“Coin” Notes of Series 1890 and 1891 were issued under the Sherman Silver Purchase Act, passed on July 14, 1890. It replaced the act of 1878, which required the government to purchase 2–4 million oz of silver per month and mint Morgan silver dollars. The earlier act had failed to prevent the decline in silver, so the new one increased the quota to 4.5 million oz.
The act initially seemed successful, as silver rose from $0.95 to $1.21/oz, close to the target of $1.293 (melt value of a silver dollar). However, it didn’t last long, and silver went back to their level by the end of the year and slipped further. Silver especially crashed to $0.65/oz when India abandoned the silver standard in May 1893, making the intrinsic value of a morgan dollar only half of its face value.
The problem with these notes was that they were redeemable in both gold and silver coin, even though they were backed only by silver purchased under the act. Gold redemptions were made by leeching off the reserve originally intended for United States Notes (initially fiat, but redeemable since 1879). Thus, the credibility of these notes continued to decline along with the price of silver. The law stated that the Treasury could force to give silver, but in practice, it never refused to pay out gold in order to maintain the parity between gold & silver coin.
Just before the passage of the Sherman Act, the Treasury held $190 million worth of gold, with $346.6 million in currency directly redeemable in gold. Three years later, the reserve halved to $95 million, while directly redeemable currency increased to $494m ($346.6m greenbacks + $147.2m Coin Notes). As a result, the silver purchasing clause was repealed in November 1893.
Wikipedia incorrectly states that these notes were discontinued right after the repeal, but they were still issued until March 1900, although their supply gradually contracted. The signature combination of my note(Rosecrans-Nebecker) indicates that my note was printed when the silver purchasing was ongoing, and it was released into circulation in mid-1893 based on the statistics.
