Trade Dollar (United States coin)
Encyclopedia
The trade dollar was a United States dollar coin minted to compete with other large silver coins that were already popular in East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

. The idea first came about in the 1860s, when the price of silver began to decline due to increased mining efforts
Silver mining in the United States
Silver mining in the United States began on a major scale with the discovery of the Comstock Lode in Nevada in 1858. The industry suffered greatly from the demonetization of silver in 1873 by the "Crime of 73," but silver mining continues today....

 in the western United States
Western United States
.The Western United States, commonly referred to as the American West or simply "the West," traditionally refers to the region comprising the westernmost states of the United States. Because the U.S. expanded westward after its founding, the meaning of the West has evolved over time...

. A bill providing in part for the issuance of the trade dollar was eventually put before Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

, where it was approved and later signed into law as the Coinage Act of 1873. The act made trade dollars legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

 up to five dollars. A number of designs were considered for the trade dollar, and an obverse and reverse
Obverse and reverse
Obverse and its opposite, reverse, refer to the two flat faces of coins and some other two-sided objects, including paper money, flags , seals, medals, drawings, old master prints and other works of art, and printed fabrics. In this usage, obverse means the front face of the object and reverse...

 created by William Barber were selected.

The coins were first struck in 1873, and most of the production was sent to China. Eventually, bullion producers began converting large amounts of silver into trade dollars, causing the coins to make their way into American commercial channels. This caused frustration among those to whom they were given in payment, as the coins were largely maligned and traded for less than one dollar each. In response to their wide distribution in American commerce, the coins were officially demonetized in 1876, but continued to circulate. Production of business strikes ended in 1878, though the mintage of proof coins continued until 1883. The trade dollar was re-monetized
Monetization
Monetization is the process of converting or establishing something into legal tender. It usually refers to the coining of currency or the printing of banknotes by central banks...

 when the Coinage Act of 1965
Coinage Act of 1965
The Coinage Act of 1965, , eliminated silver from the circulating dimes and quarter dollars of the United States, and diminished the silver content of the half dollar from 90% to 40%...

 was signed into law.

Background

Following the California gold rush
California Gold Rush
The California Gold Rush began on January 24, 1848, when gold was found by James W. Marshall at Sutter's Mill in Coloma, California. The first to hear confirmed information of the gold rush were the people in Oregon, the Sandwich Islands , and Latin America, who were the first to start flocking to...

 that began in 1849 and the Australian gold rush that began in 1851, a larger amount of gold was put into commerce than could be easily absorbed by the normal channels. This resulted in a decrease in the value of gold and an increase in the relative value of silver. As a result, silver coins rapidly disappeared from circulation due either to hoarding or melting. In response, Congress authorized the Mint
United States Mint
The United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. The Mint was created by Congress with the Coinage Act of 1792, and placed within the Department of State...

 to reduce the quantity of silver in all denominations except the three-cent piece
Three-cent piece (United States coin)
The United States three cent piece was a unit of currency equaling 3/100th of a United States dollar. The mint produced two different three-cent coins: the three-cent silver and the three-cent nickel. Its purchasing power in 1851 would be equivalent to $ today.-History:The three cent coin has an...

 and silver dollar. Beginning in the 1860s, silver production rose and the price decreased. During this time, silver coins largely disappeared from circulation and were replaced by paper and copper currency.

In China, the Mexican peso
Mexican peso
The peso is the currency of Mexico. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". The Mexican peso is the 12th most traded currency in the world, the third most traded in the Americas, and by far the most...

 (successor to the Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...

) was greatly valued in commerce. However, the Chinese were sensitive to any changes in the coin's design, and were reluctant to accept newer coins due to a minor design change. The American silver dollar, 7.5 gr lighter than its Spanish counterpart, was unpopular in the Orient due to its light weight, forcing American merchants to purchase the Spanish or Mexican pieces to use in trade. Beginning in 1866, during the reign of Emperor Maximilian
Maximilian I of Mexico
Maximilian I was the only monarch of the Second Mexican Empire.After a distinguished career in the Austrian Navy, he was proclaimed Emperor of Mexico on April 10, 1864, with the backing of Napoleon III of France and a group of Mexican monarchists who sought to revive the Mexican monarchy...

, the design was changed to show the Emperor's portrait; this caused widespread nonacceptance of the coins in China.

While conducting an investigation of the Mint at San Francisco
San Francisco Mint
The San Francisco Mint is a branch of the United States Mint, and was opened in 1854 to serve the gold mines of the California Gold Rush. It quickly outgrew its first building and moved into a new one in 1874. This building, the Old United States Mint, also known affectionately as The Granite Lady,...

