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"Money": Legal History

Report on the Subject of a Mint 1791

A little more than a year after Hamilton's Mint Report, Congress enacted these traditional principles into law, at the same time rejecting Hamilton’s innovation of a "gold dollar".

Constitutional Militia
By Constitutional Militia
Mint Report 1791
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Last Updated on September 2, 2022 by Constitutional Militia

Alexander Hamilton’s Mint Report (1791)

In his Report, Hamilton urged Congress to adopt silver and gold as the nation’s monetary substances, at an exchange ratio representing the proportionate value between the metals in the domestic free market. And that Congress should continue on “the track marked out” under the Articles of Confederation and the Constitution by employing the “dollar” as the monetary unit—a new silver coin derived directly from the Spanish milled dollar (or “piece of eight”) and a new gold coin containing a “dollar’s”-worth of that metal.

Alexander Hamilton’s Report on the Subject of a Mint 1791

On 28 January 1791, Secretary of the Treasury Alexander Hamilton presented to Congress his Report on the Subject of a Mint.[1] “A plan for an establishment of this nature”, he wrote, “involves a great variety of considerations—intricate, nice, and important.”[2] Indeed, the erection of a national mint was essential to the integrity of the coinage that Congress would soon mandate:

The dollar originally contemplated in the money transactions of this country [I.e., the silver Spanish milled dollar], by successive diminutions of its weight and fineness [in the Spanish mints], has sustained a depreciation of five percent, and yet the new dollar has currency in all payments in place of the old, with scarcely any attention to the difference between them. The operation of this in depreciating the value of property depending on past contracts, and * * * of all other property, is apparent. Nor can it require argument to prove that a nation ought not to suffer the value of the property of its citizens to fluctuate with the fluctuations of a foreign mint, and to change with the changes in the regulations of a foreign sovereign. This, nevertheless, is the condition of one which, having no coins of its own, adopts with implicit confidence those of other countries.

     The unequal values allowed in different parts of the Union to coins of the same intrinsic worth * * * are inconveniences * * * .

     It was with great reason, therefore, that the attention of Congress, under the late Confederation, was repeatedly drawn to the establishment of a mint; and it is with equal reason that the subject has been resumed * * * .[3]

To form “a right judgement of what ought to be done”, Hamilton posed several important questions:

• 1st. What ought to be the nature of the money of the United States?
• 2d. What the proportion between gold and silver, if coins of both metals are to be established?
                                                              * * * * *
• 4th. Whether the expense of coinage shall be defrayed by the Government, or out of the material itself?
• 5th. What shall be the * * * denominations * * * of the coins?
• 6th. Whether foreign coins shall be permitted to be current or not; if the former, at what rate and for what period?[1]

Recognizing that “[a] pre-requisite to determining with propriety what ought to be the money unit of the United States” is to form as accurate an idea as the nature of the case will admit, of what actually is”, but claiming that “it is not * * * easy to pronounce what is to be considered as the unit in the coins”, Hamilton referred to the resolutions of the Continental Congress the subject, noted that they had resulted in “no formal regulation on the point, (the resolutions of Congress of 6 July, 1875 and 8th of August, 1786, having never yet been carried into operation)”, and concluded that “usage and practice * * * indicate the dollar as best entitled to that character”.[2] What Hamilton meant by saying the resolutions of the Continental Congress had “never yet been carried into operation” is unclear. Certainly, that Congress had formally “Resolved, That the money unit of the United States be one dollar”, and had adopted a “dollar” containing 375-⁶⁴⁄₁₀₀ grains of silver as that “money unit”.[3] No coins of that weight had been minted however. And the Continental Congress’s preliminary determination as to the purely factual question of the “dollar’s” actual content did not bind the Congress seated under the Constitution’s aegis.

Footnotes:

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2061.

2.) Id.

3.) 5 Journals of the Continental Congress, 1774-1789 (Library of Congress ed. 1904 et seq.), at 162-63.

As to “what kind of dollar ought to be understood; or, in other words, what precise quantity of fine silver”,[1] Hamilton surveyed the various pieces in circulation over the years, and recommended that “[t]he actual dollar in common Circulation has * * * a much better claim to be regarded a the actual money unit”.[2] This would have set the intrinsic value of the “dollar[ ]” as “something between 368 and 374 grains of fine silver”.[3] From this, no debate is possible as to Hamilton’s—and one may infer—everyone else’s understanding that, as of January 1791, the “dollar[ ]” was no abstract concept, but instead a real silver coin actually circulating in the marketplace. This provides further evidence fixing the meaning of that term as used in the Constitution[4]—and pointing to what Congress should deem that coin’s intrinsic value to be for constitutional purposes.

