Rare American Coins and the Early Development of US Silver Dollars
By Paul St. Julien
The American colonies started out with none of their own coinage, so they used foreign coins. Spanish milled 8 Reales were the most widely used. The 8 Reales was officially sanctioned by congress as legal tender until 1869.
Eight Reales were commonly known as pieces of 8, because one real was 1/8 of the coin that converted in our system to 12 ½ cents. It was also nicknamed a “bit”. A quarter then was 2 bits.
In the beginning, individual colonies minted their own coins for commerce. Massachusetts was the first colony to start minting coins. Before the revolutionary war, various forged and colony minted coins circulated for trade, as well as falling back on the barter system.
At the time of the revolution, all coins in America were rare. Britain simply didn’t supply the colonies with money.
In the Articles of Confederation of 1781, individual states were allowed to coin money. Congress regulated the alloy and value of coins for fungibility between the states.
NH, VT, CT, MA & NJ started minting their own coins with the dollar named after the German Thaler (pronounced taller) and based on the size of the 8 Reales. One ounce silver crown size coins were common in Europe and our standard was based on what was in general use at the time.
Thomas Jefferson proposed the dollar be divisible by 100 to eliminate confusion about values. Silver served as the basis for the dollar and gold as basis for the five dollar and above monetary units.
By 1787, the US Government contracted with existing Massachusetts private mints to strike the first U.S. coins. Then, in 1792, Congress passed a resolution to start a Federal Mint for national coinage. They located the first US mint in Philadelphia.
In the beginning, silver and gold had to be supplied by the public. These metals were made into coins and returned to original owner for use in commerce. Copper however was plentiful enough to be supplied by the new government.
These new coins had precious metal content slightly higher than the face value, so they were frequently melted for their bullion. They were spent abroad more advantageously than at home. Therefore, early US coins either flowed out of the country, or were melted down almost as soon as they left the mint, leaving few for domestic commerce.
Coins remain rare in America even after they were being minted by the US government.
The problem was so bad that President Jefferson suspended gold and silver coinage in 1804. Fractional coinage continued to be minted on a limited basis from 1794-1834. Even at that time, there was less than one coin per person in general circulation.
The problem was finally solved in 1837 with new laws governing coinage. The laws changed the standards, weights, accounting methods, and fineness tolerances (alloy), so their use in commerce was now favorable. By 1838 US coinage was finally acceptable in commerce and had become more stable.
This was done by reducing the weight of gold and silver coins below their denominational values. Arrows began to be used on fractional silver coins to indicate the lighter weight versions.
Spanish coins were finally retired from circulation by 1859.
Strangely, silver dollars didn’t circulate much in the 19th century, even though they were struck almost continuously from 1840 until 1904. Silver dollars sat in bank vaults waiting to redeem paper silver certificates. Silver dollars were much more popular in the west than in the east, where they were almost never used.
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