The Coinage Act of 1873 or Mint Act of 1873 was a general revision of laws relating to the Mint of the United States. By ending the right of holders of silver bullion to have it coined into standard silver dollars, while allowing holders of gold to continue to have their bullion made into money, the act created a gold standard by default. It also authorized a Trade dollar, with limited legal tender, intended for export, mainly to Asia, and abolished three small-denomination coins. The act led to controversial results and was denounced by critics as the "Crime of '73".
By 1869, the Mint Act of 1837, enacted before the California gold rush or the American Civil War affected the monetary system of the United States, was deemed outdated. Treasury Secretary George Boutwell had Deputy Comptroller of the Currency John Jay Knox draft a revised law, introduced into Congress by Ohio Senator John Sherman. Silver's market price then exceeded the value at which the Mint would purchase the metal, suppressing the demand for bullion to be struck into silver dollars. However, Knox and others correctly forecast that development of the Comstock Lode and other rich silver mines would lower silver's market price, making the option of having bullion struck into legal-tender coins attractive. Congress considered the bill for almost three years before passage. During its consideration, it was rarely publicly mentioned, but also was not concealed, that the bill would establish a gold standard by ending bimetallism. The bill became the Act of February 12, 1873, with the signature of President Ulysses S. Grant, and became effective on April 1 of that year.
In 1876, when silver's market price indeed dropped as forecast, producers brought silver bullion to the Mint only to learn that the Mint no longer was authorized to coin it. The matter became a major political controversy that lasted the remainder of the century, pitting those who valued the deflationary gold standard against those who believed free coinage of silver, an inflationary policy, to be necessary for economic prosperity. Despite contemporary accusations, scant evidence exists that the 1873 act had a corrupt motivation. The political dispute was settled when the gold standard was explicitly enacted into law in 1900. Beginning in March 1933, the United States rapidly abandoned the gold standard in favor of fiat currency for almost all purposes. The United States abandoned the dollar's final formal link to gold in 1971, leaving gold and silver as commodities.
Background
The Mint Act of 1792 established the Mint of the United States. The Mint, in its first decades, only coined gold and silver in response to deposits of that metal by citizens, returning the bullion to the depositor in the form of coins. Either gold or silver could be presented for conversion into currency, as both metals were a legal tender, a dollar was equal to both a legally defined weight of silver, and another legally defined quantity of gold. Having a currency defined in terms of two different metals is called bimetallism. Such a system may experience instability as the price of gold and silver on the world market changes, and this took place in the first decades after 1792, as the relative values of gold and silver in Europe changed. At that time, gold or silver U.S. coins were rarely seen in the nation, as they were heavily exported because of such shifts—most pieces in circulation were foreign in origin.
In 1834, Congress made a dollar worth slightly less, thus lightening U.S. gold and silver coins (known collectively as specie), making them uneconomical to export, and they were seen more often in commerce within the U.S. With this greater circulation, Congress re-examined the existing statutes relating to the Mint, and found many provisions to be obsolete. It enacted the Mint Act of 1837, a thorough revision of the statutes relating to the Mint. New provisions included the establishment of a bullion fund, allowing depositors to be paid without waiting for their metal to go through the coining process. The ratio of value between equivalent weights of gold and silver was adjusted slightly, allowing coins of both metals to circulate within the U.S.