I've been reading some of the early history of US coinage. in the 1800's there were speculators and hoards that would find all ways to earn a profit from exchange rates between countries; the gold/silver ratio for example. Coins could have been redeemable at the bank for silver or gold (paper certificates or raw bullion) with a small premium that the bank would use to cover costs. This would have helped prevent the melting of gold and silver. I'm sure I'm missing some economic fundamental, but i just wanted to address situation.
There have always been, and always will be, people, be they dealers, politicians, conmen, or outright scammers, who will find every way they can to make a buck, regardless of any moral or legal principal involved.
People still play exchange rates. FOREX. For metals it's COMEX. Once the value of the metal exceeded the face values of the coins that's when the problems began for hording or melting the coins and no way to stop it. It wouldn't be tied to the denomination on the coin anymore, it would be tied to its commodity value of the metal instead. Same reason people hoard copper cents dated before 1983 now, because one day they can maybe melt for like 3 cents each or more. If zinc shot way up people would hoard that too thinking they could melt down and turn a huge profit one day. No way to control the global market for gold and silver.
The fancy word for making money by finding minute differences in exchange rates is “arbitrage.” So far as having the early U.S. made out of base metal, that would have been a disaster for everyone. The U.S. monetary system was already in the tank because of worthless Continental Currency for the high denominations and a gut of counterfeit copper coinage on the low end. Issuing more fiat money would have only insured that U.S. would have remained a third world country. We would have probably been overrun by England, France or Spain.
When I was in Germany in the Army around 79-81 or so… When we cashed our checks half the guys would immediately purchase duetchmarks hoping to gain enough for beer money holding the local cash for a week or so or even vise versa depending upon the recent trend.
One thing you are missing is that at the time the general belief was that in order for a coin to be acceptable and circulate it had to contain close to its full value. That was why the copper cent was so large, and even at that it was deliberately undersized for its face value. The original 1792 Birch cent pattern was to contain its full value, and was to be 264 grains of copper or 17.3 grams (the chain cent as made was only 13.5 grams). At that rate a base metal (copper) dollar would have weighed 1713 grams or 3.77 pounds, a base metal eagle would have been 37.7 pounds. Not really a coin you would want to carry around. (See Swedish plate money. They tried the base metal approach, their copper 10 Riksdalar coin weighed 44 pounds)
Ok I understand. If it was base metal, then people would simply use foreign coins an not the US coins.
