“Crime of 1873” Summary

  • Last updated on November 10, 2022

The so-called Crime of 1873 was an emotion-laden slogan used by proponents of the free coinage of silver to express their hostility toward the federal Coinage Act that made gold the sole monetary standard, with no provision for the coining of silver dollars. The debate over silver coinage would continue into the twentieth century.

Summary of Event

The U.S. money controversy that the shibboleth “Crime of 1873” dramatized raged between 1865 and 1896 and can best be understood in the context of the nation’s antebellum and Civil War monetary policies. Until the Civil War, the United States functioned under bimetallism Bimetallism —a monetary system based on silver and gold, supplemented by the notes of its banks. The use of the two kinds of specie as money was deemed desirable because there were insufficient quantities of precious metals for the requirements of trade, commerce, and exchange. Under bimetallism, both silver and gold were acceptable for the payment of debts at rates fixed by the government. The Currency Act of 1834 Currency Act of 1834 established a legal ratio between the two metals of sixteen ounces of silver to one ounce of gold. Under this so-called mint ratio, the Treasury was obligated to purchase both metals at the established prices. "Crime of 1873"[Crime of 1873] Coinage Act of 1873 Congress, U.S.;Coinage Act of 1873 Silver;and U.S. coinage[U.S. coinage] Gold;and U.S. coinage[U.S. coinage] Treasury, U.S.;and coinage[Coinage] Coinage, U.S. Currency;U.S. [kw]”Crime of 1873" (Feb. 12, 1873) [kw]1873", “Crime of (Feb. 12, 1873) ”Crime of 1873"[Crime of 1873] Coinage Act of 1873 Congress, U.S.;Coinage Act of 1873 Silver;and U.S. coinage[U.S. coinage] Gold;and U.S. coinage[U.S. coinage] Treasury, U.S.;and coinage[Coinage] Coinage, U.S. Currency;U.S. [g]United States;Feb. 12, 1873: “Crime of 1873"[4670] [c]Banking and finance;Feb. 12, 1873: “Crime of 1873"[4670] [c]Crime and scandals;Feb. 12, 1873: ”Crime of 1873"[4670] [c]Laws, acts, and legal history;Feb. 12, 1873: “Crime of 1873"[4670] Knox, John Jay Linderman, Henry Richard Stewart, William Morris Weston, George M.

Bimetallism presented a problem, in that the values of silver and gold fluctuated on the world market in response to changes in supply. New supplies of gold from Russia, Australia, and California during the 1840’s, for example, caused gold gradually to decline in value. Therefore, silver was undervalued if priced at the mint ratio of sixteen to one. As predicted by Gresham’s law—that cheaper currency drives higher-valued currency out of circulation—silver coins Coinage, U.S. disappeared from circulation, because silver producers preferred to sell their bullion on the world market, where the price was higher than at the mint. By 1853, the market ratio of silver to gold was 15.4-1. In other words, silver producers needed sixteen ounces of silver to exchange for an ounce of gold at the mint, but only 15.4 ounces on the bullion market. After having been out of circulation for years, silver was reduced by Congress in 1853 to a subsidiary metal. Silver remained scarce and undervalued as coin until the 1870’s.

John Jay Knox, the controller of the currency.

(Library of Congress)

Under Civil War, U.S. (1861-1865);Union monetary policy great pressure to raise money during the Civil War, the government abandoned the specie standard and passed the Legal Tender Legal Tender Act of 1862 Acts of 1862, which authorized the printing of fiat money (greenbacks), unsupported by specie but acceptable legal tender for all debts except interest on government bonds and excise taxes. During the war, the Treasury circulated more than $450 million in greenbacks, which inflated precipitously by 1864. The use of gold became limited primarily to international trade.

When the war ended, the Treasury began urging a program of deflation leading to the eventual retirement of the greenbacks and a return to a specie standard. Resistance in Congress to this hard-money scheme came from a group of soft-money advocates, who opposed a return to specie but differed among themselves over the issue of inflation. Consequently, the Treasury received authority to retire only small quantities of greenbacks. Some soft-money advocates who favored inflation demanded the printing of more greenbacks to be used for payment of the national debt, a proposal that was written into the Democratic Party platform of 1868.

By that time, the money controversy had caused factions to grow in the business community (among farmers, bankers, and manufacturers), in geographical regions, and to some extent in political parties, with soft-money supporters generally showing greater strength in the states west of the Appalachians. However, the Greenbackers suffered serious reverses with the passage of the Public Credit Act of 1869, Public Credit Act of 1869 which pledged payment of the national debt in gold, and the Resumption Act of 1875 Resumption Act of 1875 , which ordered the redemption of greenbacks with gold by 1879.

In the midst of the greenback controversy, John Jay Knox Knox, John Jay , the comptroller of the currency, aided by special assistant Henry Richard Linderman, Linderman, Henry Richard the former director of the U.S. mint at Philadelphia, began preparing a revision of the laws dealing with the mints and coinage. One aspect of their work appeared in the federal Coinage Act that Congress passed on February 12, 1873, which discontinued the coinage of silver dollars. The following year, the Revised Statutes of the United States demonetized silver by limiting its legal tender function to debts of not more than five dollars. Both laws gave belated recognition to the fact that silver had not circulated since the 1840’s. At the time, the legislation disturbed no one, not even the silver miners who preferred to sell on the open market. Indeed, Senator William Morris Stewart Stewart, William Morris of the silver-producing state of Nevada, who later used the slogan “Crime of ’73,” failed to oppose either law.

