Crime of 1873: The Controversial Silver Dollar Omission and Its Impact on U.S. Currency Standards (Price: Historical, Year: 1873)
Explore the pivotal Crime of 1873, where the exclusion of the silver dollar from U.S. coinage law led to the nation's shift to the gold standard, sparking economic debate and shaping modern monetary policy.
Adam Hayes, Ph.D., CFA, is a seasoned financial writer with over 15 years of Wall Street experience as a derivatives trader. With a deep understanding of economics and behavioral finance, Adam holds a master’s degree in economics from The New School for Social Research and a Ph.D. in sociology from the University of Wisconsin-Madison. A CFA charterholder and licensed FINRA Series 7, 55 & 63 professional, he currently researches and teaches economic sociology and finance studies at Hebrew University in Jerusalem.
Understanding the Crime of 1873
The Crime of 1873 refers to the significant exclusion of the standard silver dollar from the coinage legislation enacted by the U.S. Congress on February 12, 1873, and signed by President Ulysses S. Grant. This legislative change paved the way for the United States to adopt the gold standard, a move that generated considerable controversy, particularly among those who could no longer convert their silver into legal tender.
Key Insights
- The Crime of 1873 denotes the removal of silver dollars from official U.S. coinage, setting the stage for the gold standard adoption.
- The gold standard fixed currency values to gold, excluding silver coin conversion, which altered monetary dynamics.
- Critics labeled the law a "crime" due to the devaluation of silver holdings and opposition to gold-based currency.
Historical Context and Reasons Behind Abandoning Silver
U.S. coinage laws regulate the types of coins minted and their legal tender status. The original Coinage Act of 1792 established the U.S. Mint and designated the dollar as the official currency unit. The 1873 Coinage Act revised these laws, steering the nation toward gold by specifying which silver coins would be minted—excluding the standard silver dollar.
Section 15 of the Act detailed the silver coins authorized for minting and their weights, while Section 17 declared that only coins listed in the Act would be legal tender moving forward. This effectively ended the minting of silver dollars.
Previously, the U.S. had operated under a silver standard, but gold discoveries like the California Gold Rush and increased silver production in the 1860s shifted economic priorities. The government viewed the gold standard as a more stable monetary system, culminating in its formal adoption by 1900.
Controversies and Criticism Surrounding the Coinage Act
Before 1873, the U.S. followed bimetallism, valuing both gold and silver to maintain currency stability. Removing silver disrupted this balance, leaving silver owners unable to convert their holdings into money.
Opponents warned that monometallism could cause economic instability, reduce money supply, and harm farmers and miners reliant on silver. Allegations of corruption in passing the law circulated, though no definitive proof exists. Nevertheless, subsequent gold rushes bolstered gold supplies, easing economic concerns.
The Legacy and Modern Monetary Systems
The gold standard remained until 1971, when it was officially abandoned. Since then, modern economies have transitioned to fiat money systems, where currency value is determined by government decree rather than physical commodities. The U.S. dollar exemplifies fiat currency, underpinning today's global financial system.
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