In 1833, fear was spreading through the country of a credit shortage. The Bank of United Stares (BUS) was withholding loans to merchants while the bank owned newspapers were sounding alarms and creating a panic. Merchants, who collectively owed millions of dollars to the BUS were now being forced to turn to the State banks to borrow species to pay the dues owed. To maintain viability, the state banks were forced to refuse these loans and merchants were defaulting. As Congress convened that year, the credit shortage was intensifying the already bitter dispute over President Jackson's attempts to shut down the Bank. Yet, despite fierce opposition in the Senate, President Jackson and the House Democrats managed to push through the Coinage Act of 1834 giving merchants an opportunity to replace the use of banknotes with gold coins and Andrew Jackson one more tool destroy the bank with.
The Bank was using the credit shortage as leverage to create a monopoly over the state banks and push their own bank notes over those of the state banks. By devaluing sliver and revaluing gold, the Coinage Act helped undermine the Banknotes and eliminate their monopoly over credit. The Coinage act of 1834 raised the silver-to-gold weight ration from 15:1 as established in 1792 to 15:1, a price level below its international market price. In addition, allowed the department to pay only 5 days after the gold was deposited the mint, speeding up the process to mint coins for gold. Section 1 of the act defined the quantities of gold coins down to quarter which was valued at $2.50. With these new laws in place, gold coins were ready to make a comeback. U.S. Mint Director Samuel Moore ramped up the mint to get new coins into circulation. Expecting a huge demand, Moore ordered an entirely new design that included the tousle-haired Liberty facing left with thick and curly locks wrapped by a LIBERTY inscribed headband. Over 2.1 million Classic gold Head half eagles were minted in the first four years after the act was passed.
President Jackson was enthusiastic about the future that his officers of the Mint had promised and had no doubt that the gold coins would in a short period of time replace the Bank notes "as promptly and as cheaply as they have heretofore been by the Bank of the United States". It was one more win against his political opponents and one more tool to help destroy the bank.
"The progress of our gold coinage is creditable to the officers of the Mint, and promises in a short period to furnish the country with a sound and portable currency, which will much diminish the inconvenience to travelers of the want of a general paper currency should the State banks be incapable of furnishing it. Those institutions have already shown themselves competent to purchase and furnish domestic exchange for the convenience of trade at reasonable rates, and not a doubt is entertained that in a short period all the wants of the country in bank accommodations and exchange will be supplied as promptly and as cheaply as they have heretofore been by the Bank of the United States. If the several States shall be induced gradually to reform their banking systems and prohibit the issue of all small notes, we shall in a few years have a currency as sound and as little liable to fluctuations as any other commercial country."
References
Presidency.ucsb.edu. 2020. Sixth Annual Message | The American Presidency Project. [online] Available at: <https://www.presidency.ucsb.edu/documents/sixth-annual-message-2> [Accessed 6 May 2020].En.wikipedia.org. 2020. Coinage Act Of 1834. [online] Available at: <https://en.wikipedia.org/wiki/Coinage_Act_of_1834> [Accessed 6 May 2020].
Ngccoin.com. 2020. 1834-1838 Classic Head $5 | NGC. [online] Available at: <https://www.ngccoin.com/coin-explorer/classic-head-5-1834-1838-pscid-63> [Accessed 6 May 2020].
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