Book Review of Fractional Money

The half dollar: workhorse of former years; little used today. The twenty cent piece: created for private interests; legislated out of existence unwanted and unused. These are but some of the facts presented in Neil Carothers’ Fractional Money. Subtitled “A History of Small Coins and Fractional Paper Currency of the United States,” this book is an exhaustive study of the use and legal development of American money less than a dollar from colonial times until the late 1920s, when the book was written.

Carothers begins by explaining key terms and principles discussed throughout his book. Fiduciary coinage occurs when the bullion value of a coin is less than its face value. Subsidiary coins are silver fiduciary coins, while minor coins are made of base metals. Thus said, in the next chapter the author illustrates the origins of the fiduciary system during medieval times, as well as its advance and acceptance in England.

Following this background information, the next four chapters are spent describing monetary conditions in America from the colonial period until the law of 1792. The colonists used motley currencies, including those of multiple foreign countries, wampum, and colonially issued coins and notes. During the Revolution, these monies were augmented by notes issued under the authority of the Continental Congress. Following the conclusion of the war, several reports were submitted to Congress by leading men of the time, such as Robert Morris, Governor Morris, Thomas Jefferson, and Alexander Hamilton, recommending various coinage plans for the country. Finally, the law of April 2, 1792, based primarily on the recommendations of Jefferson and Hamilton, provided for a national coinage.

Following this primary law, many bills were proposed to refine the currency during the period before the Civil War. Throughout the course of the book, Carothers discusses both bills that were passed and many that were not. He also explains the financial conditions that led to such proposals. One of the major coinage laws of this period, the law of 1837, revised all the previous coinage laws and standardized the alloy in gold and silver coins at ten percent. The law of 1851 created a subsidiary three-cent piece, while the law of 1853 made the half-dollar to half-dime subsidiary by reducing their silver content. Finally, in addition to creating a small size copper-nickel one-cent piece, the law of 1857 revoked the legal tender status of all foreign coins.

Just as an adequate amount of minor coinage was beginning to circulate, the Civil War drastically changed the currency, as Carothers details in four chapters. With the disappearance of silver coins from circulation, cities, banks, and private businesses issued fractional notes in an attempt to fill the void. The national government authorized the use of postage stamps as money, leading to difficulties between Postmaster General Blair and Treasury Secretary Chase, though better monetary alternatives were soon found in the forms of postage currency and fractional currency. During this period, the bronze one and two cent pieces and the nickel three and five cent pieces were created, while bullion dealers profited by exporting silver coins to Canada and Latin America.

Finally, Carothers spends the remaining chapters describing monetary conditions from the conclusion of the Civil War until just after World War I. The law of 1873 both codified previous coinage laws and created the trade dollar. However, it dropped the standard silver dollar, legally placing the country on the gold standard. As further coinage laws were passed over the next decade, old silver U.S. coins returned from abroad, resulting in a surplus of coins in circulation. However, the law of 1879 provided for the redemption of worn and excess subsidiary coins by the Treasury. Also, various silver acts were passed in the 1890s and 1910s, though the silver dollar never experienced popular use. Finally, Carothers ends by summarizing the main principles of fiduciary coinage, with recommendations for further improvements.

Though lengthy, Fractional Currency succeeds in explaining key economic principles behind the development of American coinage in easy-to-understand terms. Seeming to read almost as a fictional story, this book interestingly presents both major events and little remembered proposals in the history of American fractional money, as well as painting a picture of daily life. Still relevant over seventy years after its first publication, Fractional Currency is a must read for numismatists of all levels.

By Amanda Rondot.

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