Footnotes:

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2061-62.

2.) Id. at 2062-63.

3.) Id. at 2063.

4.) U.S. Const. Art. I, § 9, cl. 1 and amend. VII.

Hamilton recognized that “[t]he suggestions and proceedings hitherto [in the Continental Congress]have had for the object of annexing of [the title of ‘money unit’] emphatically to the silver dollar”. Nevertheless, and without adverting to the Constitution’s references to the “dollar[ ]”, he put forward the view that “a preference ought to be given to neither of the metals for the money unit”—at least “[I]f each of them be as valid as the other in payments to any amount”.[1] His reasoning was opaque:

A resolution of Congress, of the 6th of July, 1785, declares that the money unit of the United States shall be a dollar, and another resolution of the 8th of August, 1786, fixes that dollar at 375 grains and sixty-four hundredths of a grain of fine silver. The same resolution, however, determines that there shall be two gold coins, one * * * equal to ten dollars, and the other * * * equal to five dollars; and it is not explained whether either the two species of coins, of gold or silver, shall have any greater legality in payments than the other. Yet it would seem that a preference in this particular is necessary to execute the idea of attaching the unit exclusively to one kind. If each of them be as valid as the other in payments to any amount, it is not obvious in what effectual sense either of them can be deemed the money unit rather than the other.[2]

Actually, it is obvious: In a traditional bimetallic system, when the free-market exchange ratio diverges significantly from the statutory exchange ratio, the legal “Value” of the “money-unit” remains unchanged, but the legal “Value” of the other metal should be “regulate[d]” up or down to conform the statutory to the market ratio. And in a dual (or parallel) monetary system in which no statutory ratio is fixed, but the law treats the free-market as the legal ratio, the legal “Value” of the “money-unit” remains unchanged, but the legal “Value” of the other metal “floats” with the market. In a practical sense, of course, it may not matter which metal is chosen as the unit in either system, as long as the choice is clear.

Although Hamilton personally proposed gold as the unit, rather than silver, “if either were to be preferred”, he concluded that it would be

most advisable * * * not to attach the unit exclusively to either of the metals; because this cannot be done effectually, without destroying the office and character of one of them as money and reducing it to the situation of a mere merchandise * * * which would probably be a greater evil than occasional variations in the unit, from the fluctuations in the relative value of the metals; especially if care be taken to regulate the proportion between them with an eye to their average commercial value.[3]

In this, he was partially correct, in a bimetallic system, the expense of melting undervalued coins into specie and selling it on the market allows the market ratio to vary somewhat from the statutory ratio before one metal completely displaces the other as a medium of exchange.[4] But Hamilton was incorrect to suggest that this economic flexibility depends on whether one, or both, metals in such a system retains the formal legal designation of “unit”.

“If”, Hamilton went on, “the unit ought not to be attached exclusively to either of the metals, the proportion which ought to subsist between them in the coins becomes * * * of no inconsiderable moment”.[5] True, in a bimetallic system with a statutory exchange ratio, the proportion between the two metals is critical to their concurrent circulation, whether one metal is formally designated the unit, or both, or neither. When one metal is deemed the unit and the other “floats” in relative value, however, the proportion * * * in the coins” is not important.

Hamilton proposed two “option[s]”: namely, “[t]o approach as nearly as can be ascertained, the * * * average proportion in * * * the commercial world”; or “[t]o retain that which now exists the United States”.[6] The first alternative “requir[ing] better materials than are possessed, or than could be obtained without an inconvenient delay”, he recommended the domestic market ratio of “about as 1 to 15”.[7] “There can hardly be a better rule in any country for the legal than the market proportion”, he explained, “if this can be supposed to have been produced by there and steady course of commercial principles. The presumption in such case is that each metal finds its true level, according to its intrinsic utility, in the general system of money operations.”[8]

Interestingly, although Hamilton recognized that the market ratio should be the legal ratio, he did not recommend that Congress simply fix the statutory ratio as the market ratio, whatever that might be from time to time, but without statutorily declaring what that ratio was at any time. This proved most unfortunate. For, although the statutory ratio of 15 to 1 approximated the free-market ratio in Hamilton’s day, the latter soon rose to mettle legal ratio in France, which was 15.5 to 1. Congress did not respond until 1834, when it altered the American legal ratio to 16 to 1.[9] At that time, the idea of allowing the statutory ratio to “float” with the free-market ratio came to the fore, but still not into the Coinage Acts.[10] And Congress’s failure in this regard ultimately doomed the bimetallic system.

