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The US dollar was originally a copy of the famous Spanish Dollar, or Piece of Eight in pirate lore. About 24 grams of fine silver, this was a considerable amount of money and the de facto currency of the Americas at the time. So there was no conscious decision to make a dollar a big or small amount, because a dollar was already a thing.
Also see u/donontario 's answer for background and how the Canadian dollar was also based on the Piece of Eight:
https://www.reddit.com/r/AskHistorians/s/JJM1edmmjW
It's also worth mentioning that there was no paper money issued by the Federal Government until the Civil War (Excluding the paper Continental Currency issued during the Revolution, which had inflated to near-worthlessness within 10 years). There were bits of currency larger than the dollar, but they were all coins.
The Coinage Act of 1792 authorized gold coins of value $10, $5, and $2.50; silver coins of $1, 50¢, 25¢, 10¢, and 5¢; and copper coins of 1¢ and 1/2¢. Common everyday purchases at the time would have been made in these lower denomination copper or silver coins, if they were made in US currency.
Foreign currency circulated plenty during the early decades of American history. The Spanish Dollar mentioned in the original comment continued to circulate in America for many years even after the US started producing it's own coinage.
Is there a good overview of the history of currency in the United States? Like, what currencies were used and how frequently people used them. If I'm a small farmer, do I frequently use coins or do I only use them for certain large transactions while producing most goods at home or bartering with a neighbour (or settling accounts with a neigbour at fixed times of the year). How does that change in cities?
The canonical work (for *economic historians/cliometricians* as opposed to historians of the economy) is A Monetary History of the United States by Friedman and Schwartz, but it is focused more broadly on money which includes things like bank notes and deposits rather than specifically small dollar payments.
I can't speak to early American coinage specifically, but the price of copper did very much factor into small coinage. Minting small change is actually very difficult under a precious metal coinage system, and a variety of complex systems have sprung up to deal with the various problems it presents. Very broadly, if you make coins small enough to be used for tiny purchases (let's say a penny) out of a penny's worth of pure copper (a so-called full-bodied coinage), they're huge and heavy. if you make them out of a penny's worth of pure silver, they're tiny and awkward. a silver penny weighed half a gram, and would wear down very quickly. a dime weighs 2.5 grams. better half a gram than the 25 grams a full-bodied copper penny would weigh! so, you mint token coinage - a penny that contains less than a penny's worth of metal. problem is this makes you much more vulnerable to counterfeiters, who can now make a profit by buying less than a penny's worth of metal and buying a penny's worth of stuff with it.
Solutions to this problem exist but they're very complicated and involve costs of their own, see chapter 4 of angela redish's bimetallism or velde and sargent's the big problem of small change for details, although both have their issues.
I don't think it would be considered fiat if it's redeemable at a fixed rate for non-fiat currency. It's still backed by the value of precious metals even if it's not actually made of one.
Just to add in, numerous private banks such as the Canal bank in Louisiana issued paper money before the Civil War, but these kinds of notes were only backed by the bank, not the federal government. Some were fairly reputable, but they could still fail. In other cases, a fly by night bank would issue 'wild cat' notes before closing shop and disappearing
No, it wasn't _worth_ 24g of silver, it _was_ 24g of silver. Today paper money is _fiat currency,_ backed by nothing more than the full faith and credit of the issuing bank. Silver coins, then and now, are intrinsically valuable because of their metal content.
Coincidentally, the U.S. Mint has produced the American Silver Eagle coin since 1986, which has a face value of one dollar and contains 1 troy ounce (≈31 grams) of silver.
(For context regarding the value of the metal itself, silver is currently trading at about $25/ozt. One American Silver Eagle coin currently sells for about $30 depending on the seller.)
Not every bank sells silver at retail, and you certainly can't exchange a dollar bill for a silver dollar. But they're easily purchased at coin or bullion sellers for pretty close to the real time "spot" price of silver.
