More On The Spanish Dollar-U.S. Dollar Trade

First, we wish to thank R.W. Julian for posting the 1797 letter from Secretary of the Treasury,Oliver Wolcott, to the president and directors of the Bank of the United States, directing thebank to send whatever gold or silver foreign coins they have to the mint for recoining, except

Of particular interest to the subject at hand, is Wolcott's specific mention of the ofFeb. 9, 1793. That act made certain foreign coins legal tender, including Spanish dollars andtheir cut parts. However, the act also clearly states that in order to be legal tender, the dollarsmust weigh at least 415 grains (with cut parts in proportion).

The fact that Wolcott specifically cited the act truly cements our contention that few, if any, ofthe Spanish dollars deposited by the bank in 1800 through 1805 were full-weight, since doing sowould have violated the Secretary's directive. In fact, in order to comply with the directive, theSpanish dollars deposited by the bank must have weighed less than 415 grains.

So, even if one proposes that the dollars deposited weighed, on average, 414.5 grains, sincethey assayed at .8924 to .8934, the dollars, on average, would have contained just 369.89 to370.13 grains of silver - that's less than the 371.25 grains of silver in a U.S. dollar!

Since the Bank of the United States was the only entity depositing any significant quantity ofSpanish dollars prior to 1806, the fact that the dollars deposited actually contained less silverthan a U.S. dollar simply destroys the myth that huge numbers of U.S. dollars were exchangedfor Spanish dollars in the Caribbean and then supposedly returned to the mint forrecoining at a profit.

It could be suggested that the supposed dollar-for-dollar arbitrage trade story became muddledover time and what really took place was a trade of two U.S. half dollars for Spanish dollarsfrom 1806 on, when there were numerous large deposits of Spanish dollars by several entities.Or it could be suggested that U.S. banks had hoarded U.S. dollars as specie backing for loansuntil 1806 and the trade actually took place then.

No matter, the tale still does not work since the Spanish colonial dollars deposited from 1806through 1810 or so, all assayed at a maximum of .8957 fine. So, even if the Spanish dollarsdeposited in 1806 on all weighed the full standard of 417.7 grains, they contained just 374grains of pure silver. That is less than eight-tenths of a percent more than the 371.25 grains ofsilver in a dollar's worth of U.S. coins - far too little to cover the shipping and insurance costs ofthe trade, not to mention what an in the Caribbean would cost.

In fact, it is not until well into the period of the First Mexican Republic that the Mexican dollarswere of a weight and fineness consistent enough to permit this mythical trade and that is wellafter the story first appears in 1831. In sum, the storied is nothing more than a fanciful tale, concocted well after it supposedly took place.

Craig Sholley adds:

Report from the Secretary of the Treasury Respecting the relative value of Gold and Silver. &c. May 29, 1830

Craig continues:

To read the earlier E-Sylum articles, see:
ALEXANDER HAMILTON AND SILVER FINENESS(https://www.coinbooks.org/v27/esylum_v27n05a12.html)
MORE ON HAMILTON AND SILVER FINENESS(https://www.coinbooks.org/v27/esylum_v27n06a10.html)
FURTHER ON HAMILTON AND SILVER FINENESS(https://www.coinbooks.org/v27/esylum_v27n07a07.html)
FURTHER ON HAMILTON AND THE GOLD/SILVER RATIO(https://www.coinbooks.org/v27/esylum_v27n08a16.html)