At the end of the 18th century, the United States relied on silver as one of its chief materials in producing coinage that would be circulated through the economy. However, things began to change near the turn of the 20th century. Let’s take a closer look to determine what changed the course of U.S. currency.
The Early History
Following Alexander Hamilton’s request in 1792, the U.S. began to adopt a monetary system that was based off the precious metals of gold and silver, noting them for their worth and abundance across the nation. While the 1849 rush to California increased the public interest in gold, the silver frantic hit when silver ore was discovered in Nevada in 1859.
While silver was slowly garnering attention in the U.S., it was the 1862 authorization of paper “greenbacks” as legal tender that began to cause worries for the future of the precious metal. The Coinage Act of 1873 only made matters worse, demonetizing silver bullion—that citizens were no longer allowed to have their bullion metal struck into legal tender silver coins—and shifting the nation on the road for the gold standard.
In the 1890s, silver bullion began to see a bit of hope, wherein the Sherman Silver Purchase Act of 1890 called for 4.5 million ounces of silver bullion to be melted and minted into silver coins monthly; however, when the U.S. Treasury’s gold reserves began to sink, President Cleveland repealed the Sherman Silver Purchase Act to help increase the value of the gold standard. It was the turn of the century that truly hurt silver, as the Gold Standard Act of 1900–enacted by President McKinley–ended all bimetallism, making gold tied to the evaluation of the USD.
The Silver Purchase Act of 1934
Some decades later, President Roosevelt’s passage of Executive Order 6814, known as the Silver Purchase Act of 1934, would be the beginning of the end for silver coins. The notion provided was that this would allow the government to seize a large portion of non-coinage silver so that it could be melted down for coinage usage, and storage, within the Federal Reserve and its member banks.
Furthermore, this act was a means for the U.S. Government to effectively nationalize all privately-owned silver, wherein citizens had to turn over any collected silver that exceeded 500 ounces. To own any amount of silver in quantities over 500 ounces was then considered to be a federal crime. In return for excess silver seizure, citizens would receive a certificate for U.S. silver ownership, which meant little as the fixed price meant people would only receive half of what their silver was worth in return while the government came out on top.
The Silver Purchase Act of 1946
In 1946, the U.S. once again made a declaration dealing with silver bullion and silver coins. With the passage of the Silver Purchase Act of 1946, the U.S. became the largest global buyer of silver, purchasing it from domestic silver producers at an increased cost from the silver spot price they would soon fix at a set rate. Silver producers benefited, but the cost for U.S. citizens was increased, allowing for the U.S. government to continue stockpiling within the Federal Reserve.
The Coinage Act of 1965
Yet while these might have reduced the usage of silver in the American economy, it was President Johnson’s Coinage Act of 1965 that brought the end to U.S. silver coins. The grounds on which this act was made were shaky at best. Before Congress, Johnson’s sole reasoning was because silver was a “scarce material” in which its uses were “growing as our population and our economy grows,” it must be regulated and reduced from coinage.
The effective legislation of the ruling reduced the circulation of silver coins, primarily driven by entirely eliminating silver from U.S. dimes and quarters, as well as reducing the half dollar silver content from 90 percent to 40 percent, replacing it with a composition of nickel and copper.
While silver coins and silver bullion have begun to see a return over the past half century, caused by the weakening of the USD, we can’t be sure what path the U.S. Treasury will take for the future. Provident Metals hopes to continue seeing the precious metals get the attention they deserve so that your investment portfolios and collections can continue to grow as time goes on!