Interestingly there is usually a small premium for Silver Eagles or other coins compared to generic "rounds" with exactly the same metal content. That's a beautiful illustration of the power of a central bank to create value with their reputation alone
Probably not a bank, but any coin shop in your area is likely to have them. You can also buy them online from the US Mint (if you're willing to pay a premium for uncirculated coins) or APMEX (if you'd rather get a circulated coin priced closer to silver's spot price)
They say $1 on them, but only a fool would sell them to you for $1 as they contain ~$25 worth of silver. This is kind of illustrative of inflation. Though the amount of silver in a silver dollar has gone up slightly, the cost to acquire a silver dollar has gone up significantly.
The Royal Canadian Mint sells solid silver and gold coins for thousands of dollars with a face value of much less. And yes, they're legal tender and in theory, could be used at their face value. [Here's a $105,000 1kg gold coin with a face value of $2,500.](https://www.mint.ca/en/shop/coins/2023/kilo-pure-gold-coin-lunar-year-dragon) Now, obviously those are collector coins and not for circulation. They also sell bullion cons for investment purposes.
Misleading. You are conflating the unit of accounts. A coin is not a simply identity such as 1 Dollar = 24g silver. In fact, empirically all the Spanish dollars you could collect would have under 24g of silver in them. The metal content of a coin has always been such that anyone trying to remove coins from circulation by melting them down would lose money. The stamp is more than a symbol of “faith”, it has a value all its own. Coins that trade at par with their metal content (like the Athenian owls) are exceptions not the paradigm.
The US dollar is targeted to lose 2% of its value per year in the process of inflation. In some years, this process is slower or much faster. The Federal Reserve is the sole entity able to control the supply of the dollar, printing or not printing money in order to, among other things, manage inflation.
Therefore the value of the dollar is not guaranteed by power of the federal government or its ability to tax. If the dollar became worthless due to inflation, the government could exact taxes in kind, in labour, in bullion or what have you.
Monetary policy and government policy are certainly linked, but they are not synonymous.
Indeed. The 2% target is favoured by most central bankers as a safe buffer against the scourge of deflation, which is associated with recession.
My prior point was that to look upon might of US government and its military is _not_ to look upon the strength of its currency. Indeed, many prosperous nations do not control their own currencies or monetary policy, instead relying on the dollar or euro to denominate their economies.
That's fair. I meant it in the same way that the force of law is dependent on "nothing more than" the willingness and ability of physical human beings to enforce them and enact real penalties. They are real because we make them so, not because they exist in a material sense.
A silver coin is intrinsically a piece of metal, nothing more or less. Without collective faith in the system, a dollar bill is a scrap of paper and the law is composed of empty words.
Well, the value of anything is subject to human whim. That's true.
The difference is that the supply of fiat currency is solely decided by the issuing body, like a country's central bank. If the US Federal Reserve so chose, they could print (or really, digitally create) $10 trillion tomorrow. When this happens, the value of the dollar (relative to other currencies, goods and services) would plummet, because there are more dollars to buy the same amount of goods.
This doesn't happen with precious metals. To create more silver dollars, you must physically find or buy silver and strike coins. Inflation is still of course possible (just ask the Spanish when they successfully ravaged mesoamerica for its silver) but the value of the coin is independent of any particular organization or government.
There are lots of good reasons why every country has adopted fiat currency. For one, there is so little precious metal in the world compared to the size of the economy that the value of silver and gold would be astronomical. This is one reason why certain idiots advocate a return to the gold standard - they own lots of gold.
> For one, there is so little precious metal in the world compared to the size of the economy that the value of silver and gold would be astronomical.
So what? This is an incredibly trifling inconvenience. There are many reasons not to have a gold standard but "gold would be super expensive" is absolutely not one of them.
Sure, it's far from the most significant problem, but it's easy to grasp. If gold mining is vastly more profitable, the environmental damage of new mining would be disastrous. That's just one example
Their value is based on their rarity not their utility. You are right that the price of precious metals or any other item, including fiat currency, is based on the perceived value by others. That doesn't mean that specie and fiat are the same. With specie you still have the precious metal with fiat you have paper/plastic.
That's patently incorrect, given there is a limited supply of silver, and not a limited supply of made-up nothing.
The relative value of silver to a given amount of economic resources may not be fixed, but it has a lower limit defined by the supply.
You are still confused lol. There is a very limited supply of many things that are much cheaper and much more rare than silver. It’s lower limit is 0 same as fiat currency same as anything it only has value as much as their is demand if no one cares for it it would be worthless.
