Senator William B. Allison in 1870. He wrote the silver certificate provision in the Bland-Allison Act of 1878.
Economist F. W. Taussig in 1915. He wrote an important treatise on silver legislation and usage in America.
Economist J. Laurence Laughlin was very critical of United States silver policy. endless supply of silver dollars to use every day in their commercial dealings. But, unfortunately, that was not the case.
The volume of silver dollars that Americans would absorb, writes Taussig,“ reached an early and stubborn limit … and the silver certificate has been the form in which mainly the currency of the country has been affected.” The silver certificate, along with the dollar coins, comprised the nation’ s silver currency. As the volume of silver dollars grew, only a small percentage of them ever reached the American public.
Introduction of Silver Currency
Silver dollars were initially produced in March 1878, and the first 15 months of silver certificate circulation was inconsequential. The end of June 1879 saw— out of a production of $ 36 million silver dollars— about $ 28 million worth of silver in Treasury department vaults. Taussig eloquently refers to those coins that were not represented by silver certificates as“ dead silver.”
Around mid-1879, there was a slight increase in circulation of both dollars and certificates. And in 1880, the distribution of silver certificates increased dramatically, from less than eight million in August to more than 36 million in December. More certificates in the hands of the public resulted in less dead silver.
The first half of 1881 saw a contraction in the use of certificates. However, by the end of December 1881, the circulation of those notes totaled over 62 million. Additionally, the distribution of dollars and certificates together was within seven million of the total number that was coined.
The Treasury had adopted a new plan to force silver into circulation. September 1880 saw a Treasury department circular in which, writes Taussig,“ in exchange for deposits of gold coin with the assistant treasurer in New York, drafts were offered on the sub-treasuries in the South and West, payable in silver certificates.” Specifically, the Treasury covered the cost of transporting cash to anyone who needed to remit to the South and West. The plan worked. Significant amounts of certificates were paid out, in exchange for deposits in New York City, by the sub-treasuries in New Orleans, St. Louis, Chicago and Cincinnati. Such payments were mostly of the two smallest denominations available at the time: $ 10 and $ 20. 1
Banks and Silver
At first, the new silver currency— both dollar coins and silver certificates— was found to be anathema to the banking industry. They paid it out first from among the cash they received and refused to hold it as a reserve. Banks did not
“ boycott” silver currency; they received silver certificates on deposit. However, they paid them out to the public as quickly as possible. The new silver currency only entered into retail transactions and, in essence, it became the“ large change” of society. It did not affect banking transactions whatsoever.
Thus, writes Taussig,“[ silver currency ] has not [ been ] affected by far the largest and most effective part of the circulating medium of the country.” All of the silver currency was in the hands of the public for daily transactions and the excess supply of it returned to the Treasury through the banks in payment of public dues. However, the status of the silver certificate, as well as banks’ attitude towards it, would change within a few years.
The Act of July 12, 1882
The Act of July 12, 1882 permitted an extension of the corporate existence of national banks for an additional 20 years. In order to eliminate low-denomination notes, however, the act made it compulsory that all national bank notes be redeemed via the Treasury. The old notes were replaced with new ones with a different design— and only in denominations of at least $ 5. This action nearly eradicated the circulating small-denomination bank notes within a few years. The act also
38 FINANCIAL HISTORY | Spring 2025 | www. MoAF. org