Even as the legislation was passed, however, new mines Mining;silver were opening in the western states, augmenting the world supply of silver. The market ratio, 15.9-1 in 1873, climbed to 16.1-1 in 1874, and to 16.6-1 by 1875, or about ninety-six cents in gold. As silver prices dropped, mining interests discovered to their dismay that the Currency Act of 1873 Currency Act of 1873 blocked the profitable sale of silver to the mint at 16-1.

On March 2, 1876, George M. Weston Weston, George M. , the secretary of the U.S. Monetary Commission, charged in a letter to the Boston Globe that the demonetization of silver was a conspiracy by the creditor class against the people. Weston’s letter, which attached the word “crime” to the federal law for the first time, began the controversy over silver. Other advocates of silver took up the charge, demanding the free coinage of silver. Later, Greenbackers and other inflationists, fighting losing battles against resumption, also began supporting silver.

Agitation for the free coinage of silver continued until 1896, when new gold supplies began inducing the price increases that post-Civil War inflationists had desired. Congress, however, previously had passed legislation permitting limited silver coinage. The Bland-Allison Act of 1878 Bland-Allison Act of 1878[Bland Allison Act of 1878] required the Treasury to buy between two and four million ounces of silver per month at the prevailing market price. According to the Sherman Silver Purchase Act of 1890, Sherman Silver Purchase Act of 1890 four million ounces had to be purchased each month. This legislation demonstrated that those who favored silver had far greater strength than the Greenbackers had had a decade earlier.

Significance

The conspiracy charge against the Currency Act of 1873, which alleged that British financiers plotted to influence Congress, was rejected by most nineteenth century economists and writers. The issue was raised again in 1960 with the discovery of new evidence that seemed to indicate that Linderman Linderman, Henry Richard foresaw an increase in silver output and, as a monometallist, allegedly plotted to omit silver coinage from the 1873 legislation. Nevertheless, most modern scholarship continues to reject the conspiracy thesis.

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Barrett, Don Carlos. The Greenbacks and Resumption of Specie Payments, 1862-1879. Cambridge, Mass.: Harvard University Press, 1931. Although dated in some ways, this work, which treats the gold standard almost as a moral issue, is still a useful reference.
  • citation-type="booksimple"

    xlink:type="simple">Friedman, Milton, and Anna J. Schwartz. A Monetary History of the United States, 1867-1960. Princeton, N.J.: Princeton University Press, 1963. This massive study by two economists combines economic analysis with economic history. Its first three chapters discuss the greenback and silver controversy.
  • citation-type="booksimple"

    xlink:type="simple">Hixson, William F. Triumph of the Bankers: Money and Banking in the Eighteenth and Nineteenth Centuries. Westport, Conn.: Praeger, 1993. Contends that the dominating theme of U.S. monetary history is a perennial conflict between creditors and debtors. Two chapters deal with monetary policy from 1865 to 1896.
  • citation-type="booksimple"

    xlink:type="simple">Laughlin, J. Laurence. The History of Bimetallism in the United States. 4th ed. New York: Greenwood Press, 1968. The author, who was one of the most scholarly writers on the silver issue during the nineteenth century, was a gold supporter. His work still serves as a useful and necessary reference.
  • citation-type="booksimple"

    xlink:type="simple">Rothbard, Murray N. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig Von Mises Institute, 2002. One of the best general histories of U.S. banking and the money supply, by a distinguished economist.
  • citation-type="booksimple"

    xlink:type="simple">Studenski, Paul. Financial History of the United States. New York: McGraw-Hill, 1952. This general work contains four chapters on the Civil War and Reconstruction periods that general readers should find helpful before undertaking more complex studies, such as those by Unger or Friedman and Schwartz.
  • citation-type="booksimple"

    xlink:type="simple">Timberlake, Richard H. Monetary Policy in the United States: An Intellectual and Institutional History. Chicago: University of Chicago Press, 1993. Discusses the evolution of governmental control of the U.S. monetary and banking system. Chapters 10 through 12 discuss the greenback and silver issues.
  • citation-type="booksimple"

    xlink:type="simple">Unger, Irwin. The Greenback Era: A Social and Political History of American Finance, 1865-1879. Princeton, N.J.: Princeton University Press, 1964. Authoritative treatment of the post-Civil War period. Challenges the view of the era as a struggle between embattled farmers and rising capitalists, arguing that it was far more complex and confused.
  • citation-type="booksimple"

    xlink:type="simple">Van Ryzin, Robert R. Crime of 1873: The Comstock Connection. Iola, Wis.: Krause, 2001. Popular history of the minting of Morgan and Silver Trade dollars. Apart from the author’s views on corruption in the U.S. Mint, this book will be of interest mainly to numismatists.
  • citation-type="booksimple"

    xlink:type="simple">Weinstein, Allen. Prelude to Populism: Origins of the Silver Issue, 1867-1878. New Haven, Conn.: Yale University Press, 1970. Focuses on the politics and social conflicts involved in the first drive to restore silver as a monetary standard.

Establishment of Independent U.S. Treasury

Congress Passes the National Bank Acts

“In God We Trust” Appears on U.S. Coins

Birth of the People’s Party

McKinley Is Elected President

Related Article in <i>Great Lives from History: The Nineteenth Century, 1801-1900</i>

John Peter Altgeld. "Crime of 1873"[Crime of 1873] Coinage Act of 1873 Congress, U.S.;Coinage Act of 1873 Silver;and U.S. coinage[U.S. coinage] Gold;and U.S. coinage[U.S. coinage] Treasury, U.S.;and coinage[Coinage] Coinage, U.S. Currency;U.S.

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