The ‘Crime of 1873’: Definition, Historical Impact, and Key Examples

The “crime of 1873” is a significant turning point in American economic history that revolves around the Coinage Act of 1873. This act marked the omission of the standard silver dollar from the official coinage, fundamentally altering the monetary landscape of the United States. In this comprehensive article, we will explore the definition, historical context, and the consequences of this pivotal moment in American finance.

The Coinage Act of 1792 laid the foundation for American currency, establishing the U.S. Mint and designating the dollar as the official standard unit of money and legal tender. However, things took a different turn with the Coinage Act of 1873.
The Coinage Act of 1873 revised its predecessor’s laws, steering the country toward the gold standard and away from silver. Section fifteen of the Act detailed the silver coins to be minted and their respective weights, conspicuously excluding the standard silver dollar. Section seventeen declared that only the coins explicitly included in the Act would be legal tender from that point forward. This shift was influenced by the changing dynamics of the 19th-century economy. The California Gold Rush and subsequent silver discoveries threatened to push gold out of circulation. As a result, the United States considered the gold standard as a rational economic approach, ultimately leading to the adoption of the gold standard in 1900.

The removal of silver from the equation marked a departure from the bimetallism system that had characterized American currency until 1873. Bimetallism used both gold and silver as reference points for determining the relative value of legal tender, maintaining a fixed exchange rate between the two. With the Coinage Act of 1873, individuals who possessed substantial amounts of silver could no longer convert it into money.
Critics argued that this shift to monometallism, a single metal standard, would have adverse effects on the economy. They anticipated unstable prices and a decrease in the money supply, which could lead to economic instability. Some even alleged that the law was passed corruptly, though no concrete evidence substantiates this claim. Nonetheless, industrial advances and gold discoveries, including those in South Africa and the Klondike, bolstered the circulation of gold and provided economic reassurance.

The gold standard remained in place until 1971, when it was officially abolished. Since then, most modern economies have adopted fiat money, where the value and inflation rate are determined by the government rather than being tied to the intrinsic worth of a specific metal. The U.S. dollar is a prime example of fiat currency.

The exclusion of silver from the coinage law had a profound impact on agriculture and silver mining, primarily in the Western United States. In regions like Nevada, Colorado, and Utah, silver mining was a vital industry, and many local economies depended on it. The omission of the silver dollar led to a decrease in the value of silver, and miners and producers faced a significant economic downturn.

For instance, in Nevada, the “Silver State,” the sudden devaluation of silver struck hard. Mines laid off workers, and mining towns experienced economic collapse. The impact was felt far beyond the mining industry, affecting local businesses, land values, and overall prosperity.

The Coinage Act of 1873 triggered substantial political backlash. Many believed the act favored the interests of Eastern industrialists and bankers over Western miners and farmers. This discontent gave rise to the Populist movement in the late 19th century, which called for a return to bimetallism and the unlimited coinage of silver.

One of the most prominent figures of the Populist movement was William Jennings Bryan, who famously declared, “you shall not crucify mankind upon a cross of gold!” This fiery speech at the 1896 Democratic National Convention captured the sentiment of many who believed that the gold standard was detrimental to the average American.

In 1933, the United States officially abandoned the gold standard under President Franklin D. Roosevelt. This decision was a response to the economic challenges posed by the Great Depression. The country moved away from the fixed exchange rate of gold and shifted toward a more flexible monetary system.

When President Roosevelt took office, the country faced severe economic turmoil. The gold standard, which had been in place for decades, limited the government’s ability to adjust the money supply. By departing from the gold standard, Roosevelt’s administration gained the flexibility needed to implement policies like devaluing the dollar, stimulating inflation, and stabilizing the economy.

The Federal Reserve System, established in 1913, played a pivotal role in shaping the modern American monetary system. As the central bank of the United States, the Fed was given the authority to regulate the money supply, interest rates, and ensure financial stability.

During the Great Depression, the Federal Reserve employed various monetary policy tools to manage the money supply and stimulate economic growth. This included measures like lowering interest rates and increasing the money in circulation. Such actions showcased the importance of having a flexible monetary system and an institution like the Federal Reserve to navigate economic crises.

The United States’ transition from the gold standard to fiat money was not an isolated event. Globally, countries began moving away from the gold standard in the 20th century. The flexibility and control that fiat currency offered became increasingly attractive to governments worldwide.

One notable example is the United Kingdom’s decision to abandon the gold standard in 1931 during the Great Depression. This move allowed the country to manage its currency independently and better respond to economic challenges. It marked a shift in global monetary policy and set the stage for the predominance of fiat currencies in the modern world.

The “crime of 1873” and the Coinage Act that precipitated it remain a pivotal chapter in American financial history. The omission of silver from the official coinage had far-reaching consequences and set the stage for the adoption of the gold standard, a move that reshaped the nation’s monetary policy. Understanding this historical event is essential for comprehending the evolution of the American economy and its transition from the gold standard to modern fiat currency systems.

The omission of the standard silver dollar from the coinage law in 1873 had a profound impact on silver mining, especially in the Western United States. Silver mining was a vital industry in states like Nevada, Colorado, and Utah. The exclusion of the silver dollar led to a decrease in the value of silver, resulting in economic hardships for miners and local economies.

The United States officially abandoned the gold standard in 1971 due to economic challenges posed by the Great Depression. The fixed exchange rate of gold limited the government’s ability to adjust the money supply. Abandoning the gold standard provided the flexibility needed to implement policies like devaluing the dollar, stimulating inflation, and stabilizing the economy.

The Federal Reserve System, established in 1913, played a pivotal role in shaping the modern American monetary system. As the central bank of the United States, the Fed was given the authority to regulate the money supply, interest rates, and ensure financial stability. During the Great Depression, the Federal Reserve employed various monetary policy tools to manage the money supply and stimulate economic growth.

The Coinage Act of 1873, which marked the “Crime of 1873,” triggered substantial political backlash. Many believed the act favored the interests of Eastern industrialists and bankers over Western miners and farmers. This discontent gave rise to the Populist Movement, which called for a return to bimetallism and the unlimited coinage of silver. Prominent figures like William Jennings Bryan led this movement, protesting the gold standard’s impact on the average American.

The United States’ transition from the gold standard to fiat money in the 20th century was not an isolated event. Globally, countries began moving away from the gold standard during this period. The flexibility and control that fiat currency offered became increasingly attractive to governments worldwide. For example, the United Kingdom’s decision to abandon the gold standard in 1931 during the Great Depression marked a significant shift in global monetary policy and set the stage for the predominance of fiat currencies in the modern world.