Money Mischief_ Episodes in Monetary History - Milton Friedman [111]
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* The 1873 act included provision for coining a heavier silver "trade dollar" to be used in trade with Mexico and the Far East, which were on the silver standard. The trade dollar had legal-tender status, which was removed in June of 1874, when Congress passed the Revised Statutes providing that no silver coin was to be legal tender beyond the amount of $5.00 and that foreign coin was prohibited from being a tender (see Barnett 1964, p. 178).
According to Nugent (1968, pp. 98, 134), the coinage legislation was first introduced by Senator John Sherman in 1868, and the bill that actually passed was initially drafted in 1869 (though clearly with some subsequent changes) and first introduced into the Senate in April 1870.
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† For a detailed discussion of the greenback period and resumption, see Friedman and Schwartz (1963, chap. 2).
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‡ By 1819 the market price of gold had fallen to the legal price, but the Bank of England was not legally required to redeem its notes in gold until 1821.
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* It was not the only possible reaction, despite the tendency of many historians to regard what happened as if it had to happen. France was under even greater financial pressure than Britain was, yet "through twenty years of war, at times against half Europe, [Napoleon] never once allowed a resort to ... inconvertible paper money" (Walker 1896b, p. 87). Chapter 6 discusses this episode at greater length.
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† David Ricardo, one of Britain's most influential proponents of resumption, initially favored silver but not bimetallism ([1816] 1951, p. 63). In subsequent testimony in 1819 before a committee of Parliament, Ricardo shifted to gold because "I have understood that machinery is particularly apposite to the silver mines and may therefore very much conduce to an increased quantity of that metal and an alteration of its value, whilst the same cause is not likely to operate upon the value of gold" ([1819a] 1952, pp. 390–91; see also [1819b] 1952, p. 427). That judgment, like so many based on the opinion of technical "experts," proved to be very wide of the mark. Chapter 6 provides a fuller discussion of this episode.
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* Currently, it pays to bring neither gold nor silver to the mint because both have been replaced by a cheaper money, paper. There still are, however, official prices on the books ($1.2929 for silver, $42.22 for gold). The gold holdings of the U.S. government are still valued on the books at the official price. Yet no one would dream of using a silver coin stamped $1 or a gold coin stamped $20 as money at these nominal values. The coins are numismatic items valued at about $8 and $475, respectively. I am indebted to Conrad J. Braun for the rough estimates of the current market values of the silver and gold coins.
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† That was the situation in France from 1803 to 1873. During the whole of that time both gold and silver circulated, despite market ratios that departed from the French legal ratio of 15.5 to 1, although at times silver tended to displace gold and at other times gold tended to replace silver (Walker 1896b, chaps. 4 and 5, esp. p. 121). See chapter 6 for a fuller discussion of a bimetallic standard.
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* They even cited one of their opponents in support: "As Professor Laughlin states...: 'The Senate occupied its time chiefly on questions of seignorage and abrasion and the House on a question of the salaries of the officials'" (National Executive Silver