The Pittman Act: Why and How

Overview

The Pittman Act, officially known as “An Act to provide for the coinage of silver and for other purposes”, was signed into law on April 23, 1918 during the administration of President Woodrow Wilson. The Act was named after Senator Key Pittman of Nevada, a strong advocate for the silver mining industry.

This legislation played a major role in U.S. monetary history by addressing silver coinage, international silver markets, and America’s wartime economic needs during World War I.

Background and Context

At the time of its passage, the United States faced several economic and geopolitical pressures:
- World War I Demand for Silver: The British Empire urgently needed silver to maintain currency stability in India, where silver rupees were the primary medium of exchange.
- Fluctuating Silver Prices: Global silver prices were rising, leading to hoarding and melting of U.S. silver coins, which threatened domestic circulation.
- Support for the Silver Industry: The Western silver mining states were politically influential, and their representatives pushed for measures that would stabilize silver prices and encourage production.

Key Provisions of the Pittman Act

1.   Authorization to Melt and Sell Silver Dollars – The Act authorized the melting of up to 350 million standard silver dollars held by the U.S. Treasury. The silver bullion was primarily sold to Great Britain at a fixed price of $1.00 per ounce.

2. Replacement of Melted Coins – The Act required the U.S. Mint to recoin silver dollars using newly purchased silver, either from domestic mines or imports, after the war emergency ended. This guaranteed a market for American silver producers for several years.

3. Stabilization of the Silver Market – By setting a floor price and creating a predictable demand, the Act helped stabilize silver prices during a period of volatility.

Why It Was Passed

- To Support the War Effort: The British government desperately needed silver to maintain economic stability in India and fund wartime expenses. The Pittman Act allowed the U.S. to meet that need.
- To Protect U.S. Coinage: Rising silver prices risked U.S. silver dollars being melted for bullion profit. Removing silver dollars from circulation and reintroducing them later at a controlled pace prevented disruption.
- To Aid Domestic Silver Mining: The Act guaranteed a minimum price and purchase commitment for silver from U.S. mines, which was a major political goal for Nevada and other mining states.

Actions and Outcomes

1. Melting of Silver Dollars – Approximately 270,232,722 silver dollars were melted down under the Pittman Act, making it one of the largest coin melting in U.S. history.
   
   Sales to Britain – The silver bullion was shipped overseas, helping stabilize the British financial system in India and supporting Allied war efforts.
   
   3. New Coinage – Peace Dollar – Beginning in 1921, the U.S. Mint recoined silver dollars using newly purchased silver, eventually producing the Morgan Dollars (1921) and later the iconic Peace Dollars (1921–1935).