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Gold Coins: Not the Only Currency in a Gold Standard

A look at the various species of money that were circulating a century ago...

LET'S TAKE a look at the evolution of the US currency system, particularly in the pre-WWII period, suggests Nathan Lewis at New World Economics.

Here is the relevant graph, sourced from the St. Louis Fed.

Today, we use Federal Reserve Notes pretty much exclusively for our currency. However, it was not always that way – certainly not before the Fed was created in 1913. As you can see, there was quite a menagerie of stuff out there. What is this stuff?

Federal Reserve Bank notes are apparently notes issued by the Federal Reserve regional banks, such as the St. Louis Fed. Not seen anymore.

Federal Reserve Notes are the "Dollar bills" we use today.

National Bank Notes are notes issued by private commercial banks. This was organized under a system known as the National Bank System. There were over three thousand commercial banks issuing their own bank notes, each one with their own design, all of them linked to Gold Bullion of course. This system pretty much died out in the late 1930s.

United States Notes are the "greenbacks" printed by the US government during the Civil War. For the most part, they remained in circulation, and are now collector's items.

Minor coin is non-silver and non Gold Coins, basically pennies and nickels.

Subsidiary silver is silver coins in less than a one-Dollar denomination, namely, quarters and dimes.

Treasury Notes of 1890 were something issued in 1890 by the US Treasury. They were significant for a few years.

Silver Certificates were notes issued by the US government, redeemable in silver. 

Standard Silver Dollars were $1 silver coins, such as Morgan Dollar and Peace Dollars.

Gold Certificates were notes issued by the US government, redeemable in gold. Gold Coins are, you guessed it, coins made of gold.

Here is a simplified version of the same chart, showing the ratio of metal coins (shown in blue) to paper money (red), during that time period.

What we can see here is that silver and Gold Coins made up a relatively small fraction of US currency, even in the 1880s, and certainly by the 1920s the currency in use was overwhelmingly paper. The notion that a gold standard system means "silver and Gold Coins" is exceedingly antiquarian, and was not the case at all during this period in the US

That the Federal Reserve Note should become popular, and in the end the sole type of US currency, is not particularly surprising. People want uniformity in their currency.

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Formerly a chief economist providing advice to institutional investors, Nathan Lewis now runs a private investing partnership in New York state. Published in the Financial Times, Asian Wall Street Journal, Huffington Post, Daily Yomiuri, The Daily Reckoning, Pravda, Forbes magazine, and by Dow Jones Newswires, he is also the author – with Addison Wiggin – of Gold: The Once and Future Money (John Wiley & Sons, 2007), as well as the essays and thoughts at New World Economics.

See the full archive of Nathan Lewis articles.

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