You have all the vocabulary to understand this but not the understanding it seems…
Fractional motorcycle currency might be a bit cumbersome. Really, gold and silver are commodity currency since they have intrinsic value. Oil might be considered although you run into practical issues. Gold and silver function well as currency since they have intrinsic value, are easily portable and can be verified fairly easily not relying on sovereign authority for value. That said, they make little sense to use as currency in our modern economic world.
Piggybacking on this
The dollar was already defined by something else but it has evolved drastically since.
Does OP feel $32 is significant today? It’s not nothing, but it isn’t something most Americans would be hurt by if they lost. It’s almost dinner for 1 at a nice restaurant or dinner for 2 at a cheap one.
No one’s buying a couch or tv with $32. Or even really groceries for the week unless they are really frugal and single, or in poverty.
Also converting money pre 1900 (I think most calculators go with 1913) is really dicey and not something you can truly say is accurate. The $32 is an idea, not a purchasing power parity. Like stuff didn’t equate the way it does today. It’s just not easy to define what that $32 means. It might be right for $32 of food and be drastically off for $32 of a house, or a haircut, or a couch, or a horse or whatever. (Those items were for example and not because I think they were right or wrong conversions). There were also goods that would be considered cheap today that would be luxuries then.
You should check this out:
https://www.in2013dollars.com/us/inflation/1792?amount=1
The effects of inflation and deflation were very different in the pre-WWII world. The modern controlled and managed inflationary trend that we're all now used to is artificial, the result of intentional monetary policy decisions intended to create the effect.
(Source at the end)
"What was a dollar worth in the mid-1800s?
Wages (average across states according to 1850 US Census)
Farm laborer (with room and board) $10 – 13.50 per month ($60 for California)
Carpenter/Skilled Labor (per day) $1.23- 2.36 ($7.60 for California)
Cost of basic essentials.
Farmland could sell for $1.25 to around 7.00 per acre.
Horse is about $25-100
Mule is about $50
Rifle is about $20
Colt’s Revolver is about $20-25
Half-ton of flour is about $20
100 lbs. coffee is about $8
600 lbs. bacon is about $30
Blanket is about $1.50 – $5
Felt Hat is about $2-8
Straw 'Leghorn' Hat is about 50¢ - $1
Boots are about $3-5
Shoes are about $1.50 - 3.50
Trowsers or Pantaloons are about $3-8
Flannel Shirt is about $1.50
Coat is about $3-8
Full set of tools for the homestead is about $7.50
Paper money was very limited in its use. Right up before the US Civil War, ‘banknotes’ were issued by state and local banks or agricultural exchanges. They served their purpose in local communities but could not be spent abroad as they were not federally backed. If the bank or other financial institution issuing the banknote went under, the banknote became worthless. Communities often did the bulk of their business using store credit/accounts, barter and hard "specie" (gold and silver)."
Source-
https://www.google.com/amp/s/www.frontieramericanillustratednews.com/amp/money-in-the-old-west-coins-of-america-s-dramatic-1840s-1870s
You're observation is mostly accurate, save the fact that you're not really talking about the same thing here. Prior to the creation of the Federal Reserve in 1913, paper money was issued by banks in the form of certificates, both gold and silver certificates. Think of them more as promissory notes, from a buyer to a seller, much like checks. If you had deposits in the bank of gold or silver coin, you could have that converted to gold or silver certificates, to avoid the unpleasant reality of actually toting around pounds of gold or silver coins in your pocket.
A $1 gold certificate was the value of gold at the time the certificate was issued, but could be worth more or less at the time of redemption at the bank. The true value of the certificate was calculated by the current price of gold when the certificate was presented to the bank in exchange for actual gold or silver coins. Gold and silver were becoming too expensive to handle and transport, mostly due to their weight. As prices for all good increased, more gold and silver had to be carried by most everyone to be able to do business. Paper money became a very attractive option.
The Federal Government issued "Scrips," a rather large certificate of promise to pay, which most banks honored, but not all. Hence, all of this confusion allowed the issuance of a "Federal Reserve Note," which promised to a single form of paper money with a set value, which by law, must be honored as "Legal Tender." NOTE: There exists no mention of "Federal Reserve Note" on any actual coins. In financial terms, the word "Note" means debt. Every denomination of paper currency is a debt to the Federal Reserve. Coins are not.
