000,000, while trade was crippled by war, and specie was drained from the country. Great embarrassment was felt by the Government from the fact that as the only medium of exchange such State bank notes could hardly be refused in payments, while with the suspension of specie payments by the banks their value depended upon the vagaries of bank management. This state of affairs called loudly for a remedy, and the reorganizatiim of the Bank of the United States was planned. It was eventually accomplished in 1816, and for twenty years it exercised on the whole a salutary influence upon the monetary circulation. When in 1836 its charter expired, State bank notes again ran riot and precipitated the disastrous panic of 1837. In the days of depression which followed the States generally put their banking systems in order. So long, however, as any State countenanced the loose methods which had formerly brought the whole system into disrepute, some were bound to suffer from such iniquity, but the mass of suffering was greatly reduced. This was in part due to the gold discoveries of California, which furnished the nation with a larger supply of metal than had ever been known, and made it comparatively easy for the banks to maintain an adequate reserve. When the Civil War broke out the State bank system was at its best, and the agitation which culminated in 1863 in the national banking system had its origin more in the fiscal necessities of the Government than in any immediate need of reform of the State banks.
The unit of value adopted in the act of 1792 mentioned above was a dollar of 371¼ 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 culmimite 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 $190,000,000, 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 pro-
