Home U.S. Coin Forum

Coin history

edwardBe5edwardBe5 Posts: 2
edited January 11, 2023 2:53PM in U.S. Coin Forum

Hello, Does anyone know if there a time in the US like in the 20th century before 1933 when gold coins and silver coins existed side by side without a bimetallism fixed exchange rate between the two metals? That is, could a person exchange 10 silver dollars for a 10 dollar gold piece?

Comments

  • djmdjm Posts: 1,558 ✭✭✭✭✭

    Of course, you could exchange ten silver dollars for a ten-dollar gold piece. Why would anybody do that they were exactly the same value of intrinsic metal?

  • OwnerofawheatiehordeOwnerofawheatiehorde Posts: 1,517 ✭✭✭✭✭

    @edwardBe5 said:
    Hello, Does anyone know if there a time in the US like in the 20th century before 1933 when gold coins and silver coins existed side by side without a bimetallism fixed exchange rate between the two metals? That is, could a person exchange 10 silver dollars for a 10 dollar gold piece?

    Yes, up until 1933 I bet.

    Type collector, mainly into Seated. Young Numismatist. Good BST transactions with: mirabela, OKCC, MICHAELDIXON

  • lermishlermish Posts: 1,922 ✭✭✭✭✭
    edited January 11, 2023 3:34PM

    @djm said:
    Of course, you could exchange ten silver dollars for a ten-dollar gold piece. Why would anybody do that they were exactly the same value of intrinsic metal?

    Wrong. They are two separate commodities which have do not maintain a fixed priced relationship. And yes, 10 silver dollars could be exchanged for 1 $10 gold piece but the intrinsic value of the metals was always changing, not fixed.

    Whether the average person would/could melt down coins to arbitrage the difference or whether it would be worthwhile is a different matter.

  • BuffaloIronTailBuffaloIronTail Posts: 7,408 ✭✭✭✭✭

    Seems like a simple question. Not getting too technical about it I would have to say yes.

    If not, please explain.

    Pete

    "I tell them there's no problems.....only solutions" - John Lennon
  • SapyxSapyx Posts: 1,999 ✭✭✭✭✭
    edited January 11, 2023 4:09PM

    The problem is, any government that issues both gold and silver coins for circulation, is in effect fixing an "official government exchange rate" between the two metals, because the government is promising to exchange those coins at that rate. If the economic realities of the day mean that the real-world or international values of gold and silver are different from that official government rate, then Gresham's Law says that people are going to be redeeming the "expensive" coin (bad money), and exchanging it for the "cheap" coin (good money), then either melting down the "cheap" coins and selling the bullion at the full market rate, or exporting the "cheap" coins to some other country where their value is more appreciated. So at any price ratio other than the official government rate, either the gold coins or the silver coins will be disappearing from circulation and bleeding out of the country.

    To have gold and silver coins freely circulating side by side without this happening, you need one of two things:

    (1) to have full government control of all the silver and gold mines in the country, and strict export/import controls to prevent either the exporting of cheap coins or the importing of non-government metal into country. And you can't do this without going full Hermit Kingdom dictatorship.

    (2) to have an internationally stable gold:silver ratio. And in the modern world, that just doesn't happen, because some darn fool is always out there finding new gold or silver mines, or discovering some new industrial application that increases demand for one or the other metal, or a thousand other variables outside of any government's control.

    Waste no more time arguing what a good man should be. Be one.
    Roman emperor Marcus Aurelius, "Meditations"

    Apparently I have been awarded one DPOTD. B)
  • lermishlermish Posts: 1,922 ✭✭✭✭✭

    @Sapyx said:
    The problem is, any government that issues both gold and silver coins for circulation, is in effect fixing an "official government exchange rate" between the two metals, because the government is promising to exchange those coins at that rate. If the economic realities of the day mean that the real-world or international values of gold and silver are different from that official government rate, then Gresham's Law says that people are going to be redeeming the "expensive" coin (bad money), and exchanging it for the "cheap" coin (good money), then either melting down the "cheap" coins and selling the bullion at the full market rate, or exporting the "cheap" coins to some other country where their value is more appreciated. So at any price ratio other than the official government rate, either the gold coins or the silver coins will be disappearing from circulation and bleeding out of the country.

    To have gold and silver coins freely circulating side by side without this happening, you need one of two things:

    (1) to have full government control of all the silver and gold mines in the country, and strict export/import controls to prevent either the exporting of cheap coins or the importing of non-government metal into country. And you can't do this without going full Hermit Kingdom dictatorship.

    (2) to have an internationally stable gold:silver ratio. And in the modern world, that just doesn't happen, because some darn fool is always out there finding new gold or silver mines, or discovering some new industrial application that increases demand for one or the other metal, or a thousand other variables outside of any government's control.