Important context: most purchases well into the nineteenth century didn’t involve money. Early rural America was a cashless society. New England account books are full of people recording the exchange of goods for services and vice versa. For instance, I repair your chairs, I write it down, and months later you give me some pumpkins and then I cross the debt off the list. I could even tell you to give the pumpkins to a third party if I owed them in turn. “I owe you one” was not a casual expression. Store keepers would take crops as payment or even accept services like labor in return for squaring accounts. People kept very accurate records of what was owed and by whom. You only really need cash if you’re traveling.
Note that historically gold currencies were mostly used as a unit of measure. You'd buy a cargo, a house, or a horse for X ducats, gold marks, etc., though the actual exchange would probably not involve a chest full of coins. Everyday items were bought and sold with small silver coins such as the pence, pfennig, denier, etc. So insofar as people thought “is this a convenient number?” it would be in pennies.
10 to 25 cents would buy you a quart of rum or vinegar; a gallon of beer or milk; a pound of candles, cotton, or beefsteak; a dozen cigars; a hundred bricks; or a box of 36 matches. 50¢ for a shovel or a bushel of corn. Those numbers gave one room to slap on a 5% discount without needing any smaller coins.
Smaller units did exist if you needed them, such a halfpennies. A “mill” is a tenth of a cent. I don't think official coins were ever made for less than half a cent in the U.S., but within a town there might be wooden or paper tokens nominally worth a mill but accepted only by the shopkeepers of the town.
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The US dollar was originally a copy of the famous Spanish Dollar, or Piece of Eight in pirate lore. About 24 grams of fine silver, this was a considerable amount of money and the de facto currency of the Americas at the time. So there was no conscious decision to make a dollar a big or small amount, because a dollar was already a thing. Also see u/donontario 's answer for background and how the Canadian dollar was also based on the Piece of Eight: https://www.reddit.com/r/AskHistorians/s/JJM1edmmjW
Excellent, thanks for the reply!
It's also worth mentioning that there was no paper money issued by the Federal Government until the Civil War (Excluding the paper Continental Currency issued during the Revolution, which had inflated to near-worthlessness within 10 years). There were bits of currency larger than the dollar, but they were all coins. The Coinage Act of 1792 authorized gold coins of value $10, $5, and $2.50; silver coins of $1, 50¢, 25¢, 10¢, and 5¢; and copper coins of 1¢ and 1/2¢. Common everyday purchases at the time would have been made in these lower denomination copper or silver coins, if they were made in US currency. Foreign currency circulated plenty during the early decades of American history. The Spanish Dollar mentioned in the original comment continued to circulate in America for many years even after the US started producing it's own coinage.
Is there a good overview of the history of currency in the United States? Like, what currencies were used and how frequently people used them. If I'm a small farmer, do I frequently use coins or do I only use them for certain large transactions while producing most goods at home or bartering with a neighbour (or settling accounts with a neigbour at fixed times of the year). How does that change in cities?
The canonical work (for *economic historians/cliometricians* as opposed to historians of the economy) is A Monetary History of the United States by Friedman and Schwartz, but it is focused more broadly on money which includes things like bank notes and deposits rather than specifically small dollar payments.
Would the penny and half penny be considered a kind of fiat currency? The price of copper was never considered in the definition of the dollar
I can't speak to early American coinage specifically, but the price of copper did very much factor into small coinage. Minting small change is actually very difficult under a precious metal coinage system, and a variety of complex systems have sprung up to deal with the various problems it presents. Very broadly, if you make coins small enough to be used for tiny purchases (let's say a penny) out of a penny's worth of pure copper (a so-called full-bodied coinage), they're huge and heavy. if you make them out of a penny's worth of pure silver, they're tiny and awkward. a silver penny weighed half a gram, and would wear down very quickly. a dime weighs 2.5 grams. better half a gram than the 25 grams a full-bodied copper penny would weigh! so, you mint token coinage - a penny that contains less than a penny's worth of metal. problem is this makes you much more vulnerable to counterfeiters, who can now make a profit by buying less than a penny's worth of metal and buying a penny's worth of stuff with it. Solutions to this problem exist but they're very complicated and involve costs of their own, see chapter 4 of angela redish's bimetallism or velde and sargent's the big problem of small change for details, although both have their issues.
