Blog/America's Economic History
Posted Jun 12, 2015 by Martin Armstrong
Private money has ALWAYS emerged during periods of crisis. The Feuchtwanger Cent was a “German silver” private token coin. German silver is a term for a white appearing metal we use today which is a copper alloy with nickel and often zinc. The usual formulation is 60% copper, 20% nickel, and 20% zinc giving the impression of silver. Lewis Feuchtwanger circulated these tokens during the 1830–40s in the USA. The denominations were one and three cent varieties.
The tokens were originally created as patterns to demonstrate a new type of metal for coinage, however when these proposals failed, they were temporarily used by the public during depression which followed the collapse in the banking sector after the Panic of 1837.
When Andrew Jackson shutdown the Second Bank of the United States, ending central banking, that begun the age of Wildcat Banking with every bank issuing their own money. That led to the collapse in banking and people began hoarding coins. In 1837, to alleviate the need for small change during the Hard Times, Feuchtwanger’s tokens were proposed to Congress as cheaper to mint than silver.
Andrew Jackson unleashed the Sovereign Debt Crisis of the 1840s as states issued debt to try to bail out banks and then defaulted. The period led to civil unrest and killing immigrants on the street of Philadelphia, as people blamed the Irish for taking their jobs and causing rising unemployment.
The period was especially rough for the economic recession following the dissolution of the Second Bank of the United States, known for massive hoarding of small change. Much of the small change circulating at this time vanished between 1837 to 1844. Hard Time tokens began to circulate as a substitute for official money, which was composed of clunky copper half-cents and cents privately produced or various cuts and whole silver coins of foreign origin. The variety is rich for the era as there are many political statements, such as not one cent for tribute (taxes).
In fact, it would not be until 1857 that Congress would enact into law that legal currency be coin of United States Mint origin because there was so much private coinage in circulation.
Those interested in the coinage can buy a catalogue on the period with a wealth of illustrations. It is by far a most interesting example of how money can be created by the private sector against government.
History repeats BECAUSE human nature never changes throughout the successive generations. There is nothing ever new under the sun.