At the end of the American Revolution, the Continental Dollar was worthless, along with all the other currencies issued by the states. Non-barter transactions used the English pound, the Spanish dollar, the Dutch guilder, French francs or livres.
To remedy this, on April 1st, 1792, the Second U.S. Congress passed what is known as the Coinage Act, also known as The Mint Act. Since then, there have been seven Coinage Acts – 1834, 1849, 1853, 1857, 1864, 1873 and 1965. Looking back, the first Coinage Act had far reaching effects.
First, the 1792 bill established the U.S. dollar and pegged its value to the Spanish silver dollar. Next, it established U.S. currency denominations based on the decimal system. The bill signed by George Washington created three gold coins, $10 Eagles, $5 half Eagles, $2.50 quarter Eagles. Dollars and below were in silver except for pennies and half-pennies which were to be minted in copper. The coins were half dollars, quarter dollars, dismes (dimes), half-dismes (nickels) were all to be silver.
FYI, for those who remember the English pound, one had to deal with a system based on 10 pence to a shilling and 20 shillings to a pound. Pricing was often in guineas (one pound, 1 shilling, or crowns (10 shillings) or half crowns (5 shillings), so going to a decimal system made perfect sense.
When The Coinage Act was passed, national currencies were backed by bullion. To collect enough gold and silver to support a national monetary system, citizens of the U.S. were encouraged to sell their gold and silver bullion to the Federal government without penalty or tax. Shortly after this Coinage Act was passed, Congress authorized a bulk purchase of copper (An Act to Provide for a Copper Coinage passed on May 8th, 1792), “not to exceed 150 tons” to be used in the new currency.
The Coinage Act of 1792 established the first U.S. Mint, which would be in Philadelphia. It gave the organization its “chain of command” and specific instructions on what was to be on each coin and its precious metal content.
For example, minted U.S. dollars had to contain 11 parts gold and one part a gold and silver alloy. This made U.S. dollars equal to one-fifth of the precious metal content of four British shillings. The act also stipulated that each coin must contain the words “United States of America,” Liberty,” an eagle along with the year the coin was minted and the value of the coin.
When The Coinage Act of 1792 was passed, the custom in Europe was to put the head of the reigning monarch on coins. Washington and the Founding Fathers had just fought a revolution, so the Thirteen Colonies were not ruled by a king and specified a symbol of Liberty on U.S. coins. On the 100th anniversary of Lincoln’s birth, Congress authorized the first U.S. coin – the Lincoln penny – in 1909. It was the first U.S. coin created with the image of an individual.
Congress also mandated that all Federal accounts be in the new currency and that debasing and/or counterfeiting U.S. currency could be punishable by death!
Picture of a 1798 U.S. silver dollar.