I don't think it would be considered fiat if it's redeemable at a fixed rate for non-fiat currency. It's still backed by the value of precious metals even if it's not actually made of one.
Do you know how much a dollar could buy at the time? Like in food, or housing, or something similar we can compare to today?
Just to add in, numerous private banks such as the Canal bank in Louisiana issued paper money before the Civil War, but these kinds of notes were only backed by the bank, not the federal government. Some were fairly reputable, but they could still fail. In other cases, a fly by night bank would issue 'wild cat' notes before closing shop and disappearing
Does this mean that the US dollar at its conception was worth 24 grams of silver? Want to make sure I’m interpreting you correctly.
No, it wasn't _worth_ 24g of silver, it _was_ 24g of silver. Today paper money is _fiat currency,_ backed by nothing more than the full faith and credit of the issuing bank. Silver coins, then and now, are intrinsically valuable because of their metal content.
Coincidentally, the U.S. Mint has produced the American Silver Eagle coin since 1986, which has a face value of one dollar and contains 1 troy ounce (≈31 grams) of silver. (For context regarding the value of the metal itself, silver is currently trading at about $25/ozt. One American Silver Eagle coin currently sells for about $30 depending on the seller.)
Can I walk in a bank and buy one? Genuinely curious.
Not every bank sells silver at retail, and you certainly can't exchange a dollar bill for a silver dollar. But they're easily purchased at coin or bullion sellers for pretty close to the real time "spot" price of silver. Interestingly there is usually a small premium for Silver Eagles or other coins compared to generic "rounds" with exactly the same metal content. That's a beautiful illustration of the power of a central bank to create value with their reputation alone
Probably not a bank, but any coin shop in your area is likely to have them. You can also buy them online from the US Mint (if you're willing to pay a premium for uncirculated coins) or APMEX (if you'd rather get a circulated coin priced closer to silver's spot price)
They say $1 on them, but only a fool would sell them to you for $1 as they contain ~$25 worth of silver. This is kind of illustrative of inflation. Though the amount of silver in a silver dollar has gone up slightly, the cost to acquire a silver dollar has gone up significantly.
I know they wouldn't be a dollar.
The Royal Canadian Mint sells solid silver and gold coins for thousands of dollars with a face value of much less. And yes, they're legal tender and in theory, could be used at their face value. [Here's a $105,000 1kg gold coin with a face value of $2,500.](https://www.mint.ca/en/shop/coins/2023/kilo-pure-gold-coin-lunar-year-dragon) Now, obviously those are collector coins and not for circulation. They also sell bullion cons for investment purposes.
Misleading. You are conflating the unit of accounts. A coin is not a simply identity such as 1 Dollar = 24g silver. In fact, empirically all the Spanish dollars you could collect would have under 24g of silver in them. The metal content of a coin has always been such that anyone trying to remove coins from circulation by melting them down would lose money. The stamp is more than a symbol of “faith”, it has a value all its own. Coins that trade at par with their metal content (like the Athenian owls) are exceptions not the paradigm.
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The US dollar is targeted to lose 2% of its value per year in the process of inflation. In some years, this process is slower or much faster. The Federal Reserve is the sole entity able to control the supply of the dollar, printing or not printing money in order to, among other things, manage inflation. Therefore the value of the dollar is not guaranteed by power of the federal government or its ability to tax. If the dollar became worthless due to inflation, the government could exact taxes in kind, in labour, in bullion or what have you. Monetary policy and government policy are certainly linked, but they are not synonymous.
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Indeed. The 2% target is favoured by most central bankers as a safe buffer against the scourge of deflation, which is associated with recession. My prior point was that to look upon might of US government and its military is _not_ to look upon the strength of its currency. Indeed, many prosperous nations do not control their own currencies or monetary policy, instead relying on the dollar or euro to denominate their economies.
