prevent the revival of business and import uncertainty and distrust into the near future?… The Act of 1878 has caused an accumulation of silver, and the payment by the solid medium of gold is becoming difficult because of the rising tide of silver in the Treasury. Soon the gold road will entirely disappear, and we shall be afloat on an uncertain and fluctuating sea of silver.
Forcing Silver Dollars into Circulation
The Treasury, desperate to push the silver dollars out of their vaults, went as far as to pay the cost of shipping them from the sub-treasuries to literally any location in the United States where they were wanted. That premium led to significant quantities being sent for and used. In order to facilitate this policy, Treasury ended the issuance of greenbacks in denominations under $ 5. The distribution of silver certificates was declining— however, circulation of silver dollars jumped by 10 million. That achievement took place primarily in the South, and it was a welcome relief to the Treasury.
However, the vast majority were sent back to the Treasury shortly thereafter. They collected in the tills of shopkeepers; from there they moved to local bank vaults; and finally, they were returned to the Treasury as payment for public dues. But were silver dollars wanted anywhere? Taussig writes,“ They circulate more freely and permanently west of the Alleghanies than east of them; and among the negroes of the South the big pieces are favorites, and find a permanent lodgment.”
Low-Denomination Silver Certificates vs. National Bank Notes
August 1885 saw nearly 43 million silver certificates in the Treasury, which was the largest quantity since the passage of Bland- Allison. Treasury needed to do something about that. By then, it was understood that silver dollar coins didn’ t circulate. However, it was important to get the public using the notes, as there was simply far too much dead silver in government vaults.
Four years after low-denomination national bank notes were abolished, Congress launched new low-denomination silver certificates. The Act of August 4, 1886, saw the Treasury department authorize
In 1886, lower denomination silver certificates were issued. Here is a $ 1 series 1886 that carries the image of Martha Washington upon it.
notes in denominations of $ 1, $ 2 and $ 5. This legislation came in response to the stockpiling of notes in the Treasury department. The distribution of silver certificates in denominations over $ 10 dipped from 1886 to 1891, as they were displaced by the new lower-denomination notes.
In a 2007 working paper for the Federal Reserve Bank of Cleveland, Bruce Champ and James B. Thomson write,“ Within two years of the passage of the act of August 4, 1886, low-denomination silver certificates( ones and twos) accounted for around 20 % of the total amount of silver certificates in circulation, and five-dollar silver certificates made up nearly one-third of total circulation.”
Taussig writes,“ the situation has been greatly modified by the issue of silver certificates of very small denominations, and by the sharp decline of the [ national ] bank note circulation …” When examining gross circulation— national bank notes that actually were used in daily business transactions in the community— we see there was a diminution of $ 100 million from 1886 to 1889.“ With their disappearance,” writes Taussig,“ a void has been made in the large change of the public, in which the silver certificates have been readily absorbed.” Not coincidentally, the revival of business activity occurred when the $ 1, $ 2 and $ 5 silver notes first were distributed. From 1886 to 1889, the volume of silver currency gained continuously on the total mintage of the dollars, and, writes Taussig in 1890,“ since the beginning of 1889, practically all of the dollars have been in circulation, chiefly, of course, in the form of certificates.”
Champ and Thomson write that from 1883 to 1892,“ the decline in national bank note circulation … was to a large degree demand driven. In this view, the decline in bank note issue occurred because the public and financial institutions replaced holdings of national bank notes with holdings of silver certificates.”
From 1882 to 1891, national bank note issuance decreased by more than $ 190
40 FINANCIAL HISTORY | Spring 2025 | www. MoAF. org