A common misconception about the Federal Reserve System is that it is responsible for producing physical currency: coins and paper notes. While the Fed distributes coins and paper notes to depository institutions and uses its monetary policy tools to alter the overall supply of money in the economy,[1] responsibility for manufacturing coins and paper notes falls to the Department of the Treasury.[2] Within the Treasury, there are two separate agencies responsible for producing coins and paper notes: The Mint produces coins, while the Bureau of Engraving and Printing produces paper notes. This Inside FRASER will focus on the history of the Mint, as well as details about coins in the colonial period, in the days of the early republic, and through the early twentieth century.[3]
Coins in the Colonies and the Early Republic (and Beyond)
In the years before independence, several different kinds of coins circulated in the colonies. For example, British pounds and German thalers changed hands, along with some coins the colonies produced themselves. Spanish milled dollars were popular thanks to the consistency in the amount of silver in their composition. Due to an insufficient supply of coins in smaller denominations, people would occasionally cut this coin into smaller pieces.[4] Livestock and produce also helped facilitate commercial activity.[5] Even tobacco was used as money in colonial Virginia, as were grain, fish, and furs in colonial New England.
After the Revolutionary War, the fledgling United States was loosely held together by the Articles of Confederation, which allowed states to manufacture their own coins and establish values for them. Such an arrangement, in addition to the foreign coins still in circulation, did little to promote efficient commerce among the states. In 1787, Congress authorized the production of copper “Fugio” cents, with an obverse depicting a sundial and a memorable motto: “MIND YOUR BUSINESS.” When the states ratified the Constitution in 1788, debate continued over the future of coinage in the young republic.[6]
In April 1792, Congress passed the Coinage Act, establishing the first national mint in US history, in Philadelphia. Even with a mint of its own, the country struggled to produce enough coinage to meet existing need. In its early days, the Philadelphia Mint consisted simply of a three-story brick building alongside smaller buildings home to horse-operated machinery. The processes of melting and assaying silver and gold, followed by casting, stamping, rolling—and, finally, drawing, cutting, and weighing—were cumbersome and required many hours of labor and the skilled use of large machines. Steady improvements to these processes were not made until the 1830s, when, in 1836, the Mint began using the first steam coining press (invented in 1833).
Due to a prolonged coin production process, legislation allowing foreign coins to continue circulating as legal tender in the United States passed in February 1793. Around one month later, the Mint finished producing its first batch of circulating coins: more than 11,000 copper cents.[7] Production of silver coins began the following year, and gold coins the year after that. Only in 1857 did legislation pass to strip all foreign coins of legal tender status in the United States.[8]
As the young republic matured, concerns related to metal and coinage did not lose their central position in American political life. President Ulysses S. Grant signed into law the Coinage Act of 1873, which prevented miners and other bullion holders from continuing to take their silver to the Mint to be coined into US dollars.[9] Only about five years later, in 1878, Congress overrode a veto from President Rutherford B. Hayes to pass the Bland-Allison Act, which required the Treasury to purchase silver and mint it for circulation as dollar coins. The resulting silver coins were known as Morgan dollars, named after the engraver of the design, George T. Morgan.[10] The Fifty-First Congress passed the Sherman Silver Purchase Act in 1890, which increased the amount of silver the Treasury was required to purchase to 4.5 million ounces per month.[11] Debate over silver and coinage continued in the Fifty-Second Congress and Fifty-Third Congress, leading up to the repeal of the Sherman Silver Purchase Act—with the support of President Grover Cleveland—following the onset of the Panic of 1893.[12] Debates about the role of silver in American coinage were captured vividly by cartoons published in Judge magazine. Most famously, the “Cross of Gold” speech, delivered in 1896 at the Democratic National Convention in Chicago by William Jennings Bryan, was a defining moment of that year’s presidential election cycle.[13] Bryan would lose the election to William McKinley, but his speech in Chicago had electrified the crowd.[14] By 1918, with World War I raging and demand for silver growing among American allies, Congress passed the Pittman Act, which led to the recasting of more than 259 million silver dollars into bullion for sale to Great Britain alone.[15] Most of the coins melted down were Morgan dollars.[16]
