Mr. Summers is a member of the staff of The Foundation for Economic Education.
America has never had a free market in money. From 1933 to 1975, Americans could not legally own gold. Since 1933, contracts payable in gold or indexed to the price of gold have been illegal, although the restored right to own gold may soon lead to new legal challenges. Since 1864, the private coining of money has been illegal. and since colonial days, we have had legal tender laws designed to force the acceptance of coins and bills minted by the government.
Despite the absence of a completely free market, there have been times when Americans have privately minted money, and buyers and sellers have willingly used this money. Let us survey the history of American private coinage, for this history lends support to the practicality of free market money, with private minters supplying the monetary needs of the market, and the government protecting people from fraud and coercion.
One of the first private coiners was John Higley, a blacksmith in Granby, Connecticut, who minted copper coins in 1737 and 1739. Higley let the market determine the value of his coins, on which he imprinted "I am good copper/Value me as you please." No one was forced to accept Higley’s coins, in contrast with our federal government’s policy of printing on its paper money, "This note is legal tender for all debts, public and private."
The eminent numismatist Edgar H. Adams attested to the quality of Higley’s coins: "In fact so pure was the metal contained in these pieces that they were much sought by goldsmiths of the period for the purposes of alloy, and the coins seem to have been in pretty general use until 1792, the time of the opening of the United States mint."¹
Both Silver and Gold
Silver was also coined by private minters. In 1783 I. Chalmers of Annapolis, Maryland minted silver shillings, sixpences, and threepences that were described by Henry Chapman as "very creditable."2 But the favorite metal of private minters was gold.
Joseph Coffin reports on the first privately coined gold: "During this period of our history (18301861) many private gold coins were struck in various sections of the United States. The first of such gold coins was issued in 1830 by Templeton Reid, an assayer at the gold mines of Lumpkin County, Georgia, the same county in which the Dahlonega mint [a Federal mint] was located. The Templeton Reid coins were issued in three denominations ($2.50, $5, and $10) at Reid’s private mint. The gold was of the best quality, and later many of the coins were melted because they were worth more as bullion than the face value of the coins."3
Templeton Reid successfully competed with the Dahlonega Federal mint. Another mintmaster who thrived in the face of Federal competition was Christopher Bechtler of Rutherfordton, North Carolina.
Bechtler, his sons, and nephew arrived in Rutherfordton in 1830, having emigrated from the Grand Duchy of Baden. From 1831 to 1847 they coined gold in three denominations ($1, $2.50, $5) despite competition from the nearby Federal mint established in 1837 in Charlotte.
Clarence Griffin reports on the public’s acceptance of the Bechtler coins which, like all privately minted coins, were not legal tender: "Bechtler coins were accepted and passed at face value in all of western North Carolina, South Carolina, western Tennessee, Kentucky and portions of Virginia. One of the country’s oldest citizens once told the writer that he was 16 years old before he ever saw any other coin than the Bechtlers. The coins filled a long-felt need for specie and continued to circulate long after the discontinuance of the mint in 1847. At the outbreak of the War between the States the new Confederacy began issuing currency, but did not put out any specie. Bechtler coins, especially in this locality, were carefully hoarded, and many contracts and agreements of the sixties specified Bechtler gold coins as a consideration rather than the Confederate States currency or the scant supply of Federal specie.
"Despite the fact that these coins bore no device emblematic of a national character, or any official guaranty of their purity, they were unhesitatingly accepted by all. In the proper sense of the word they were only ‘tokens’ and when offered at the government mints were worth less than the face value, as the government deducted the seigniorage and assay fees for reminting. Yet these coins were passed over the counters of the stores, where they received the same consideration as if they were made by the United States Government. They were carried by traders into Kentucky and South Carolina, and many homeseekers going westward during the great immigration period of 1850-1870 carried their Bechtler coins with them. Many circulated more freely than did government specie, and it has not been so many years since the local banks accepted them at face value.
