Date of Award


Degree Name

Master of Arts



First Advisor

Gilbert Morell

Access Setting

Masters Thesis-Open Access



An inadequate banking system and an attachment to monetary panaceas are both characteristic of the American past. When the Revolutionary War began, the colonist were ill-prepared to meet the growing burden of financial stress in the newly formed Confederation. In order to bring some degree of organization to the unstable monetary system, the Continental Congress fixed the ratio between gold and silver at 15.3 to 1 and authorized the issuance of Continental notes redeemable in Spanish-milled dollars or their equivalent in gold or silver. But after 1780, "continentals" depreciated so rapidly they soon ceased to circulate, and coins replaced them.

After the Confederation gave way to the Federal government, Congress passed the Coinage Act of 1792 and the United States had its first official monetary measure under the Constitution. The dollar was designated as the official monetary unit of the nation and it was defined in terms of both gold and silver at a mint ratio of 15 to 1. The bimetallic system established was felt by the Secretary of the Treasury, Alexander Hamilton, to be the best way to enhance the monetary stocks of the new nation. However, the period from 1792 to 1884 proved to be an unhappy one for the American monetary system. During this period, the value relationships between the two metals changed rapidly as the supply of silver of the world market increased proportionately more than gold. Despite the variations of ratios on the foreign market - 15.5 to 16.06 - the United States maintained its mint ratio between the two metals at 15 to 1. It therefore became more profitable to export gold to European countries in exchange for silver. This meant that the monetary system of the United States faced a depletion of gold reserves and an abundance of silver at the mint. An attempt was made to rectify the situation when an act was passed in 1884 which set the mint ratio in America at 16 to 1. Ratio differences remained on the foreign market however; only now it became apparent that gold was overvalued and silver was undervalued. Soon silver began to disappear from circulation, and little was taken to the United States mint. In seeking a remedy, Congress passed an act in 1853 which placed America on a gold coin standard with silver to be used in a supplementary capacity. With the outbreak of the Civil War, however, the credit of the Federal government was at a low ebb and was still suffering from the repercussions of the Panic of 1857. In 1862, Congress authorized the issuance of fiat money, popularity called "greenbacks," which placed the country on a paper standard until the passage of the Resumption Act in 1875 when the relationship between greenbacks and gold was strengthened. By 1879 paper was circulating at a par with gold.