    Very nice post and I mostly agree...for today. Or even during the Hunt Bros. silver episode when many people did exactly that with silver. However...

    I am not a scholar so I am happy to be refuted if this is incorrect: My belief is that the realities of international travel and trade for the vast majority of people in the US when gold was circulating was much different than it is now. The lack of air travel or speedy boat travel and even the expense of communication and speed of news/price dissemination by wire likely negated the opportunity for arbitrage on a day to day basis for all but very large commodity houses, traders, import/export firms or banks.

  • lermishlermish Posts: 1,922 ✭✭✭✭✭

    @OriginalDan and @ChopmarkedTrades - do you have any insight into arbitrage opportunities in regard to sending silver to China in exchange for gold (in addition to goods)? I know the Chinese did not care for gold but do we have any insight into whether there were beneficial gold/silver exchange rates to be had?

  • OriginalDanOriginalDan Posts: 3,723 ✭✭✭✭✭

    @lermish said:
    @OriginalDan and @ChopmarkedTrades - do you have any insight into arbitrage opportunities in regard to sending silver to China in exchange for gold (in addition to goods)? I know the Chinese did not care for gold but do we have any insight into whether there were beneficial gold/silver exchange rates to be had?

    Sort of, but in Japan not China. Read about the "Japanese gold rush of 1859". Here's an article I found after a quick search

    https://www.gold-eagle.com/great-japanese-gold-trade-1859

  • OriginalDanOriginalDan Posts: 3,723 ✭✭✭✭✭

    Turns out there was a post here about this a couple years ago, started by forum member @pruebas

    https://forums.collectors.com/discussion/1039892/the-great-japanese-gold-trade-of-1859

  • Thanks for the interesting takes. I guess the government was establishing a de facto gold to silver ratio by having the two metals circulate side by side. The 1901 $10 Gold Liberty Head Eagle Coin that I found on the internet was .900 gold and weighed 0.4838 troy oz. A Morgan Silver Dollar will weigh around 26.73 grams and contain a total silver weight of .7734 Troy Ounces. So the ratio is 10*.7734 troy oz or 7.734 troy oz = 0.4838 troy oz of gold which is very roughly 16:1, a ratio that was quite common in the 19th century but was often problematic due to frequent large silver strikes.

  • SapyxSapyx Posts: 1,999 ✭✭✭✭✭

    @lermish said:
    I am not a scholar so I am happy to be refuted if this is incorrect: My belief is that the realities of international travel and trade for the vast majority of people in the US when gold was circulating was much different than it is now. The lack of air travel or speedy boat travel and even the expense of communication and speed of news/price dissemination by wire likely negated the opportunity for arbitrage on a day to day basis for all but very large commodity houses, traders, import/export firms or banks.

    Everything was slower back then. Transport of goods and news was slow, but price changing of gold and other commodities was slow too. And while it is true that everyday people would not have indulged in the trade, the trade would still have happened.

    If you were the supercargo aboard a European merchant ship doing the Europe-America trade run in, say, the 1850s, it would be your job to maximize profits for your boss, the ship-owner. So you'd bring your ship full of European goods to America for sale, and use the proceeds of the sale to purchase American goods for the return voyage to Europe. But you'd logically have plenty of leftover cash once the cargo hold was full, since you're presumably mostly buying "raw goods" like wood, cotton, sugar or furs that are cheaper per unit volume than the luxury and manufactured goods you'd have brought over. So, you've got some leftover American money in your purse, a mixture of gold and silver coins, and maybe some local paper money; what do you do with it?

    If you knew that when you left your home port in Europe, a US gold dollar was selling for the equivalent of US$1.10 in Europe, but a silver dollar was only selling for 90 cents, you'd want to make sure as much of your money was in gold form before you leave, because the price of the gold dollar would likely not have moved from $1.10 in the few months you've been away. When you get back to home port, the gold dollars are sold for profit, while the silver and paper (if you couldn't exchange them) would have to stay on board ship, and go back to America on the next run. The US gold dollars in your purse have in effect become just another commodity your ship is carrying.

    Now imagine every ship on the transatlantic trade route is doing the same thing. You will see that gold dollars will very quickly disappear from America under those circumstances.

    Waste no more time arguing what a good man should be. Be one.
    Roman emperor Marcus Aurelius, "Meditations"

    Apparently I have been awarded one DPOTD. B)
  • lermishlermish Posts: 1,922 ✭✭✭✭✭

    @Sapyx said:

    If you knew that when you left your home port in Europe, a US gold dollar was selling for the equivalent of US$1.10 in Europe, but a silver dollar was only selling for 90 cents, you'd want to make sure as much of your money was in gold form before you leave, because the price of the gold dollar would likely not have moved from $1.10 in the few months you've been away. When you get back to home port, the gold dollars are sold for profit, while the silver and paper (if you couldn't exchange them) would have to stay on board ship, and go back to America on the next run. The US gold dollars in your purse have in effect become just another commodity your ship is carrying.