Footnotes:

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2064.

2.) Id.

3.) Id. at 2064, 2065.

4.) See Friedman, “Bimetallism Revisited”, 4 J. Econ. Perspectives 85 (1990), at 90.

5.) Hamilton’s Mint Report, ante note 1, at 2066.

6.) Id. at 2068.

7.) Id.

8.) Id. at 2069.

9.) See Friedman, “Bimetallism Revisited”, ante note 4, at 88. 

10.) See Report of the House Select Committee on Coins, 22 February 1831 [No. 2], in 10 Register of Debates in Congress (Gales & Seaton Eds. 1834), Appendix at 264-65.

Hamilton then turned to the issue of free coinage, which he characterized as “one of the nicest questions in the doctrine of money”.[1] Hamilton recommended “defraying the expense of the coinage out of the metals * * * to allow at the mint such a price only for those metals as will admit of profit just sufficient to satisfy the expense of the coinage”.[2] In the course of analyzing this issue, Hamilton restated in emphatic terms the traditional policy against monetary debasement:

[R]aising the denomination of the coin * * * [is] a measure which has been disapproved by the wisest men in the nations in which it has been practiced, and condemned by the rest of the world. To declare that a less weight of gold or silver shall pass for the same sum, which before represented a greater weight, or to ordain that the same weight shall pass for a greater sum, are things substantially of one nature. The consequence of either of them is to degrade the money unit; obliging creditors to receive less than their just dues, and depreciating property of every kind.

*     *     *     *     *

[T]he quantity of gold and silver in the national coins, corresponding with a given sum, cannot be made less than heretofore without disturbing the balance of intrinsic value, and making every acre of land, as well as every bushel of wheat, of less actual worth than in time past.

*     *     *     *     *

[A] rise of prices proportioned to the diminution of the intrinsic value of the coins * * * might be looked for in every enlightened commercial country; but, perhaps, in none with greater certainty than in this; because in none are men less liable to be the dupes of sounds; in none has authority so little resource for substituting names for things.

     A general revolution in prices * * * could not fail to distract the ideas of the community, and would be apt to breed discontents as well among those who live on the income of their money as among the poorer classes of the people, to whom the necessaries of life would * * * become dearer. * * *

     Among the evils attendant on such an operation are these: creditors, both of the public and of individuals would lose a part of their property, public and private credits would receive a wound; the effective revenues of the Government would be diminished. There is scarcely any point, in the economy of national affairs, of greater moment than the uniform preservation of the intrinsic value of the money unit. On this the security and steady value of property essentially depend.[3]

On the question of the denominations of the coins, Hamilton recommended two equivalent statutory money-units based on weight, a gold coin of 24-¾ grains of fine gold, and a silver coin of 371-¼ grains of fine silver. “[N]othing better”, he wrote, “can be done * * * than pursue the track marked out by the resolution [of the Continental Congress] of the 8th of August, 1786.” Specifically, he proposed (among other coins) “[o]ne gold piece, equal in weight and value to a ten units or dollars”, “[o]ne gold piece, equal to a tenth part of the former, and which shall be a unit or a dollar”, and [o]ne silver piece, which shall also be a unit or a dollar”. “The chief inducement to the establishment of the small gold piece”, he argued, “is to have a sensible object in that metal, as well as in silver, to express the unit.”[4] Going on, he wrote that

[t]he silver dollar is recommended by its correspondency with the present coin of that name for which it is designed to be a substitute [i.e., the Spanish Milled Dollar], which will facilitate its ready adoption as such in the minds of the citizens. * * * Perhaps it might be an improvement to let the dollar have the appellation either of the dollar or unit * * * . In time the unit may succeed the dollar.

     The eagle is not very expressive or apt appellation for the largest gold piece, but nothing better occurs. The smallest of the two gold coins may be called the dollar or unit, in common with the silver piece with which it coincides.

