One of the more interesting aspects of American numismatics is the study of those tokens which served in place of coins. The best known of these were made in the late 1830s and today are called Hard Times Tokens because of the economic problems that affected the United States during that era.
Prior to 1837 tokens were little used in the American marketplace but a series of events that began in 1834 was to change everything. In that year, after many years of debate, Congress finally reformed the gold coinage by lowering the weights. During the 1820s most coined gold had left the United States, leaving only silver and bank notes to conduct commercial affairs.
The act of June 1834 was meant to bring United States gold coins into line with the international ratio between gold and silver. The law of 1792 had set the ratio at 15 to 1 (i.e. one ounce of gold was worth 15 ounces of silver) but by the 1820s the world markets used ratios closer to 16 to 1. The result of the 1834 law was that gold flowed heavily into the United States because the ratio had been set a little too high, at 16 to 1.
During 1835 and 1836 Mint and Treasury officials became concerned that the influx of gold was having the unwanted effect of driving out the silver coinage of the United States; foreign silver still arrived in considerable quantities, however. To solve this latest problem, Mint Director Robert M. Patterson prepared a comprehensive coinage bill that included a provision that slightly lowered the ratio, to about 15.9 to 1. The revised law was passed in January 1837 and proved beneficial. U.S. silver stopped leaving the country while gold continued to arrive.
During early 1837 the United States was perhaps the best supplied with gold and silver coins than had ever been the case in its history up to that time. But all of this would soon end, due to a series of blunders made by the states, as well as the federal government.
The early 1830s witnessed a great expansion of business and with this came a call for roads and canals so that goods could be gotten to market and raw materials brought from the interior to the coastal manufacturing plants. All of this initiated massive borrowing by the states for these internal improvements. This spending created inflation and increased issues of paper money.
The expansion of the roads and canals played out against another backdrop, the attack by President Andrew Jackson on the Bank of the United States. This bank, which had been chartered in 1816 for 20 years, served the nation well in forcing private banks to honor their paper currency with specie, usually silver but after 1834 in gold if desired.
The strong position of the Bank of the United States, however, inevitably led to political involvement and the bank leadership was openly against the Jackson Administration. This President felt the same about the bank and was determined to destroy it. The early 1830s saw a bitter struggle between the bank and Jackson. The bank lost.
One of the strategies used by the President to undermine the bank was the removal of federal deposits (gold and silver coin). Such funds were placed in private banks friendly to the administration, called “pet banks” by Jackson’s enemies. These banks were sometimes poorly managed and the influx of hard money led them to issue loans to politically connected individuals without the proper collateral.
The federal government had also stepped in to make matters worse, much worse. Jackson had long felt that paper money, in particular that was issued by private banks, was holding back the economic expansion of the United States; the President believed that bank notes of less than $20 in value ought not to be issued. The problem with this was that was a large number of notes of less than $5 value in daily use, an unintended result of the monies going to pet banks.
The disaster waiting to happen was politely termed the Specie Circular and had been issued by Treasury Secretary Levi Woodbury on July 11, 1836. It required that land purchases on the frontier be made strictly in gold or silver coin. Some exceptions were made for the use of paper money on a temporary basis but the intent was clearly to force paper money out of daily use.
At the same time, the massive influx of gold into the United States from 1834 through 1836 caused problems in Europe, especially England. The Bank of England responded to the loss of gold by raising the discount rate to 5 percent in September 1836. This caused a reverse flow of gold to Great Britain although on a limited basis at first. By the spring of 1837 gold was leaving for England at a growing rate.
The cumulative effect of the Specie Circular, funds to pet banks, and the English discount rate came crashing down in May 1837. On May 10 the New York banks suspended specie payments for their notes, triggering a run on banks throughout the United States.
The financial upheaval forced many businesses to fail and a large number of workmen were laid off. The Panic of 1837, as it came to be known, was a severe recession but not a depression. Gold and silver were now rarely used in commerce, their place being taken by bank notes as well as scrip for values as low as a few cents. The government had meant well but failed to foresee what would happen by acting too quickly.
As in all such situations a number of people saw the opportunity not only to make money, but score political points against their enemies at the same time. It is hard to say which aim was the most important. The token coinage which resulted succeeded very well in both aims, much to the irritation of the supporters of Andrew Jackson and his hand-picked successor, Martin Van Buren. Van Buren had taken the oath of office as President on March 4, 1837, just in time to reap the whirlwind caused by the earlier mistakes.
On the eve of the token explosion in 1837 the United States Mint had no idea of what would happen. But it did have a vested interest in seeing to it that the tokens were neither issued nor used in the marketplace. The reason was purely economic in that the Mint derived a considerable profit from issuing copper coins to the public.
There was, however, a difficult problem that the Mint had in dealing with the token outbreak. Copper coins were not legal tender and not convertible into gold or silver except at the so-called exchanges, where copper cents could be converted to silver for a fee of several percent. Merchants had to pay their bills in specie (until the banks suspended specie payments) so the accumulation of United States copper coins was not exactly a blessing. (Legal tender status was not given to minor coins until 1864.)
Just when the first Hard Times Tokens began to be seen in the marketplace is uncertain, but distribution of these pieces was well under way by the summer of 1837, perhaps as early as mid July. They apparently first appeared in New York City but this is also not quite certain and is based on the fact that more varieties of tokens are known for this area.
