Encased Postage Stamps
Solving a Coin Shortage
Contributed By: Steve Swain
Encased Postage Stamps:
U.S. Civil War Coin Shortages
Of
the many shortages of goods and services in the early years of the U.S.
Civil War, none was more interesting than the shortage of coins and the
enterprising and creative solutions to remedy that shortage using
postage stamps.
At the time, paper money was not backed by
gold or silver and, therefore, it was only a very tenuous faith in the
Government that gave people any assurance that paper money had true
value. Most people didn’t want to embrace that faith. Combine that
feeling with the uncertainty associated with the ultimate outcome of the
civil war and, hence, the hoarding of common gold, silver and copper
coinage, the time-tested, universally accepted exchange medium.
$5 Demand Note. People had very little faith in paper money in 1862.
But
people still needed to purchase a 3¢ loaf of bread, a 1¢ newspaper, a
5¢ quart of milk and countless other goods that required coins. And
vendors had to make change when an item’s price was less than a nickel, a
dime or a quarter. How was this to be done?
In some cities, businesses gave customers “I.O.U”s, private companies created “Civil War token coins”, and paper money was cut into several pieces to represent a fraction of a dollar. Clever remedies for sure, but none that were widely used or accepted.
All of this radically changed on July 17, 1862, when Congress decided to address the coinage shortage and passed a law that allowed postage stamps to satisfy debts of less than $5, but only debts to the government. As probably the first case of an “urban myth”, the public grossly misinterpreted this to mean that postage stamps could be universally used in lieu of coins for any type of debt or purchase. Through various newspaper announcements and other mediums, the government attempted to educate the populace as to their misunderstanding, but to no avail.
People began to carry stamps in their purses and pockets and used them repeatedly for daily purchases. Vendors gladly accepted the stamps as payment. But all of this hand-to-hand usage quickly resulted in damaged stamps with denominations sometimes unrecognizable.
The
local post offices would not exchange damaged stamps for new ones, so a
remedy was needed. John Gault, a New York entrepreneur, decided he had
the best solution.
The Solution to the Shortage
On
August 12, 1862, Gault obtained a patent for a “postage stamp case”, or
as he named the item in a newspaper advertisement, the “New Metallic
Currency.”
A 1¢ encased stamp using the 1861 Franklin Issue (Scott 63).
Machines
used to make buttons were the fundamental components in Gault’s idea.
Starting with a round piece of brass (about the size of a quarter) as
the backing, and then layering on a piece of cardboard, a stamp, a piece
of mica (as a clear covering for the stamp), and finally another piece
of brass with a hole in it, the button machine would press all of the
pieces together to create the encased stamp. The final step in the
process was for the machine to bend over the edges of the frame to keep
all of the pieces inside the case.
Gault didn’t sell the encased stamps to the public. Instead, he sold them to stores and businesses that needed “coinage” to make change for customers’ purchases. Gault’s profit came from the 20% markup over the face value of the stamp.
To
increase his potential profit, Gault’s second idea was to inscribe
advertising on the back of the encased stamp. He would charge companies
who purchased the metallic currency an additional 2¢ for each item. In
time, 31 merchants signed up with Gault, including Joseph L. Bates
(fancy goods), Drake’s Plantation Bitters (a “medicine” mainly
consisting of rum), the Tremont House, North America Life Insurance, and
Aerated Bread.
A 3¢ encased stamp (Scott 65) with “Ayer’s Sarsaparilla
To Purify Blood” advertisement on the reverse.
Gault’s largest client was
J.C. Ayer, a manufacturer of “medicines” and medical remedies. Ayer was
well versed in the advantages of keeping a product’s name in front of
the public, as he had done with newspaper advertising and almanacs. So,
many of the existing encased stamps today are the Ayer varieties since
so many were produced.
Encased stamps
were widely accepted in the general commerce realm until later in 1862
when the government issued “fractional currency”, i.e., bills with
values of less than one dollar. This legitimate, government sanctioned
currency quickly eliminated the coin shortage. Having no other value
than the stamp, people tore apart the encasements of their metallic
currency to remove the stamp to use as postage. Thus the scarcity of the
1862 encased stamps today.
Foreign Encased Postage Stamps
In
the early 20th century, encased postage stamps were used in Denmark,
France, Austria, Germany, and Italy. Similar to the purpose of the
encased stamps used during the U.S. civil war, these metallic currencies
hoped to solve a coinage shortage due to wars and other territorial
conflicts.
French, German and Austrian encased postage stamps.
Adopting the advertising
concept used with the U.S. Civil War encased postage stamps, the
production of the Denmark “coins” was paid by the American Tobacco
Company in Copenhagen, who in return was allowed to have their ads
inserted the reverse side of the encasement.
As
the wars and civil conflicts were resolved, the various governments
were again able to produce sufficient coinage and the use, and value, of
the encased stamps disappeared.
The Author
Steve Swain has enjoyed all aspects of philately for 55 years . His articles have appeared in The American Philatelist, The Philatelic Communicator, Stamps and other stamp publications on topics ranging from writing for online “content mills” to collecting first day covers.
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Encased Postage Stamps - Solving a Coin Shortage