*     *     *     *     *

      As it is of consequence to fortify the idea of the identity of the dollar, it may be easy to let the form and size of the new one * * * agree with the form and size of the present.[5]

So once again, Hamilton identified the then-existing”dollar”—the “dollar[ ]” mentioned in the Constitution—with the Spanish milled dollar: “the present coin of that name for which it [i.e., the United States ‘dollar’] is designed to be a substitute”. His apparent hope that the term “dollar” would eventually conflate with or collapse into the term “unit” mirrored his idea that both silver and gold would serve in that capacity simultaneously. However, his Report nowhere explained how, when the free-market exchange ratio between silver and gold changed (as he expected it would), the legal “Value[s]” of the silver and gold units would change. If, for example, silver appreciated against gold, would an extant (silver) “dollar” be valued at more than a “dollar”; or would an extant “gold dollar” be valued at less? Thus, in this particular, Hamilton’s idea of two parallel units was, if not incoherent, at least operationally incomplete. Neither did the Report explain how Hamilton’s new unit (whether off silver or gold) could “succeed to” the “dollar[ ]” mentioned in the Constitution, unless that new unit always maintained the selfsame “Value” as that particular “dollar[ ]”—in which case the silver unit was the true and permanent unit, the gold unit a unit only so long as the free-market exchange ratio between the metals remained a the point Hamilton proposed Congress adopt.

Footnotes:

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2071.

2.) Id. at 2073.

3.) Id. at 2071-73.

4.) Id. at 2082-83.

5.) Id. at 2083-84.

As to “the currency of foreign coins”, Hamilton recommended the eventual “abolition of this in proper season, when “some considerable progress has been made in preparing substitutes for them”. So,

foreign coins may be suffered to circulation precisely on their present footing for one year after the mint shall have commenced operations. The privilege may then be continued for another year to the gold coins of Portugal, England, and France, and to the silver coins of Spain. And these may still be permitted to be current for one year more at the rates allowed to be given for them at the mint; after the expiration of which the circulation of all foreign coins to cease.

*     *     *     *     *

It may, nevertheless, be advisable * * * to repose a discretionary authority in the President of the United States, to continue the currency of the Spanish dollar at a value corresponding with the quantity of fine silver contained in it, beyond the period above mentioned for the cessation of the circulation of the foreign coins.[1]

Apparently, as to foreign coins, Hamilton’s recommendation rested on the idea that “ a nation ought not to suffer the value of the property of its citizens to fluctuate with the fluctuations of a foreign mint”.[2] Precisely how this would occur, where Congress enjoyed plenary power to “regulate the Value * * * of foreign Coin”, Hamilton did not explain. Certainly, though, Hamilton understood the essence of that power, as he recommended that the President be given “authority * * * to continue the currency of the Spanish milled dollar at a value corresponding with the quantity of fine silver contained in it”—which rule (if not the “discretionary” authority Hamilton suggested to be lodged in the Executive) could have applied mutatis mutandis to all foreign silver and gold coins. And, just as surely, Hamilton was aware of the thinking that led to the provision in the Coinage Act of 1792, mandating that “all the gold and silver coins which shall have been struck at, and issued from the * * * mint, shall be a lawful tender in all payments whatsoever, those of full weight according to the respective values * * * declared [in the Act], and those of less than full weight at values proportional to their respective weights”.[3]

Footnotes:

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2085-86.

2.) Id. at 2060.

3.) Act of 2 April1792, ch. 16. § 16, 1 Stat. 246, 250 (emphasis supplied).

In sum, Hamilton’s Report restated the traditional monetary principles of Anglo-American common law, as Blackstone had recapitulated them, as the Continental Congress had applied them, and as the Federal Convention had embodied them in the Constitution. Congress, Hamilton urged, should adopt silver and gold as the nation’s monetary substances, at an exchange ratio representing the proportionate value between the metals in the domestic free market. Congress should continue on “the track marked out” under the Articles of Confederation and the Constitution by employing the “dollar” as the monetary unit—a new silver coin derived directly from the Spanish milled dollar (or “piece of eight”) and a new gold coin containing a “dollar’s”-worth of that metal. The government should provide free coinage of both silver and gold coins, and should preserve the intrinsic value of the coinage. Hamilton’s one innovation was his notion of a “gold dollar” which would also be the “unit”, along with the (silver) “dollar”.

1.) H.R. Doc. No. 24, 1st Cong., 3d Sess. (1791) (“Hamilton’s Mint Report”), in 2 The Debates and Proceedings in the Congress of the United States (J. Gales compilations. 1834), Appendix, at 2059.

2.) Id.

3.) Id. at 2060.

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