The Crime of '73, '93

The free coinage or silver and gold had been adopted in 1792. This meant that anyone could take gold or silver to the mint, and have it coined. A silver dollar would have a dollar's worth of silver, and the much smaller gold coin would have a dollar's worth of gold in it. Gold's price on the international market was stable, but the price of silver floated. During the Presidency of Andrew Jackson, (1829-1837), the ratio between gold and silver was set at 16 to 1, which has always been its historic ratio anyway. The ratio wasn't a new idea, but it became official then. In 1849, gold was found in California. The 49ers mined so much gold, that the treasury was flooded with gold, and it became less valuable in relation to silver, with an ounce of silver buying $1.04 worth of gold. In 1853, Congress abandoned the free coinage of all silver coins except the silver dollar, which got the nick name of "cartwheel." Few Americans noticed or cared, as silver coinage was still being minted by the Treasury.

Then came the War Between the States, when both the North and South's currencies came to absolute zero. Both sides printed money to pay for their respective sides, and the result was just another example of history repeating itself. After the war, people wanted a money which had actual value. Sound money, which couldn't be inflated by a printing press. The business community wanted a gold dollar, whose value was stable throughout the world. Due to pressure from the eastern capitalists, Congress, in 1873, decided to drop the silver dollar, literally de-monetizing silver. This became known as the "crime of '73." A depression followed. In 1875, the "Specie Resumption Act," required all currency in circulation to be backed by gold. Outrage continued, with demands that silver once again be declared as legal tender. Finally, in 1878, the Bland-Allison Act provided that (1) The U.S. Treasury purchase between $2 and $4 million in silver each month from the western mines, (2) The silver was to be purchased at market rates, not at a pre-determined ratio of 16 to 1, and (3) The metal was to be minted into silver dollars as legal tender. Rutherford Hayes vetoed it, but the Congress handily over-rode, and it became law. The Bland-Allison Act was not a total solution, but it was a start towards making America once again on a silver-gold money standard. The term 'bi-metallism' has been used to describe this law.

The western miners, farmers, and others who were in trouble because of a shortage of money, translated as silver, still protested vehemently. In 1890, the Congress and President Benjamin Harrison passed the Sherman Silver Purchase Act, which supplemented the Bland-Allison Act, and required the purchase of 4.5 million ounces of silver additionally each month, for a total of 8.5 million ounces, and the purchase to be paid with notes which were redeemable in either silver or gold. This took most of the production of the western mines, and silver shot up from 84 cents an ounce to $1.50. Colorado's silver mining interests were in full bloom after the Sherman Act was made law. Leadville boomed, with moneybags Horace Tabor leaving his dowdy wife Augusta, and marrying the famous "Baby Doe," who died feeble, frozen, and penniless at the "Matchless" mine in 1937. In San Juan County Colorado, the Red Mountain Mining District gushed tons of silver on the Silverton Railroad, which was abandoned in 1925. Otto Mears, a Russian immigrant, who got rich building toll roads and railroads in Colorado, made so much money hauling madams, whiskey, coal, and supplies up to Red Mountain Town, and ore out, that he gave his best customers solid silver passes each year. They command thousands now, if one can be found for sale. (I offered $1500 for one in 1972 and was soundly rebuffed). It is said that Silverton got its name because one wag said, "We ain't got no gold, but we got silver by the ton." Silverton, during the booming silver days, had 37 saloons and 'girls of the night' by the dozens. There was "Diamond Tooth Lil," "Nigger Lola," "Jew Fanny," and Broncho Lou," just to name a few. George Brower opened the Arlington dance and gambling hall and brought in Wyatt Earp to run the gambling operation. The last of the 'girls' to leave was Jew Fanny, who remarked to 'Deacon' Salfisberg the postmaster when she left that, "I can't sell what high school girls are giving away." She was getting a bit old and squat when she left. Her house still stands on Blair St, and houses a restaurant.

The Comstock Lode in Virginia City Nevada, plus the various Colorado mines were producing huge quantities of silver. Silver then became a glut, and people traded in their silver dollars for gold dollars, because it made sense to do so. A gold dollar was worth more than a silver dollar, and people exchanged them by the millions. The 16 to 1 ratio went out the window for all practical purposes. As a result of the imbalance, by 1893, there was a shortage of gold, and a surplus of silver. This surplus of silver also caused great fear among eastern business men, republicans in general, and foreign investors, who thought that if silver replaced gold, gold would be hoarded. The general gloom in the east resulted in just the opposite of what happened in the west. Stores and businesses in the east began to fail, and indeed gold did begin to be hoarded. Another "crime" was then enacted by Congress. The "Crime of '93," was the Sherman Silver Purchase Act being repealed by Congress. This was the end of the silver mines for all practical purposes. Western and mining town businesses failed, real estate values plummeted, bankruptcies were legend, and banks closed, with some never re-opening. Those that did, usually paid 25 cents on the dollar. The Denver and Rio Grande Railroad went into receivership, and silver dropped to 62 cents an ounce. Mines, mills and smelters closed, and miners by the thousands lost their jobs. Those that didn't, had their wages cut, which resulted in many violent strikes. Even far off Denver was in a crisis situation, and was unable to care for the jobless and homeless. Aspen Colorado, which had been a total silver town, went into deep depression, and was not partially revived until WW II, when the Army trained the 10th Mountain Division on Aspen slopes. Other Colorado Towns such as Telluride, Silverton, Ouray, and Leadville, also fell into horrible depressions, except Cripple Creek, where a huge gold discovery was made in 1891, giving it the nickname of "The World's Greatest Gold Camp." Cripple still produces a lot of gold. Cripple Creek's gold is produced by the "heap leach" process, and is no longer underground, but copies coal mines by skimming off the tops of whole mountains, getting the gold, and then replacing the used material.

Many mine camps were so immersed in silver, that they never even thought about gold. After the "Crime of '93" was digested, mine bosses and superintendents discovered that the mine dumps, which had been regarded as trash, contained were huge deposits of gold, lead, zinc, and even copper. The dumps were re-worked, mines re-opened and they became even more prosperous for a time. What finally killed them was the government, EPA, MSHA (mine variation of OSHA), and various other bureaucracies which make mining in the USA virtually impossible. As far as Silverton is concerned, the last mine quit in 1991; unable to make a profit with the numerous restrictions, regulations, and red tape. It has been said that for every dime removed from Silverton mines, 90 cents is still in those glorious mountains I love so much.

William Jennings Bryan ran on a ticket of resuming a bi-metallic standard, and his famous speech said that if elected, America would, "Not be crucified on a cross of gold." Bryan was a famous orator-lawyer, who died shortly after defending in the famous "Scopes Monkey Trial" in Tennessee. One of my all time favorite movies is "Inherit the Wind," which is about that trial. Today, there is far more gold around that silver, although both are excellent ways to, as I usually say, "Protect yourself."

Closed Friday 9/1, and all next week. No column next week. If you need service, I will have my cell phone with me on vacation, but I won't guarantee I can answer or be in a place which has service. If it is urgent, the number is 1-970-596-1600.

September 1, 2006

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com