The US Mint: Past and Present
FRASER’s collections include many interesting materials related to the history of the Mint, from its formation to the twentieth century and into the present day. For instance, early Press Releases of the US Treasury include many of the speeches, announcements, and statements of Nellie Tayloe Ross, the first woman to become Director of the US Mint, a position she held for two decades. The struggles of World War II brought about a need to conserve and cooperate, as evidenced in this 1942 circular from Federal Reserve Bank of New York president Allan Sproul, notifying banking institutions in the Second Federal Reserve District of the Mint’s request that empty coin bags be returned due to “the growing use, by our armed forces, of the material of which the bags are made.” Fed economists have frequently studied the demand for coin, such as this 1964 article from the Federal Reserve Bank of Richmond’s Monthly Review in which researchers discuss the growth of the Mint and changes to coinage laws, output, and minting operations. In October 2022, the Mint and Federal Reserve Financial Services jointly released a report on persistent challenges to the circulation of coin since the onset of the COVID-19 pandemic.
Even in a time when many Americans increasingly think of money in digital terms, coins play a critical role in promoting access to the economy for our unbanked and underbanked neighbors. From colonial days to the present, coins have stimulated debate and discussion among wise Americans who know that efficient, stable, and trustworthy methods of payment are nothing to take for granted.[17]
[1] To learn more about how the Fed conducts monetary policy, peruse these resources from the award-winning Economic Education team at the Federal Reserve Bank of St. Louis.
[2] Laura J. Hopper. “Does the Federal Reserve Print Money?” November 1, 2017, and “Four Common Myths about the Federal Reserve.” June 26, 2018, Federal Reserve Bank of St. Louis Open Vault Blog.
[3] To learn more about paper currency in US history, check out this post on the Federal Reserve Note, which includes information on additional forms of US paper currency. See also the free resources available through the US Currency Education Program.
[4] United States Mint. “The History of U.S. Circulating Coins.”
[5] United States Mint. “History of the U.S. Mint.”
[6] United States Mint. “The History of U.S. Circulating Coins.” See also an explanation for using the Latin word fugio on the coin from the Federal Reserve Bank of Atlanta.
[7] United States Mint. “History of the U.S. Mint.”
[8] United States Mint. “Historic Coin Production”; “History of the U.S. Mint”; and “The History of U.S. Circulating Coins.”
[9] United States Mint Office of Corporate Communications. “U.S. Mint History: The ‘Crime of 1873’.” Inside the Mint, March 22, 2017.
[10] Jill Westeyn. “One Hundred Years of Silver Dollar Coinage (1878-1978).” Inside the Mint, April 15, 2021.
[11] William L. Silber. “The Story of Silver: How the White Metal Shaped America and the Modern World.” Princeton: Princeton University Press, 2019, pp. 24-5.
[12] Richard White. “The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865-1896.”New York: Oxford University Press, 2017, p. 772.
[13] Charles Postel. “The Populist Vision.” New York: Oxford University Press, 2007, p. 269.
[14] Jonathan Levy. “Ages of American Capitalism: A History of the United States.”New York: Random House, 2021, p. 299.
[15] United States Mint. “Catalogue of Coins of the United States.” Washington, DC: Government Printing Office, 1928.
[16] Jill Westeyn. “One Hundred Years of Silver Dollar Coinage (1878-1978).” Inside the Mint, April 15, 2021.
[17] For additional materials related to the Mint’s history, see the following resources on women and United States currency, women in the Department of the Treasury, and past and present disruptions in the availability of coin.
© 2023, Federal Reserve Bank of St. Louis. The views expressed are those of the author(s) and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.
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