Morgan Dollar - Background

Background

In 1873, Congress enacted the Fourth Coinage Act, which effectively ended the bimetallic standard in the United States by demonetizing silver bullion. Prior to enactment of the Coinage Act, silver could be brought to the mints and coined into legal tender for a small fee. With such a system in place, bullion producers could have silver coined into dollars when the intrinsic value of a silver dollar was lower than the face value, thus making a profit, flooding the money supply and causing inflation. The act ended production of the standard silver dollar (then the Seated Liberty dollar, as designed by Christian Gobrecht) and provided for mintage of a silver trade dollar, which was intended to compete with Mexican dollars for use in the Orient. Under the act, bullion producers were allowed to bring bullion to the mints in order to be cast into bars or coined into the newly authorized trade dollars for a small fee. Trade dollars initially held legal tender status, but it was revoked in 1876 to prevent bullion producers from making a profit by coining silver into trade dollars when the value of the metal was low. The restrictions on free coinage laid out in the Coinage Act initially met little resistance from mining interests until the price of silver declined rapidly due to increased mining in the Western United States. Protests also came from bankers, manufacturers and farmers, who felt an increased money supply would have a positive impact. Groups were formed that demanded the free coinage of silver (or "Free Silver") in order to inflate the dollar following the Panic of 1873.

In 1876, Richard P. Bland (left) introduced a bill in the House to resume coinage of the standard silver dollar, to which William B. Allison (right) added amendments in the Senate.

Beginning in 1876, several bills were introduced in the House of Representatives in an effort to resume the free coinage of silver. One such bill introduced into the House by Democratic Representative Richard P. Bland of Missouri was passed in the fall of 1876. Republican senator William B. Allison of Iowa added important amendments to the bill in the Senate. The House bill allowed Free Silver; one of Allison's amendments struck that provision. This same amendment allowed for the issuance of silver certificates for the first time in United States history. The bill was vetoed by President Rutherford B. Hayes. The president's veto was overridden on February 28, 1878. What came to be known as the Bland–Allison Act required that the Treasury purchase between two and four million dollars worth of silver per month, to be coined into silver dollars at the former gold/silver value ratio of 16:1, meaning that one ounce of gold would be valued the same as sixteen ounces of silver.