During the time of U.S. bimetallism, which began with the Coinage Act of 1792 and ended with the Coinage Act of 1873, the value of a U.S. dollar was pegged to gold and silver, and the ratio of gold to silver was set at 15:1 (and went to 16:1 in 1834).
This meant that paper currency would be honored by the U.S. government with a return in gold or silver based on a set ratio and pegged to the U.S. dollar according to the standing value of gold (and silver, by extension).
Silver certificates were printed and issued by the U.S. government from 1874 to 1964 to assuage the anger of silver currency advocates called "silverites" who dubbed the Coinage Act of 1873 the "Crime of '73" because the demonetization of silver effectively placed the U.S. on the gold standard, which was blamed on any number of financial problems.
Panic of 1873
The Coinage Act of 1873 angered more than the silverites. The silver mining lobby represented the interests of a growing and powerful mining community and they had no doubt that the government's decision to demonetize silver had the potential to wreck their industry.
The decision immediately depressed silver prices and raised interest rates, which hurt farmers and other business owners carrying debt.
This compounded with the international demand for silver triggered the Panic of 1873, which capped a series of financial crises that began with the Black Friday Panic in 1869. The depression lasted five years and resulted in a slew of failed banks that eventually shut down the New York stock market.
Bland-Allison and Sherman Silver Purchase Acts
The response was the Bland-Allison Act of 1878. The Act was essentially a push to return to silver coinage, and required the U.S. Treasury to buy between $2 and $4 million in silver from Western mining interests to use in minting silver dollar coins for use as legal tender.
The coins, however, were very heavy and after winning a pitched battle to bring silver currency back on the table, people ultimately did not prefer carrying the coins around. This had the interesting effect of putting silver in circulation, although no one was circulating them.
Undeterred, mining interests and the mining lobby put even more pressure on the government to put silver in demand, and the Sherman Silver Purchase Act was passed in 1890. This Act required the
U.S. government to purchase 4.5 million ounces of silver a month for use in currency, and was repealed when it nearly caused the country to go bankrupt, although not before the U.S. further increased its silver stockpile.
A "silver certificate" is simply another term for a specific kind of paper currency issued by the U.S. government. The Treasury had purchased a great deal of silver that no one wanted to physically possess - apparently the argument was that their money be backed by silver, not that they necessarily wanted to carry it around.
Recognizing this, the Treasury began to issue silver certificates in 1878 that could be redeemed for the same face value in silver coins, and later bullion. It was part of an effort to transition to paper currency, although it will be remembered in history as one more step toward the fiat currency system.
Design and Series
There is nothing overly striking about the design of silver certificates and in fact the later series of U.S. silver certificates look very similar to the design of the paper currency of the late 20th century that was basically an evolution of the certificates that omitted the verbiage pertaining to silver.
There are two notable differences. The first is that the certificates included notation on them that specified how much silver was due to the bearer upon delivery to the Treasury. The second is that they went through a transformation in size, from larger to smaller in 1928, to facilitate ease of transactions and reduce printing costs.
The first (large size) series of silver certificates began as a trial run of $5 certificates printed against the heavy silver dollars the public failed to circulate. Popularity with the certificates led to a first official series in 1878 and was printed in denominations of $10 to $10,000.
This continued until 1928 when the first of the smaller series certificates were introduced and were printed in denominations of $1, $5 and $10, and began to look much more like the paper currency we see today.
Silver Certificate Value
Since 1968 silver certificates have been redeemable only in US Currency (Federal Reserve Notes) and not silver. Although the notes are still valid legal tender, they are no longer redeemable in silver. Some less common certificates, or in uncommonly good condition or the combination of both may have additional value to collectors.