Specie Payments
Collier's New Encyclopedia (1921)
SUSPENSION OF, AND RESUMPTION OF, terms signifying the regulation of currency during times of stress, as during a war. Suspension of specie payments means that the Government and the banks suspend payments in metal coin, silver or gold, and issue instead "credit money," in paper. This was done in the United States in 1862, when the Government found itself compelled to borrow more money than could be raised by the banks of the country. In other words, the need of money by the Government, suddenly expended, found the money in circulation inadequate to meet that need. So paper money must be issued to fill the gap. When this is done recklessly and without restriction, as it was in 1862, this paper currency depreciates es in value. The resumption of specie payments after such a period of financial dislocation must necessarily be very gradual. In the above instance resumption was not begun till 1879, and then it was several years more before normal conditions were restored. During the Civil War the Government was again compelled to suspend specie payments because of vast quantity of metal currency which was being hoarded by the people. A large volume of Treasury notes were, therefore, issued and made to take the place ce of metal money. It was 1879 before the resumption of specie payments in this case begun. During the World War the United States was practically the only belligerent country which was not compelled to suspend specie payments, the result being that its currency is now at a premium in all other countries.
What Has Changed in the Last Century
When Collier's wrote this in 1921 the question was when a government would return to paying out gold or silver on demand; today no major currency is redeemable in metal at all, so the phrase itself has passed out of use. The United States, which Collier's proudly noted had stayed on gold through the World War, abandoned domestic redemption in 1933, when Franklin Roosevelt's administration called in gold coin and Congress voided gold clauses in contracts, and the dollar's remaining link to gold for foreign central banks was cut by Richard Nixon in August 1971. The Bretton Woods system built in 1944 was the last structure resembling specie settlement, and its collapse left the world on floating paper (and now largely electronic) money. What Collier's treated as an emergency to be corrected "gradually" is now the permanent condition of every central bank.
Written for this edition, 2026.