Whatever the exact sequence of events, they were unknown to Mint Director Robert M. Patterson until the fall of 1837. He noticed, in a local newspaper, an advertisement offering tokens for sale at a price well under the official value of a cent. Considering that the Mint needed the profit on copper coinage to offset other expenses, he was less than pleased at what he saw.
Dr. Patterson sent a Mint employee to purchase a few of the tokens that had been advertised and then visited the United States district attorney, whose name was Reed. Patterson told Mr. Reed that the tokens in question were “spurious” and that the 1825 anti-counterfeiting statute was applicable in this case. Patterson testified before a federal grand jury and that body agreed with him; federal officials now ordered the local merchant to stop selling tokens on pain of prosecution.
At first the Mint director believed that the token episode was an isolated one. However, he soon learned that he had witnessed but a small part of the business and that it was widespread throughout New England and New York State. Patterson then began writing letters to friends asking them to investigate the matter and report back to him.
By late November Patterson had learned how much of a nuisance the tokens had become, at least in his mind. On Dec. 2, 1837, he wrote Treasury Secretary Woodbury on what he viewed as a worsening situation as the Mint’s profits on copper coinage were being eroded. Patterson began his letter by recounting the incident with the Philadelphia merchant and the grand jury.
Patterson noted that similar problems were encountered at Baltimore but that the major problem was in New York City where the tokens were not only manufactured but used widely in ordinary business transactions. One friend of the director’s in New York had picked up 10 different kinds of tokens and sent them to the Mint for examination. The Mint director found that at least three of the tokens had been made at the same private mint because the design was similar.
In particular Patterson mentioned the following tokens (or “store cards” as we might term them now): New York Joint Stock Exchange Company, Robinson, Jones & Company, and Ezra Sweet. He went on to note that a newspaper, the New York Observer, was reporting numerous kinds of such pieces in daily use throughout the city. According to the newspaper account, the tokens were sold for about 62 cents per hundred pieces, a nice profit when passed on for a cent.
According to Patterson, an anti-slavery newspaper, the Emancipator, reported that pieces similar to a cent of a “new emission” were being sold at the offices of the Anti-Slavery League on Nassau Street. The paper described the devices as being anti-slavery in nature. There is one anti-slavery token listed by Lyman Low (No. 54), in his study of Hard Times Tokens, which seems to fit the given conditions except that it is dated 1838. Perhaps the issuers felt that it would be coming out so late in 1837 that it ought to be given the next year’s date.
The listing made by Dr. Patterson show another interesting aspect of the Hard Times Tokens in general. The date, if prior to 1837, may well mean nothing more than some important year connected with the business that issued them. The Robinson, Jones, & Company piece, for example, uses an 1833 date to show that it received a medal that year for a button display.
Patterson also noted that tokens were well used in Boston though he did not give any names. The Boston tokens, as with most of the others, were lightweight compared to the genuine cent, averaging perhaps 70 percent of the weight. He thought that manufacturing costs were about 50 cents, or a bit more, for a hundred pieces which gave a decent profit when they were later sold at about 62 cents per hundred. The dies were crude and cheaply made, which helped hold costs down.
Not only did the merchants get “cents” at a strong discount but most of these tokens had the added advantage of advertising their businesses. As far as they were concerned it was a win-win situation. Dr. Patterson, however, had a slightly different opinion.
In the meantime Treasury Secretary Woodbury had taken Patterson’s letter under consideration. On Dec. 4 he replied, noting that he had just written the federal attorneys at New York and Baltimore; he did not mention Boston but this was probably done as well. The attorneys were instructed to take such steps as to eradicate the problem.
December 6 saw Patterson writing Woodbury again, this time to report that he had seen another 11 tokens, primarily from New York. His list included token issuers Henry Anderson, H. Crossman, Maycock & Company, Merchants Exchange, and Abraham Riker. These later tokens were somewhat heavier, though still light by as much as 32 grains below the legal standard of 168 grains.
In an 1849 letter discussing these tokens Dr. Patterson mentioned that the legal attacks by federal attorneys had put a stop to the business. It is not clear from the letter, however, if the political tokens were interdicted by the same methods since no names appeared on these as issuers. It is believed that very few merchant tokens were struck after the spring of 1838.
At the same time as the merchant pieces were issued, political opportunists saw the chance to not only attack Presidents Jackson and Van Buren but make a tidy profit in the process. Quite a few varieties of the political tokens were issued and are collected today by specialists.
It is of interest to note that the tokens of 1837-1838 are known as Hard Times Tokens, but this is a little less than accurate. The recession that started in May 1837 was essentially over within a year; New York banks resumed specie payments in May 1838. In June 1839, however, matters suddenly got worse and this time it was a full-blown depression with large numbers thrown out of work.
The underlying cause of this second round of economic bad news was primarily the English discount rate, as too much gold had again left the island kingdom. This time the problem lasted until 1842, when important discoveries of gold in Russian Siberia provided massive quantities of the yellow metal for world markets.
Hard Times Tokens are but a footnote in the numismatic history of the United States yet played a key role in the marketplace for a few months. They deserve to be better known.