    Now imagine every ship on the transatlantic trade route is doing the same thing. You will see that gold dollars will very quickly disappear from America under those circumstances.

    Another nice post and I agree wholeheartedly. And I think exactly that happened, sometimes favoring one or the other, particularly depending on one country vs another, and vice versa coming into the country as well.

    But I think that for some very large percentage of the domestic US population even the conception of this trade, much less its execution, was inconceivable whether it was profitable/rational or not.

  • SapyxSapyx Posts: 1,999 ✭✭✭✭✭

    @lermish said:
    But I think that for some very large percentage of the domestic US population even the conception of this trade, much less its execution, was inconceivable whether it was profitable/rational or not.

    True. In any country where such things were occurring, all that the vast majority of the general population were aware of, was that certain types of coin had become hard to come by, making regular buying and selling more complicated.

    Historically, the shifting gold:silver exchange rate was often dealt with simply by arbitrarily changing the face value of the coins. This is why most pre-1700 gold and silver coins don't actually bear a denomination. It's a policy that works well when a majority of the coins are in the government's possession at any given time, but once the middle classes grew to such an extent that the general public was holding most the coins, then it's just giving away government money for free if it does that. Which, again, is why this rarely happened anywhere after 1700.

    In Britain in the 1700s, silver was undervalued compared to gold, according to the official government rate. So British silver coins were withdrawn and exported elsewhere. The government became very reluctant to issue any replacement silver coins, since it knew perfectly well where all the silver was going. This is why British gold coins from most of the 1700s are relatively abundant, while silver coins are few and far between. This even contributed to the overall coinage shortage of the late 1700s, when even copper became too scarce to put in coinage. The public had to make do with privately-struck tokens to make change for their gold coins.

    It's recurred throughout history, for as far back as coins have existed. In Ancient Rome, silver coinage was more common than gold, until around the late 200s AD when the silver supply dried up, and Roman coinage was reduced to fine gold coins and highly debased coppers. So as you move into the early Byzantine series, gold and copper coins become common, while silver vanishes. You can see where all the silver went, just by looking at neighbouring Persia from the same time period: Persian silver coins were commonplace and gold and copper coins are scarce.

    Waste no more time arguing what a good man should be. Be one.
    Roman emperor Marcus Aurelius, "Meditations"

    Apparently I have been awarded one DPOTD. B)
  • ChopmarkedTradesChopmarkedTrades Posts: 497 ✭✭✭✭✭
    edited January 11, 2023 8:25PM

    In addition to what @OriginalDan stated regarding the opening of Japan and the economic upheaval that occurred as a result of their wildly disparate exchange rates between gold and silver, there was for some time a similar situation in China as well, but the most extreme rates were quickly brought down with the massive importation of silver (though China remained an attractive destination for global silver for centuries, particularly after the shift towards the gold standard in European countries in the aftermath of the Franco-Prussian War). It's also worth noting that several of the wrecks of returning trade vessels coming from China back to Europe included gold bullion in the cargo.

  • jmlanzafjmlanzaf Posts: 31,850 ✭✭✭✭✭

    @lermish said:

    @djm said:
    Of course, you could exchange ten silver dollars for a ten-dollar gold piece. Why would anybody do that they were exactly the same value of intrinsic metal?

    Wrong. They are two separate commodities which have do not maintain a fixed priced relationship. And yes, 10 silver dollars could be exchanged for 1 $10 gold piece but the intrinsic value of the metals was always changing, not fixed.

    Whether the average person would/could melt down coins to arbitrage the difference or whether it would be worthwhile is a different matter.

    They WERE fixed in price during the time they were being used in commerce. In 1925, no one considered a $20 gold piece to be any different than 20 silver dollars or 80 silver quarters. So, in fact, he was correct during the time frame under question.

  • jmlanzafjmlanzaf Posts: 31,850 ✭✭✭✭✭

    @lermish said:

    @Sapyx said:
    The problem is, any government that issues both gold and silver coins for circulation, is in effect fixing an "official government exchange rate" between the two metals, because the government is promising to exchange those coins at that rate. If the economic realities of the day mean that the real-world or international values of gold and silver are different from that official government rate, then Gresham's Law says that people are going to be redeeming the "expensive" coin (bad money), and exchanging it for the "cheap" coin (good money), then either melting down the "cheap" coins and selling the bullion at the full market rate, or exporting the "cheap" coins to some other country where their value is more appreciated. So at any price ratio other than the official government rate, either the gold coins or the silver coins will be disappearing from circulation and bleeding out of the country.