"Today Bechtler coins sell at enormous prices. Numismatists quote them from $5 to $100 and more."4
Honesty the Best Policy
G. W. Featherstonhaugh, who visited Bechtler in 1837, gave the following account of his visit: "Christopher Bechtler’s maxim was that honesty was the best policy and that maxim appeared to govern his conduct. I was never so pleased with observing transactions of business as those I saw at his house during the time I was there. Several country people came with rough gold to be left for coinage. He weighed it before them and entered it in his book, where there was marginal room for noting the subsequent assay. To others he delivered the coin he had struck. The most perfect confidence prevailed between them, and the transactions were conducted with quite as much simplicity as those at a country grist mill, where the miller deducts the toll for the grist he has manufactured."5
Christopher Bechtler coined over three million dollars in gold. But his operation was dwarfed by the private mints that sprang up after the discovery of gold in California in 1848. At least 15 private mints coined gold in California during 1849-1855. The bullion content of some of these coins was less than their face value, so these coins were rejected by the market and soon passed out of circulation. However, the coins of Moffat & Co., Kellogg & Co., and Wass, Molitor & Co. enjoyed the confidence of the community and were readily accepted.
The January 8, 1852 issue of the San Francisco Herald contains the following comments on the Wass, Molitor & Co. mint: "The very serious inconveniences to which the people of California have been subjected through the want of a [Federal] mint, and the stream of unwieldy slugs that have issued from the United States Assay Office have imperatively called for an increase of small coin. The well known and highly respectable firm of Wass, Molitor & Co. have come forward in this emergency, and are now issuing a coin of the value of $5 to supply the necessities of trade.
"The mechanical execution of the coin issued by these gentlemen certainly reflects the highest credit upon their skill. It is a beautiful specimen of art, far superior in finish to anything of the kind ever gotten up in California.
"But the most important point to the public is its fineness and weight, as upon these two qualities combined must depend its value. In this particular it will be found highly satisfactory, and at once secure the confidence of the community. It has a uniform standard of.880, and contains no other alloy than that of silver, which is found naturally combined with gold. The weight of each of the $5 pieces, which are the only ones at present issued, is 131.9 grains.
"The standard fineness of the United States Five Dollar piece is.900, weight 127 grains. It is therefore 20/1000 finer than Wass, Molitor & Co.’s pieces, but this is more than counterbalanced by the latter’s being 4.9 grains heavier, so that the new Five Dollar gold piece is in reality worth five dollars and four cents, a sufficient excess to pay the expense of recoinage at the United States Mint without cost to the depositor.
"The reason Messrs. Wass, Molitor & Co. have adopted the standard of.880 is because this is about the average fineness of California gold, and further because the cost of refining California gold to the United States standard is exceedingly heavy, and the necessary chemicals cannot be obtained in this country. But it will be remembered that the difference is more than made up by the increased weight of 4.9 grains, which every one can try for himself on a pair of scales. These coins will be redeemed on presentation in funds received at the Custom House and banks. The high reputation for honor and integrity enjoyed by Count Wass and his associates in this enterprise is an additional guaranty that every representation made by them will be strictly complied with. The public will be glad to have a coin in which they can feel confidence, and which can’t depreciate in their hands. The leading bankers, too, sustain and encourage this issue, and will receive it on deposit."6
The End of an Era
One of the last private mints was Clark, Gruber & Co. Carl Watner writes: "Between 1860 and 1862 the firm of Clark, Gruber & Co. was engaged in the manufacture of their own coins from their mint in the city of Denver. Here again, the demand for a circulating medium was satisfied by private means before the government was able to act. The Clark, Gruber coins were of high quality and always either met or exceeded the gold bullion value of similar United States coins. In a period of less than two years this firm minted approximately three million dollars’ worth of coin. Their mint promised to outdo the government’s own production, and to get rid of them, the government bought them out in 1863 for $25,000."r
In 1864 the private coining of money was banned by an Act of Congress. Today the prohibition against private coinage, the doubtful legality of gold contracts, and legal tender laws assure the federal government a legal monopoly over money, and prevent buyers and sellers from freely choosing mutually acceptable media of exchange.
1 Edgar H. Adams, "Higley Coppers `Granby Coinage,’" The Numismatist, August 1908.
2 Henry Chapman, "The Colonial Coins Prior to July 4, 1776," The Numismatist, February 1948.
3 Joseph Coffin, The Complete Book of Coin Collecting (Coward, McCann & Geoghegan, New York, 1973) p. 108.
4 Clarence Griffin, "The Story of the Bechtler Gold Coinage," The Numismatist, September 1929.
6 Edgar H. Adams, Private Gold Coinage of California (Edgar H. Adams, Brooklyn, N.Y., 1913) pp. 79-80. 7 Carl Watner, "California Gold: 184965," Reason, January 1976, pp. 27-28.