The unit of value adopted in the act of 1792 mentioned above was a dollar of 371 1/4 grains of pure silver-practically the Spanish dollar then current-or a gold dollar of 24.75 grains, thus providing a bimetallic system with free coinage of the two metals at a ratio of 15 to 1. There had not been for many years any material change in the production of the precious metals, and the ratio adopted corresponded fairly well with the market ratio. While no great quantity of metal was coined in the mints of the United States for the first twenty years of our history, and as before the outbreak of the War of 1812 the tide of importation was in our favor, the system worked satisfactorily.

With the war and the heavy importations of merchandise which followed an export of specie began and it was found that gold was favored. This change in the market ratio was largely due to the outbreak of the revolt against the Spanish domination in South America and the slackening of supplies of silver from that region. Agitation began for a new ratio, which did not culminate in legislation until 1834. At this epoch the United States mined no silver, while a certain amount of gold, considerable for that time, was being drawn from the Appalachian gold region.

When, therefore, the new ratio was adopted it was deemed wise to be upon the side of favoring gold rather than silver. Laws of 1834 and 1835 changing the weight and fineness of the coins established the ratio of 15.988 to 1, familiarly 16 to 1, although the market ratio was 15.625 to 1. The divergence was, however, too slight to affect materially the supply of silver, but in 1849 gold was discovered in California, resulting in a decreased value of gold as compared with silver. Moreover, a metallic surplus appeared in our own markets, and silver began to be exported. As all the silver in circulation was divisionary coin, it was feared that a dearth of small change would result. 

The exportation of silver had already seriously depleted the stock of half dollars, the largest silver coin in use, and had begun to threaten the quarter dollars when in 1853 Congress reduced the fineness of silver coins less than one dollar from 900 to 835 and made them tokens to be issued only on Government account. In so doing it did not affect the status of the silver dollar, for which as before free coinage existed-an empty privilege, since the silver dollar had a higher bullion value than the gold dollar. From the establishment of the mint until 1850 the aggregate coinage of the United States was $196,999,000 and in this total gold and silver were about equally represented. In the next ten years, 1851-60, no less than $403,000,000 were coined, of which less than $48,000,000 were silver. Such a change denotes not only that gold predominated in the metallic circulation of the period, but also that the metallic circulation itself became a thing of moment in the community.

The Civil War introduced new elements into our monetary circulation-paper money and the national bank note. Soon after the outbreak of hostilities specie payments were suspended. The Government seemed to have exhausted every device of borrowing when it grasped the dangerous expedient of paper issues. Treasury notes bearing interest had several times in the history of the nation been resorted to, but it was not until the act of February 25, 1862, was passed that non-interest-bearing notes were issued. One hundred and fifty million dollars of notes were authorized and they were declared a legal tender for all debts, public and private, except duties upon imports and interest upon the public debt.

Subsequent issues in July, 1862, and March, 1863, brought up the aggregate amount authorized to $450,000,000. This flood of paper money drove gold to a premium and swept away the silver subsidiary coinage. It became necessary to supply the place of the latter, and small notes called postage and later fractional currency were authorized in 1862 to the extent of $50,000,000. From the highest denominations down to three cents, the monetary circulation of the nation was paper only, the issues of the United States Government and the issues of the banks. In 1863 the national banking system was organized, but few banks availed themselves of the privilege of a national charter until after March 31, 1865, when a tax of 10 per cent. on the circulation of State banks outstanding after August 1, 1866, was enacted. This doomed the State bank notes, and banks which clung to the note-issuing privilege organized under the national law.

When peace had been declared the condition of the currency received attention. The volume of paper outstanding was reduced to $356,000,000 before 1868. In that year the fear of a monetary stringency due to contraction of the currency caused Congress to abandon this policy, and this postponed the day of redemption. In 1873 additional issues were made and the amount outstanding raised to $382,000,000, which limit was fixed as a maximum. In 1875 the Resumption Act was passed providing for a return to specie payments January 1, 1879. Some slight progress toward a metallic basis had already been made by calling in the fractional currency. 

The Resumption Act authorized the Secretary of the Treasury to sell bonds for the purpose of providing a gold supply sufficient to redeem the notes. It also removed the restriction which had previously rested on, the volume of the national bank currency, and provided that when additional bank notes were issued an amount of legal-tender notes equal to 80 per cent. of such issues should be retired. The fear of contraction which had dictated a bill to repeal the entire Resumption Act, which failed only through the President's veto, succeeded in May, 1878, in abolishing this retirement provision, but not before the volume of notes had been reduced to $346,681,016, at which point the issue stands today.

Much trepidation was felt lest resumption should not succeed and lest the applications for the redemption of notes should exhaust the reserve provided. But these fears proved groundless, and resumption was effected quietly and without difficulty. From 1879 the notes have been convertible into gold upon demand. No fixed reserve of gold for this purpose was prescribed by law, but the practice of the Treasury has been to keep on hand nominally at least $100,000,000 for this purpose. Whenever the reserve fell below this limit, grave concern was felt, and more than once resort was had to the issue of bonds to sustain the reserve. The law of 1900 provides a reserve of $150,000,000 for the redemption of these notes, and provides more effective and more expeditious means for its replenishment.

Before 1862 the centre of interest and discussion in our monetary circulation lay in the notes of banks. It was then transferred to the paper issues of the Government, and after 1876 to silver. During the Civil War period the United States began to produce silver as well as gold in considerable quantities, but as all our money was paper this did not affect the monetary circulation. In 1870 a revision of the coinage laws was undertaken with the purpose of codifying existing law.

One of the features of the codification was the omission of the silver dollar from the list of coins. The measure was an executive one and there was considerable difficulty in securing for it, the attention of Congress, which listened impatiently while its provisions were being explained. Between 1870 and 1873, when it became a law, it had been thoroughly discussed in Congress and should have been well understood. The omission of the silver dollar made the United States theoretically a gold standard country. This law which effected the demonetization of silver was the famous "crime of 1873," concerning the passage of which the wildest statements were current at a later date. The simple fact is that at the time no one was aware of the significance of the demonetization of silver.