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The E-Sylum: Volume 12, Number 21, May 24, 2009, Article 17

MORE ON THE GREAT DEPRECIATION

In response to Dan Owens' submission about the counterstamped coins of California druggist J.L. Polhemus, Tom DeLorey wrote: I am curious about the "great depreciat(ion)" mentioned in the article. Could this be a reference to the Mint Act of 1857, which caused foreign coins to cease to be Legal Tender in the United States?" Tom DeLorey wrote in to agree, but Bob Leonard feels otherwise - here are his thoughts on the topic. -Editor
The "great depreciat(ion)" of the foreign coins counterstamped by Polhemus had nothing whatever to do with the loss of legal tender status of these pieces. I presented the history of small change in Gold Rush California in the 2nd edition of California Pioneer Fractional Gold (Bowers and Merena, 2003); another source is Carothers' Fractional Money.

Briefly, small change of all kinds was so scarce in 1851-52 that foreign silver coins of all nations passed at premiums of up to 40%, and brokers advertised to buy whole Mexican dollars at 3% premium. Polhemus counterstamped heavily during this period. But in 1854 the San Francisco Branch Mint opened, though it did not start coining silver until 1855. As of January 1, 1854, however, the San Francisco bankers refused to accept French francs at more than 20 cents each. But the San Francisco Alta California wrote as late as Oct. 23, 1855,

We have at present in circulation a Pistareen (value 16 cents); the Chile Double Real (value about 19 cents). . . and a number of German and Spanish coins, the value of which we cannot at the moment determine, but which all pass in common for twenty-five cents. . .


In 1856, though, the Mint issued 70,000 dimes, 286,000 quarters, and 211,000 halves, and in 1857 another 82,000 quarters and 158,000 halves. These mintages, plus the declining economy, eliminated the coin shortage, and even U.S. dimes sold at a discount (!) from face value before 1860 (Carothers, p. 221). The Indian rupees (passed as half dollars), German coins, single French francs, etc. were never legal tender in the United States in the first place, so their loss of legal tender status in the East had no effect in California.

The "great depreciation" was the result of simple supply and demand; the premiums caused by the great scarcity of change disappeared after the Mint opened, and these foreign coins became worth exchange value only.

Many thanks for setting the record straight. -Editor




Wayne Homren, Editor

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