With the lack of gold coins and silver dollars, the half dollar became America’s desirable coin for large transactions and bank reserves. Until 1834, in fact, half dollars circulated very little as they were mainly transferred from bank to bank. This accounts for the relatively good supply of higher-condition half dollars of this period that is still available to collectors. A Senate committee of 1830 reported that United States silver coins were considered so much bullion and were accordingly “lost to the community as coins.”
There was only a negligible coinage of quarters, dimes, and half dimes from 1794 to 1834. It has been estimated that there was less than one piece for each person in the country in the year 1830. This period has been described as one of chaotic currency made up of bank notes, underweight foreign gold coins, foreign silver coins of many varieties, and domestic fractional silver coins. Paper money of that time was equally bothersome. Privately issued bank notes sometimes had little or no backing and were apt to be worthless at the time of redemption. In this period, before national paper money commenced in 1861, notes of the state-chartered banks flooded the country and were much more common than silver coins.
On June 28, 1834, a law was passed reducing the weight and fineness of gold coins, which had the effect of placing American money on a new gold standard. Trade and finance greatly benefited from this act, which also proved a boon to the gold mines of Georgia and North Carolina. Branch mints in Dahlonega, Georgia; New Orleans; and Charlotte, North Carolina, began operations in 1838 to handle the newly mined gold near the source. The various issues of private gold coins were struck in these areas.
The law of January 18, 1837, completely revised and standardized the Mint and coinage laws. Legal standards, Mint charges, legal tender, Mint procedure, tolerance in coin weights, accounting methods, a bullion fund, standardization of gold and silver coins to 900 thousandths fineness, and other desirable regulations were covered by the new legislation. Results of importance to the collector were the changes in type for the various coin denominations and the resumption of coinage of the eagle in 1838 and larger quantities of silver dollars in 1840.
Prior to Andrew Jackson’s election as president in 1828, the Second Bank of the United States had considerable control over the nation’s currency. In 1832 Jackson vetoed a bill rechartering the bank and transferred government deposits to state banks. The action took away some stability from the economy and eventually led to a national financial collapse. By 1837 the country was so deprived of circulating coinage that merchants resorted to making their own “hard times tokens” to facilitate trade. The few available government coins were hoarded or traded at a premium for private paper money, which was often unreliable.
The California gold discovery in 1848 was responsible for an interesting series of private, state, and territorial gold issues in the western region, culminating in the establishment of a branch mint at San Francisco in 1854.
Two new regular gold issues were authorized in 1849. In that year the gold dollar joined the American family of coins, followed in 1850 by the double eagle. The California gold fields greatly influenced the world gold market, making the exportation of silver profitable. For example, the silver in two half dollars was worth $1.03-1/2 in gold. The newly introduced gold dollars soon took over the burden and hastened the disappearance of silver coins from trade channels. This was the situation when the new 3¢ postage rate brought about the bill authorized by Congress on March 3, 1851, calling for the coinage of a silver three-cent piece in 1851. This was the United States’ first subsidiary coin in precious metals, for its silver value was intrinsically 86% of its face value, as an expedient designed to prevent its withdrawal from circulation.
The California Gold Rush had a great influence on American coinage.
The $3 gold piece was authorized by the Act of February 21, 1853. It was never a popular or necessary coin because of the existing $2.50 and $5 coins; it nevertheless was issued regularly from 1854 until 1889.
On February 21, 1853, fractional silver coins were made subsidiary by reduction of their weights. As the coins’ face value now exceeded their bullion value, free coinage of silver was prohibited except for dollars, and the Mint was authorized to purchase its silver requirements on its own account using the bullion fund of the Mint, and, according to law, “the profit of said coinage shall be . . . transferred to the account of the treasury of the United States.”
To identify the new lightweight pieces, arrows were placed at the date on all silver coins except three-cent pieces, for which arrows were added to the reverse. Dollars, which were not reduced in weight, were not marked in any way. On the quarters and half dollars of 1853, rays were added on the reverse to denote the change of weight. In 1854, the rays were removed, and in 1856, the arrows disappeared from all but the silver three-cent coins. Large-scale production of silver coins during this period greatly relieved the demands on gold dollars and three-cent pieces, and for the first time in U.S. history, enough fractional coins were in general circulation to facilitate commerce.
The Coinage Act of February 21, 1857, was designed primarily to reform the copper coinage. Although large cents and half cents are interesting and valuable in the eyes of the modern collector, they were unpopular with the American public in the 1850s because of their size. They also cost the Mint too much to produce.
The new law abolished the half cent, and reduced the size and changed the design of the cent. The new Flying Eagle cent contained 88% copper and 12% nickel. Nearly 1,000 pattern cents were stamped from dies bearing the date 1856, although no authority for the issue existed before 1857. Other important effects of the law were the retirement of Spanish silver coins from circulation, and dispersal of the new cents in such excessive quantities as to create a nuisance to business houses, particularly in the eastern cities. The Indian Head design replaced the Flying Eagle in 1859, and in 1864 the weight of the cent was further reduced and its composition changed to a proportion of 95% copper and 5% tin and zinc. (This bronze composition was the standard for the cent except for the years 1943 and 1944–1946. In 1962 the alloy was changed to 95% copper and 5% zinc. In 1982 the composition was changed to a core of 99.2% zinc and 0.8% copper, covered with an outer layer of pure copper.)
An abundance of coins turned to scarcity following the outbreak of the Civil War. Anticipation of a scarcity of hard money, and uncertainty as to the outcome of the war, induced hoarding. The large volume of greenbacks in circulation caused a premium for gold. Subsidiary silver coins, as a result of the sudden depreciation, quickly vanished from circulation. As an expediency, some people made use of postage stamps for small change. Merchants, banks, individuals, and even some towns and cities produced a wide array of small-denomination paper scrip and promissory notes to meet their needs. In 1862 the government released its first issue of “Postage Currency” and subsequent fractional notes. In 1863 many privately issued copper tokens appeared to help fill the void. They are of two general classes: tradesmen’s tokens and imitations of official cents. Many of the latter were political or patriotic in character and carried slogans typical of the times. They not only served as a medium of exchange, but also often advertised merchants or products, and were usually produced at a profit.
The Civil War brought dramatic changes to our nation’s coins.
The Coinage Act of April 22, 1864, which effected changes in the cent, provided also for the new bronze two-cent piece. The act, moreover, provided legal tender status for these two coins up to 10 times their face value. The two-cent piece was the first coin to bear the motto IN GOD WE TRUST. The new coin at first was readily accepted by the public, but it proved an unnecessary denomination because of the competing three-cent coins, and production was halted after only nine years. The secretary of the Treasury had issued a great many currency