Looking at the production of silver coins from 1878 to 1964, the weight of the unit coin, or dollar, is not equivalent as it is for fractionals. Why? dime at 2.5 grams, x 2.5 = quarter at 6.25 grams, x 2 = half at 12.5 grams x 2 does not = dollar at 26.73 grams. (1.73 grams heavier than fractionals.) trade dollar even heavier (2.22 grams over fractionals.)
For the reason you have to go back a little further. After the discovery of gold in California in 1848 so much gold began coming on the market that the value of silver as expressed in gold increased. This resulted in the value of the metal in our silver coins rising to the point where it exceeded the face value of the coins. So in 1853 the weight of the half dime, dime, quarter and half dollar were reduced. But it was felt that to reduce the weight of the dollar would result in a loss of prestige for the coin so it's weight was not reduced. Now this could result in people exchanging the lower weight minor coins for the heavy weight dollars and benefiting from the excess silver, so the legal tender status of the smaller coins was reduced from the unlimited status that they had previously to a maximum of $5. Unfortunately it also resulted in the ending of the only period in our history when the silver dollar actually circulated. This inequality in weights between the coins continued from 1853 til the end of the circulating silver coins
How long was the legal tender max $5 in effect? How did this work in real life? Would a bank not accept for deposit more than $5 in minor coins at a time? Could I pay a retailer with $10 in minor coins? Thanks
Conder may know better than me, but if I recall correctly it stayed that way until 1965. And basically it was up to the person accepting the coins as to whether or not they wanted to take them. Just like it is today. Just because a coin or bill is legal tender or has a quantity limit that doesn't mean that anyone has to accept them.
"Legal Tender" is a concept that has changed over the years. In the early years of the country if an item was legal tender it HAD to be accepted. This legal theory was handy for the government after 1862 when they first started printing greenbacks. Unlike the silver or gold certificates these notes had no backing other than the faith in the government. But they were made Legal Tender which made their acceptance mandatory. This understanding of Legal Tender survived until at least the mid 1870's (I don't know the exact date at this time.) The decision came from the Supreme Court hearing a case on the constitutionality of the issuance of the Greenbacks. The decision was that it was constitutional to issue them but not to mandate their acceptance. So from that point one the notes became a legally acceptable offer of payment but they could be refused. Interestingly the Chief Justice of the Supreme Court at the time was Salmon P Chase, the person who had come up with the idea of the legal tender greenbacks in 1862 in order to fund the war effort. As to how the limited legal tender status worked, if payment was offered that was less than the limit, the coins had to be accepted. If a sum greater than that was offered the receiver had the option to accept the full amount, accept just the limit, or to reject the entire amount. If only a partial payment was accepted it was then up to the two parties to come to an agreement as to how the rest of the payment would be tendered. (Contrary to popular opinion if a form of payment is declined that doesn't mean you don't have to pay.) And yes this applied to banks as well. They could and often did refuse deposits of coin amounts in excess of the legal tender limits. This could be a great hardship on merchants, especially in the larger cities, because most transactions were small and they received a lot of coins in payment, but the banks would refuse these coins if they tried to deposit them in great amounts than the legal tender limits. This meant that they would have to make many deposits during the day to keep the number of coins in any one deposit small so that the bank would have to take them. As far as I can tell the limits on the legal tender were removed by the legal tender clause of June 5th 1933. If there was an earlier change I don't know of it at this time.
Thanks for the explanation. I love the history of it all. Sounds like the limit system was not too practical (compared to today) in day-to-day use, full of loopholes such as depositing small amounts repeatedly.
