silver certificate. The silver dollar was never a circulating medium from 1794 to 1873. So then why was it forced upon the nation in 1878 via Bland-Allison? Even though the United States was on the gold standard, there was a de facto silver standard for a single form of currency: the silver certificate. It appears that the Sherman Silver Purchase Act— which sparked one of the most severe economic depressions in American history— benefited silver mine owners to the detriment of literally everyone else in the country.
Eric Brothers is a frequent contributor to Numismatic News. He also writes for ANS Magazine, a publication of the American Numismatic Society in New York. He is the author of the book Berlin Ghetto: Herbert Baum and the Anti- Fascist Resistance( Stroud: Spellmount, 2012). This is his eighth article for Financial History.
Series 1890 Treasury note for $ 1,000. It was nicknamed the“ The Grand Watermelon” because of the color and shape of the zeros on the reverse.
million, while during the same period silver certificate issues rose by over $ 248 million. In 1891, over 15 % of silver certificates in circulation were $ 1 and $ 2 bills. According to Champ and Thomson,“ national banks had difficulty keeping their notes in circulation for a number of years. From 1886 to 1891 more than 25 % of the notes sat idle in bank vaults.”
1886 was the year that low-denomination silver certificates were first issued. Not coincidentally, it was also the year that saw a noticeable increase of idle national bank notes. Overall, the years 1882 to 1893 saw the circulation of national bank notes fall by around 50 %.
Yet Another Form of Currency?
In 1890, the Sherman Silver Purchase Act became law. While Bland-Allison compelled the Treasury to buy a minimum of $ 2 million worth of silver bullion each month, this new legislation forced the government to purchase 4.5 million ounces of silver every month— and strike $ 2 million worth of silver dollars per month. This law required the Treasury to buy this silver with a special new issue— Treasury notes( issued from 1890 to 1893)— that could be redeemed in either silver or gold. This resulted in a dramatic expansion in the circulating currency, however without a proportionate growth of the nation’ s gold reserve. This foolhardy legislation triggered a run on the Treasury’ s gold reserve and culminated in the Panic of 1893. Concurrently, the issuance of silver certificates continued unabated along with the mintage of silver dollars.
Why did the United States need so many different forms of paper currency in circulation at the same time? There were unbacked greenbacks, gold certificates backed by the gold reserve, national bank notes backed by government bonds, national gold notes, silver certificates backed by silver dollars and the Treasury notes that drained the nation’ s gold reserve.
The currency that made the least sense— after the Treasury notes— was the
Note
1. This Treasury practice was temporary. It was suspended between October 15, 1882, and March 2, 1883, and it was discontinued in January 1885.
Sources
Brothers, Eric.“ Return of the Silver Dollar: Free Silver and the Bland-Allison Act.” Financial History. Fall 2024.
Carothers, Neil.“ Silver: A Senate Racket.” The North American Review. Vol. 233, No. 1. January 1932.
Champ, Bruce.“ The National Banking System: A Brief History.” Working Paper 07 – 23. Federal Reserve Bank of Cleveland. December 2007.
Champ, Bruce and James B. Thomson.“ National Banknotes and Silver Certificates.” Working Paper 06 – 22. Federal Reserve Bank of Cleveland. December 2006.
Sumner, W. G., Francis A. Walker and J. Laurence Laughlin.“ Shall Silver Be Demonetized?” The North American Review. Vol. 140, No. 343. June 1885.
Taussig, F. W.“ The Silver Situation in the United States.” The Quarterly Journal of Economics. Vol. 4, No. 3. April 1890.
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