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 (1830-1861) 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 Rutherfordtoffi, 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."7
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.
At the time of the original publication, Mr. Summers
was a member of the staff of The Foundation for Economic
Education.
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,
5 Ibid.
6 Edgar H. Adarns, 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.
Reprinted with permission from The
Freeman, a publication of The Foundation for Economic Education, Inc.,
July 1976, Vol. 26, No.7.
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