APPLYING HAMILTON'S 1791 MINT REPORT

 

Alexander Hamilton's 1791 Report on the Establishment of a Mint (hereafter, the Report) is an iconic financial document in which the first Secretary of the Treasury carefully plotted the future money of the United States. However, when Congress considered the Report and enacted the Coinage Act of 1792, important elements were excluded.

A main theme of Hamilton's Report was that the national unit of account would be the dollar. Through images and mottos, as well as everyday use, the dollar (both in gold and silver) would promote the bimetallic standard Hamilton desired. It would also provide a tangible embodiment of being an American and would help citizens identify with the United States as a nation, not just with their individual states. The idea was for the new American coinage to push out of circulation the ubiquitous Spanish-American eight reales (also called pieces of eight or Spanish dollars) and other international coins, as well as the myriad state coins then in circulation.

It was important to Hamilton to mint both gold and silver one-dollar coins. In Alexander Hamilton on Finance, Credit, and Debt, Richard Sylla and David Cowen write, The gold dollar's main purpose was to make the bimetallic standard real by having a coin of the same denomination in both metals. Congress did not include Hamilton's gold dollar in the Coinage Act. In fact, the Mint only produced a gold dollar from 1849 to 1889. However, the Coinage Act did include the quarter eagle ($2.50), half eagle ($5) and eagle ($10) gold coins.

Among the themes in Hamilton's Report was ending the circulation of foreign coins within a three-year period. He provided some latitude for the Spanish dollar to remain in circulation for a longer time. The intention was to have all foreign coins brought to the Mint to be melted into bullion and used to strike the new national coinage, with iconic imagery and mottos. This was part of Hamilton's concept of employing American coinage to create connections between the American people and the nascent United States, although the coins were intended for international trade and not solely for domestic consumption.

However, this important proposal was not included in the Coinage Act of 1792, and foreign coins were allowed in commerce as legal tender until the Coinage Act of 1857. Thus, an important and voluminous source of bullion was not available to produce the new national coinage. During the 1790s, silver mining production in the United States was virtually nonexistent. Therefore, Congress' decision to allow foreign coins to continue circulating unabated severely hampered the Mint's ability to produce a large quantity of American coinage for everyday commerce.

 

The surviving coins today—many of which are great rarities—were the subject of hoarding and possible storage in banks. This begs the question of why, over the course of 40 years, did Congress not once modify the silver to gold ratio? If gold merchants were regularly bringing gold bullion to the Mint to be converted into coins for the sole purpose of export, why did Mint officials not petition Congress to amend the law and charge seigniorage?

Hamilton left the US Treasury in 1795 and died in 1804, and no other financial minds stepped in to successfully confront these challenges. Congress and successive Mint directors discussed and complained about these problems for 40 years, yet nothing was done to fix them.

To read the complete issue on the Newman Numismatic Portal, see:
Financial History (#143) (https://nnp.wustl.edu/library/book/619614)

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