High-contrast black and white photograph of historic silver ore vein specimens and rough mountain topography on dark textured slate background

Monetary History

How Silver Defined the Dollar

When the Spanish first came to America they immediately began searching for Gold. But what they found was silver. Their new territories had massive deposits of Silver. In 1545 the huge silver deposit at Potosi was discovered in the mountains of Peru (now part of Bolivia). In 1546 the silver deposits at Zacatecas in the mountains of Mexico were discovered. These huge deposits, along with others discovered in the new Spanish Colonies flooded the world with silver.

Colonial Commerce

From Pieces of Eight to Hamilton’s Dollar

International Standard

The Spanish Real de Ocho

Spain minted their new found silver wealth into coins, and shipped them around the world in their treasure galleons. Chief among these coins was the real de ocho, also known as Spanish pieces of eight, and eventually became known as the Spanish dollar. These coins were so uniform in consistency and so prevalent throughout the world that they became a widely accepted international currency.

Coinage Act of 1792

Alexander Hamilton’s Standard

In Britain’s American Colonies there was a chronic shortage of British currency (because Britain’s mercantilist policies drove British currency out of the colonies) so Americans turned to Spanish dollars as their coin of commerce. When Alexander Hamilton designed the first US dollars following the Coinage Act of 1792, they were silver, and were based on the purity and weight of the Spanish dollar. The original US dollar was defined by this Act as 371 4/16 grains (24.1 grams) of pure silver. They were alloyed with 10% copper to increase their durability, so they were 90% silver.

Silver Content in American Coins

Even after the US government started producing its own coinage there were still not enough American dollars in existence to satisfy demand. Thus, Spanish dollars were still widely used and were legal tender in the US for the next 65 years until the Coinage Act of 1857.

US coins continued to be minted with 90% silver throughout their history until the Coinage Act of 1965. In 1965 dimes and quarters lost their silver and half dollars were reduced to 40% silver. By 1971 no US general circulation coins contained silver.

Paper Dollars & Silver Treasury Redemption

Even when the US went to a paper dollar bill, those dollars were “Silver Certificates” and on their face they contained the language “This certifies that there has been deposited in the Treasury of the United States of America One Dollar in Silver payable to the bearer on demand.” During the 90 years from 1878 to 1968 you could take your paper dollar bill to the treasury and demand to exchange it for silver and they had to give you a dollar in silver.

So, we can see that the entire US monetary system is linked to silver. The system is based on the dollar, and for almost 200 years that word “dollar” meant a specific amount of --- silver.