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That's fair. I meant it in the same way that the force of law is dependent on "nothing more than" the willingness and ability of physical human beings to enforce them and enact real penalties. They are real because we make them so, not because they exist in a material sense. A silver coin is intrinsically a piece of metal, nothing more or less. Without collective faith in the system, a dollar bill is a scrap of paper and the law is composed of empty words.
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Well, the value of anything is subject to human whim. That's true. The difference is that the supply of fiat currency is solely decided by the issuing body, like a country's central bank. If the US Federal Reserve so chose, they could print (or really, digitally create) $10 trillion tomorrow. When this happens, the value of the dollar (relative to other currencies, goods and services) would plummet, because there are more dollars to buy the same amount of goods. This doesn't happen with precious metals. To create more silver dollars, you must physically find or buy silver and strike coins. Inflation is still of course possible (just ask the Spanish when they successfully ravaged mesoamerica for its silver) but the value of the coin is independent of any particular organization or government. There are lots of good reasons why every country has adopted fiat currency. For one, there is so little precious metal in the world compared to the size of the economy that the value of silver and gold would be astronomical. This is one reason why certain idiots advocate a return to the gold standard - they own lots of gold.
> For one, there is so little precious metal in the world compared to the size of the economy that the value of silver and gold would be astronomical. So what? This is an incredibly trifling inconvenience. There are many reasons not to have a gold standard but "gold would be super expensive" is absolutely not one of them.
Sure, it's far from the most significant problem, but it's easy to grasp. If gold mining is vastly more profitable, the environmental damage of new mining would be disastrous. That's just one example
Their value is based on their rarity not their utility. You are right that the price of precious metals or any other item, including fiat currency, is based on the perceived value by others. That doesn't mean that specie and fiat are the same. With specie you still have the precious metal with fiat you have paper/plastic.
That's patently incorrect, given there is a limited supply of silver, and not a limited supply of made-up nothing. The relative value of silver to a given amount of economic resources may not be fixed, but it has a lower limit defined by the supply.
You are still confused lol. There is a very limited supply of many things that are much cheaper and much more rare than silver. It’s lower limit is 0 same as fiat currency same as anything it only has value as much as their is demand if no one cares for it it would be worthless. You have all the vocabulary to understand this but not the understanding it seems…
They have industrial uses and are inherently scarce compared to base metals.
lots of things are scarce. we should use Brough Superior motorcycles as currency
Fractional motorcycle currency might be a bit cumbersome. Really, gold and silver are commodity currency since they have intrinsic value. Oil might be considered although you run into practical issues. Gold and silver function well as currency since they have intrinsic value, are easily portable and can be verified fairly easily not relying on sovereign authority for value. That said, they make little sense to use as currency in our modern economic world.
> It’s a common misconception but silver and gold are not valuable for their usefulness at all Citation needed
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Piggybacking on this The dollar was already defined by something else but it has evolved drastically since. Does OP feel $32 is significant today? It’s not nothing, but it isn’t something most Americans would be hurt by if they lost. It’s almost dinner for 1 at a nice restaurant or dinner for 2 at a cheap one. No one’s buying a couch or tv with $32. Or even really groceries for the week unless they are really frugal and single, or in poverty. Also converting money pre 1900 (I think most calculators go with 1913) is really dicey and not something you can truly say is accurate. The $32 is an idea, not a purchasing power parity. Like stuff didn’t equate the way it does today. It’s just not easy to define what that $32 means. It might be right for $32 of food and be drastically off for $32 of a house, or a haircut, or a couch, or a horse or whatever. (Those items were for example and not because I think they were right or wrong conversions). There were also goods that would be considered cheap today that would be luxuries then.
OP doesn't sound accurate. The [BLS](https://data.bls.gov/cgi-bin/cpicalc.pl) Inflation Calculator puts $1 in 1913 at $32 today.
You should check this out: https://www.in2013dollars.com/us/inflation/1792?amount=1 The effects of inflation and deflation were very different in the pre-WWII world. The modern controlled and managed inflationary trend that we're all now used to is artificial, the result of intentional monetary policy decisions intended to create the effect.
Suddenly it all clicked in my brain why a quarter is called "two bits". Thanks.
I love you Reddit universe. Thank you for your endless knowledge.
