The study of tokens is one of the most interesting areas of coin collecting, because tokens often served in place of coins. The most well known tokens were made in the late 1830s and are referred to as Hard Times Tokens due to the severe economic problems that the United States experienced at that time. Tokens were not only a substitute for official coinage; they often mixed in politics along the way.
Tokens were not used much in the American marketplace prior to 1837. Starting in 1834 a series of events occurred that would change everything. In that year Congress reformed gold coinage by lowering the weights of the gold coins. During the 1820s gold coins had exited the U.S. leaving only silver and bank notes in circulation.
The Congressional act of 1834 was intended to bring United States gold coins into line with an international ratio between gold and silver. The law of 1792 had set the United States ratio at 15 to 1, which was that one ounce of gold was worth fifteen ounces of silver.
By the 1820s world markets had moved to a ratio closer to 16 to 1. The result of the 1834 act was a large influx of gold into the United States due to the ratio being set at 16 to 1 which was just a bit too high.
Between the years of 1835 and 1836, Mint and Treasury officials became concerned that this heavy flow of gold was going to drive out the silver coinage of the U.S. Of course foreign silver still entered the country in plentiful quantities.
Mint Director Robert M. Patterson resolved to solve this problem by crafting a comprehensive coinage bill that included a provision to lower the ratio to around 15.9 to 1. The bill became law in 1837 and seemed to solve the problem. U.S. silver stopped leaving the country while gold kept coming in.
In the early part of 1837, the U.S. was well supplied with gold and silver coins for the first time in its history up to that point. However this would soon change due to major mistakes made by the states and the federal government.
The early 1830s spawned a tremendous expansion of business. This huge business growth demanded that new roads and canals would need to be built to move goods to market, and the raw materials needed to the factories. All of this expansion required massive borrowing by the states and federal government. All of this new spending created inflation by new issues of paper money.
This new expansion of roads and canals clashed with President Andrew Jackson’s attack on the Bank of the United States. This central bank had been chartered in 1816 for a period of 20 years. One of the bank’s major successes was forcing private banks to honor their paper currency with specie in the form of silver and later in gold.
Eventually the bank’s officials and President Andrew Jackson clashed with one another. Bank officials openly opposed President Jackson’s Administration, which in turn caused Jackson to do everything in his power to undermine and destroy the Bank of the United States. During the early 1830s, a bitter struggle played out between the bank and President Jackson. Ultimately the bank lost and Jackson won.
One strategy used by Jackson to undermine the bank was the removal of federal deposits of gold and silver coins. These coins were deposited in private banks that were friendlier to Jackson’s Administration. These banks were referred to as “pet banks” by Jackson’s numerous enemies.
Many of these banks were poorly managed and the large influx of hard money allowed these banks to issue loans to politically connected individuals without any collateral to back up the loans.
The federal government itself added to the problems, making matters even worse. President Jackson opposed the issuance of paper money. His view was that paper money, especially that issued by private banks interfered in the economic expansion of the United States.
His belief was that no paper notes under $20 in value should be issued. Unfortunately for his view, there were a large number of notes of less than $5 value in circulation at the time. This stemmed as an unforeseen result of money going to the pet banks of Jackson.
This culminated in a disaster called the Specie Circular. The Specie Circular originated in a proclamation by Treasury Secretary Levi Woodbury on July 11, 1836. This proclamation required that land purchases on the frontier had to be strictly made in gold or silver coinage. In some cases paper money was allowed to be used but the intent was to discourage the use of paper money daily commerce.
Meanwhile the steady influx of gold to the United States from 1834 to 1836 was causing its own problems in Europe and Great Britain. The Bank of England was forced to respond to this heavy loss of gold by raising the discount rate to 5 percent in September 1836.
This stemmed the loss of gold for a spell and even reversed the trend for awhile. But by the spring of 1837 gold was again flowing out of England. The cumulative effect of the Specie Circular, funds deposited in Jackson’s pet banks, and the Bank of England’s discount rate hike struck in the month of May 1837.
On May 10, 1837 New York banks suspended specie payments for their paper notes. This triggered a run on banks throughout the United States. This financial catastrophe forced many businesses to fail and a large number of workers out of their jobs.
The financial panic of 1837 was a severe recession that fell short of becoming a depression. Gold and silver coins were rarely used for daily commerce. The shortage of coinage was filled by bank notes as well as private scrip.
You might wonder what all of this has to do with tokens. Well a number of individuals saw an opportunity to make money and score political points against their enemies at the same time. The token coinage that resulted succeeded in fulfilling both aims very well.
Andrew Jackson’s hand picked successor Martin Van Buren took the oath of office on March 4, 1837 just in time to be caught up in the calamity caused by the earlier mistakes. The explosion of token usage in 1837 was about to commence and the United States Mint was uncertain what to expect.
The Mint had a vested interest in seeing to it that tokens were neither issued nor used for daily usage. Their reasoning was purely economic in nature. The Mint derived a significant profit from issuing copper coins to the public.
However the Mint faced one difficult problem. Copper coins were not legal tender and were not normally convertible into gold or silver except at 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 unforeseen suspension of specie payments created financial havoc. The advent of the Hard Times Tokens was about to begin.