Before the era of fiat money, paper money was backed with silver or gold, and there were also gold and silver coins (I may be mixing eras together, but the principle is the same; feel free to clarify).
Going back to the 19th century, you had silver dollars made of real silver and gold pieces in various denominations. Now either 20 silver dollars were worth more melted than a 20-dollar gold piece, or they were worth less. I presume less. So why didn’t someone keep exchanging silver for gold until the gold was gone–under the principle of “bad money drives out good.”
I would tend to suspect that the metal value of both coins was lower than their facial values. If I’m right, then, keeping any of them would have been pointless, and so would have been keeping one rather than the other.
Take this as a guess, though.
I’m sure Samclem, our resident numismatist, will be here shortly to provide a definitive answer. In the meantime, I’ll take a shot at it. The OP is correct in assuming that silver was worth less than gold, during the time that both metals circulated. During that time, silver money, in effect, was fiat money with the amount of silver in a silver dollar being worth well under a dollar. (Fiat money, true, but a heck of a lot prettier than our awful “sandwich” coins of today.) So silver would have been the ‘bad’ money. However, silver was in those days freely redeemable for gold, as paper was, so there wasn’t much need to hoard gold. Also gold denominations were high for the time–$20 would be about like $400 today–so people probably didn’t need to carry gold with them every day. So people presumably carried silver and paper most of the time. Given the prices of those days, they probably didn’t even need paper most of the time.
As noted, silver coins were worth more than their metal content, but gold coins were the standard of value. The price of gold, in the later 19th century and up until 1933 was officially fixed at just over $20, and accordingly, a $20 coin weighed just a bit under one ounce. So by definition, as it were, gold coins were worth their face value.
Sometimes less, sometimes more. The United States was on a bimetalllic standard from 1792 until 1873. The fiat ratio between gold and silver was set at 15:1 in 1792 and modified to 16:1 in 1834. The market ratio fluctuated throughout that time, so sometimes one metal was overvalued, and sometimes the other.
They did. That’s exactly what happened. You can read a fairly lengthy summary of the issue here.
During periods when silver was undervalued, it would drive gold out of circulation. When gold was undervalued, silver coins would continue to circulate, but only in small denominations; there weren’t many small-denomination gold coins (I suspect that they were too difficult or too expensive to mint) so gold couldn’t always be used for small purchases.
Um, aren’t we nudging pretty close to the “Free Silver” movement of the late 19th century here? And William Jennings Bryan’s “You shall not crucify mankind upon a cross of gold,” etc.?
It took a bit of searching, but I found a site that gives the info.
How bad has American history instruction become? :eek:
In my experience, American history classes, sadly, NEVER talk about economic forces, other than
a. the stock market crash leading to the Great Depression
b. the slaveholding vs. industrial economies of the South and North just before the Civil War
c. the no taxation without representation deal of the Revolution (leaving out the fact that the Revolutionary tax rate was laughably low compared to today, and that the Brits were spending vast sums and manpower to defend the colonies, and were receiving little in return)
The Free Silver movement of the 1890’s was an unsuccessful attempt to restore the bimetallic definition of the dollar which had been repealed 20 years earlier. This question concerned how the bimetallic definition worked during the many earlier years in which it was actually in force.
Any implication that the OP reflects ignorance of American economic history is gratuitous and unwarranted. Even scholarly works on American history usually discuss bimetallism only in the context of the unsuccessful attempt to restore it, not in terms of its operation during the earlier period. I thought the OP was a good question.
turn into an allegation of any fault on his part???
I learned about Bryan in the fourth grade (I think, but maybe it was sixth). Dunno when you did. You gave him an academic answer; I gave him a colorful character to hang the topic on, which usually is the best way to ensure that the inquirer remembers it. I thought our responses were complementary.
I would appreciate a retraction of your unfounded accusation.
A generic comment like “How bad has American history instruction become?” impugns the historical literacy of everybody else posting in the thread. It implies that the OP, or perhaps all of us responding, missed something that we should have acquired in the course of basic education. It’s true that none of us brought up Bryan or the Free Silver movement, but that’s because it wasn’t directly relevant to the answer. It’s a sidelight, and worthy of mention, but need not be accompanied by “How bad has American history instruction become?”. I’m sure you didn’t mean anything malicious, but if you post something like that, you have to expect people to respond defensively.
How? Why would you assume I’m impugning any other respondent’s knowledge of monetary history (as opposed to the openly admitted lack of information by the OP, which is automatically assumed by one and all, else why ask a question?). I remind you that when I originally posted in this thread, I first mentioned Free Silver, then mentioned Bryan. I believe that qualifies as “introducing additional information”?
Thanks for that much!
I’m still baffled as to why you think any individual should feel defensive on the subject of gaps in public education. Is there some specific group which you think should or could be held responsible - or not, if I’m correctly perceiving your reaction? Do you see yourself as a member of such a group? Remember, I then said:
The purpose of this MB is to “fight ignorance”. You’ve been here long enough, and have enough posts, that you know this well (or should).
Despite a a very good basic education, and a lifelong habit of reading quantities of miscellaneous non-fiction - occasionally pursuing subjects (some abstruse) at considerable length - I bring questions here, just like nearly every intellectually curious member; nobody can know everything. :dubious:
Well, except maybe Cecil. And even he has the SAB.
I also took your post as a slam at the quality of education in the US. But that’s just two of us in this thread.
Your post about Bryan and “free silver” had little to help answer the question posed by the OP.
I think that Freddy the Pig’s posts were very helpful. They were good enough that I couldn’t respond with anything any better.
I MIGHT have heard of Bryan in the first 12 years of my education, but I may have been asleep that day. Rather than give a “coloful character,” why not give him the Straight Dope? I personally didn’t find the responses complimentary. YMMV.
I repeat; any such slam was unintended. It is true that the average quality of education in the U.S. has declined, but the causes are many, and not the fault of teachers as a group, in any case. My uncle learned calculus in HS; I assure you it was not offered in my HS, even though I’m pretty antiquated, and went to what was considered an excellent school.
I thought I acknowledged the accuracy of his response? It doesn’t get more authoritative than a textbook. I bookmarked his link, for my future reference.
I have had no formal training as an educator. I have, however, had a few signal successes as a tutor of various subjects. Regardless of whether the tutee was very bright, or learning-impaired, I have found that hanging a lesson - or a fact - on a story has always made the information more memorable.
Kinda like Jesus telling parables, y’know. Not that I compare myself; I’m a follower, working hard at humility (and the other virtues to which I aspire).
And even he has the SAB.
Rather than give a “coloful character,” why not give him the Straight Dope? I personally didn’t find the responses complimentary. YMMV.