1904, then once again in 1921, these dollars were produced in hundreds of millions, enabling modern collectors to buy excellent examples at low prices as starters when they begin to collect U.S. silver dollars.
All images courtesy of www.coinauctionshelp.com whose information pages make essential viewing for anyone contemplating the purchase of US silver dollars.