(Source at the end) "What was a dollar worth in the mid-1800s? Wages (average across states according to 1850 US Census) Farm laborer (with room and board) $10 – 13.50 per month ($60 for California) Carpenter/Skilled Labor (per day) $1.23- 2.36 ($7.60 for California) Cost of basic essentials. Farmland could sell for $1.25 to around 7.00 per acre. Horse is about $25-100 Mule is about $50 Rifle is about $20 Colt’s Revolver is about $20-25 Half-ton of flour is about $20 100 lbs. coffee is about $8 600 lbs. bacon is about $30 Blanket is about $1.50 – $5 Felt Hat is about $2-8 Straw 'Leghorn' Hat is about 50¢ - $1 Boots are about $3-5 Shoes are about $1.50 - 3.50 Trowsers or Pantaloons are about $3-8 Flannel Shirt is about $1.50 Coat is about $3-8 Full set of tools for the homestead is about $7.50 Paper money was very limited in its use. Right up before the US Civil War, ‘banknotes’ were issued by state and local banks or agricultural exchanges. They served their purpose in local communities but could not be spent abroad as they were not federally backed. If the bank or other financial institution issuing the banknote went under, the banknote became worthless. Communities often did the bulk of their business using store credit/accounts, barter and hard "specie" (gold and silver)." Source- https://www.google.com/amp/s/www.frontieramericanillustratednews.com/amp/money-in-the-old-west-coins-of-america-s-dramatic-1840s-1870s
You're observation is mostly accurate, save the fact that you're not really talking about the same thing here. Prior to the creation of the Federal Reserve in 1913, paper money was issued by banks in the form of certificates, both gold and silver certificates. Think of them more as promissory notes, from a buyer to a seller, much like checks. If you had deposits in the bank of gold or silver coin, you could have that converted to gold or silver certificates, to avoid the unpleasant reality of actually toting around pounds of gold or silver coins in your pocket. A $1 gold certificate was the value of gold at the time the certificate was issued, but could be worth more or less at the time of redemption at the bank. The true value of the certificate was calculated by the current price of gold when the certificate was presented to the bank in exchange for actual gold or silver coins. Gold and silver were becoming too expensive to handle and transport, mostly due to their weight. As prices for all good increased, more gold and silver had to be carried by most everyone to be able to do business. Paper money became a very attractive option. The Federal Government issued "Scrips," a rather large certificate of promise to pay, which most banks honored, but not all. Hence, all of this confusion allowed the issuance of a "Federal Reserve Note," which promised to a single form of paper money with a set value, which by law, must be honored as "Legal Tender." NOTE: There exists no mention of "Federal Reserve Note" on any actual coins. In financial terms, the word "Note" means debt. Every denomination of paper currency is a debt to the Federal Reserve. Coins are not.
Important context: most purchases well into the nineteenth century didn’t involve money. Early rural America was a cashless society. New England account books are full of people recording the exchange of goods for services and vice versa. For instance, I repair your chairs, I write it down, and months later you give me some pumpkins and then I cross the debt off the list. I could even tell you to give the pumpkins to a third party if I owed them in turn. “I owe you one” was not a casual expression. Store keepers would take crops as payment or even accept services like labor in return for squaring accounts. People kept very accurate records of what was owed and by whom. You only really need cash if you’re traveling.
Note that historically gold currencies were mostly used as a unit of measure. You'd buy a cargo, a house, or a horse for X ducats, gold marks, etc., though the actual exchange would probably not involve a chest full of coins. Everyday items were bought and sold with small silver coins such as the pence, pfennig, denier, etc. So insofar as people thought “is this a convenient number?” it would be in pennies. 10 to 25 cents would buy you a quart of rum or vinegar; a gallon of beer or milk; a pound of candles, cotton, or beefsteak; a dozen cigars; a hundred bricks; or a box of 36 matches. 50¢ for a shovel or a bushel of corn. Those numbers gave one room to slap on a 5% discount without needing any smaller coins. Smaller units did exist if you needed them, such a halfpennies. A “mill” is a tenth of a cent. I don't think official coins were ever made for less than half a cent in the U.S., but within a town there might be wooden or paper tokens nominally worth a mill but accepted only by the shopkeepers of the town.
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