    To have gold and silver coins freely circulating side by side without this happening, you need one of two things:

    (1) to have full government control of all the silver and gold mines in the country, and strict export/import controls to prevent either the exporting of cheap coins or the importing of non-government metal into country. And you can't do this without going full Hermit Kingdom dictatorship.

    (2) to have an internationally stable gold:silver ratio. And in the modern world, that just doesn't happen, because some darn fool is always out there finding new gold or silver mines, or discovering some new industrial application that increases demand for one or the other metal, or a thousand other variables outside of any government's control.

    Very nice post and I mostly agree...for today. Or even during the Hunt Bros. silver episode when many people did exactly that with silver. However...

    I am not a scholar so I am happy to be refuted if this is incorrect: My belief is that the realities of international travel and trade for the vast majority of people in the US when gold was circulating was much different than it is now. The lack of air travel or speedy boat travel and even the expense of communication and speed of news/price dissemination by wire likely negated the opportunity for arbitrage on a day to day basis for all but very large commodity houses, traders, import/export firms or banks.

    Yes and no. Travel was slow making arbitrage hard. HOWEVER, there were occasionally times when silver or gold temporarily decoupled. There were also times when the different weight standards created issues. This was, you might recall, the purpose behind issuing the Trade Dollar. While trade and information travelled more slowly, there was also no silver/gold commodity market trading in milliseconds. Everything was slower,

  • streeterstreeter Posts: 4,312 ✭✭✭✭✭

    Gold vs silver vs US paper money ratios are constantly changing. If you start during the US Civil war, there is good historical information regarding how much silver and paper had to be discounted to obtain an ounce of gold. Sometimes as much as 20%. A lot depended on the confidence level of 'money' politically.

    During the civil war, about 16oz of silver for an ounce. If anyone could find gold to make the swap. Gold was scarce.

    With the opening of the Comstock Lode, and as silver became more plentiful, more was required. During the Great Depression, there was only about 25¢ worth of silver in a ' silver' dollar. Good luck being able to trade 20 silver dollars for an oz of gold.
    In today's market, gold will cost you, on the average, about 4-5% more by trading paper money for it. Pretty tough to buy AGE straight across with paper.

    Have a nice day
  • rickoricko Posts: 98,724 ✭✭✭✭✭

    This is a very interesting and informative thread. Now with communications virtually instant, and travel measured in hours rather than days, it brings a different perspective to trade and values. Cheers, RickO

  • BillJonesBillJones Posts: 33,479 ✭✭✭✭✭
    edited January 12, 2023 7:52AM

    @edwardBe5 said:
    Hello, Does anyone know if there a time in the US like in the 20th century before 1933 when gold coins and silver coins existed side by side without a bimetallism fixed exchange rate between the two metals? That is, could a person exchange 10 silver dollars for a 10 dollar gold piece?

    I think that you have probably been confused by the period between 1795 and 1834 when the gold and silver coins were not exchangeable. During that period the ratio between silver and gold for coinage was 15 to 1. That was too low. A great many gold pieces, especially the $5 gold coins, were exported to Europe and melted. That is the main reason why early U.S. gold, especially the coins from the 1820s to 1834, are so rare.

    The Coinage Act of 1834 changed that and the ratio was set at 16 to 1. Gold coins remained in use although over time people preferred paper to coins **IF ** the paper was reliable. There were a lot of bumps in the road, especially during and after the Civil War until about 1876. After that the system worked well, especially when large deposits of silver were found. The caused the value of silver to be very low. It would remain there until the 1960s.

    Here is one of the last "old tenor" gold coins which weighed too much.

    And here is an 1834 $5 gold, a "Classic Head," which was struck under the Coinage Act of 1834. There were even thought thoughts of dating this coin "August 1834" to cut down on the confusion. In the end, all the mint did was to omit the moto, "E Pluribus Unum" from the reverse.

    Retired dealer and avid collector of U.S. type coins, 19th century presidential campaign medalets and selected medals. In recent years I have been working on a set of British coins - at least one coin from each king or queen who issued pieces that are collectible. I am also collecting at least one coin for each Roman emperor from Julius Caesar to ... ?
  • lermishlermish Posts: 1,922 ✭✭✭✭✭

    Thanks to @PerryHall for resurrecting a thread (https://forums.collectors.com/discussion/1000439/counterstamped-gold-coins-anyone-else-see-these-before) which I found fascinating to read.

    There was a newspaper article from 1886 posted in that thread that mentioned the arbitrage opportunity of taking full weight, newly issued gold coins for bullion sale abroad. I found it interesting and immediately thought of this thread.

Leave a Comment

BoldItalicStrikethroughOrdered listUnordered list
Emoji
Image
Align leftAlign centerAlign rightToggle HTML viewToggle full pageToggle lights
Drop image/file