, deputy comptroller of the currency John Jay Knox
John Jay Knox
John Jay Knox was an American financier, born in Knoxboro, New York. He graduated from Hamilton College in 1849 and entered the banking business.He was a vigorous supporter of the national banking plan of Treasury Secretary Salmon P. Chase...

 began discussing the monetary situation with Louis A. Garnett, a man who had worked as both the treasurer and assayer of the San Francisco Mint. Garnett recommended that the United States mint a commercial dollar that would be exported to the Orient to compete with other large silver coins that were already popular in that region. Garnett's rationale was that the coins would be hoarded or melted in Asia and would never be presented for redemption, allowing the government to make a profit from the seigniorage
Seigniorage
Seigniorage can have the following two meanings:* Seigniorage derived from specie—metal coins, is a tax, added to the total price of a coin , that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.* Seigniorage derived from notes is more...

. During his time in San Francisco, Knox also discussed the proposed commercial dollar with Henry Linderman
Henry Linderman
Henry Richard Linderman was an American financier.-Medical practice:...

, who was working as a special agent for the Treasury Department
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...

 at that time. In 1870, Knox wrote a report to the Treasury and wrote the draft for a bill on coinage. Knox's bill was approved by George Boutwell, Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...

. After modification and review from current and former government officials, the bill was put before Congress.
On November 19, 1872, while the coinage bill was still before Congress, Linderman made a report to the Secretary of the Treasury. In the report, Linderman argued that the coin need not hold legal tender status, and that it could simply be a piece of silver imprinted with its weight and fineness. Linderman also notes that such a product could supersede the Mexican dollar and eventually command a six to eight percent premium; at that time, American silver exported to the Orient was being sold at a two percent discount. Linderman proposed that the coin be named the "silver union" in order to distinguish it from the standard coins then in production.

On February 1872, the bill was amended by a House of Representatives
United States House of Representatives
The United States House of Representatives is one of the two Houses of the United States Congress, the bicameral legislature which also includes the Senate.The composition and powers of the House are established in Article One of the Constitution...

 committee to include authorization for a commercial dollar weighing 420 gr; this was struck three months later when the House voted to include provisions for the production of a standard silver dollar weighing 384 gr. While in the Senate
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...

, a provision was added to the bill requiring the Treasury to coin a trade dollar of 420 gr, as had been done earlier in the House. The revised bill, which came to be known as the Coinage Act of 1873, was approved in the House and Senate and was signed by President Ulysses S. Grant
Ulysses S. Grant
Ulysses S. Grant was the 18th President of the United States as well as military commander during the Civil War and post-war Reconstruction periods. Under Grant's command, the Union Army defeated the Confederate military and ended the Confederate States of America...

 on February 12, 1873. The bill provided, in part, for the striking of trade dollars which held legal tender status up to five dollars. The legal tender provision was added by a last-minute rider at the behest of silver interests. At the insistence of Ohio Senator John Sherman, the weight and fineness of the piece was indicated on the reverse, an attribution which numismatic historian Don Taxay found incomprehensible as "Chinese merchants would never understand them".

Prior to the passage of the Coinage Act, the director of the Philadelphia Mint oversaw all branch mints. After the Act, the office of director was transferred to Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....

, and responsibility for each mint was handed over to a superintendent.

Design selection

Throughout the year of 1872, the Mint struck a series of commercial dollar patterns in anticipation of the passage of the coinage bill. Production of patterns continued into 1873, but the denomination of the pattern coins was changed from "commercial dollar" to "trade dollar" before the bill was signed into law. After passage of the Coinage Act, Linderman met with Director of the Mint James Pollock
James Pollock
James Pollock was the 13th Governor of the State of Pennsylvania from 1855 to 1858.- Political career :James Pollock graduated from the College of New Jersey at Princeton before setting up a law practice in his home community, in Milton, Pennsylvania...

 to discuss the design of the newly authorized trade dollar. The two men agreed to request a jewelry and engraving firm, Bailey Banks & Biddle
Bailey Banks & Biddle
Bailey Banks & Biddle is an online and store retailer of jewelry in America. Its principal offices are in Carrollton, Texas and it has six retail stores in Dallas, Houston and Austin Texas, St. Louis, Missouri, King of Prussia , Pennsylvania and Little Rock, Arkansas.- History :Bailey & Kitchen,...

 of Philadelphia, to create designs that would be compared to those already created by Chief Engraver William Barber.

After examining the designs of both parties, Linderman ordered that the design would depict a seated figure representing Liberty
Liberty (goddess)
Goddesses named for and representing the concept Liberty have existed in many cultures, including classical examples dating from the Roman Empire and some national symbols such as the British "Britannia" or the Irish "Kathleen Ni Houlihan"....

 facing to the viewer's left, representing the direction of the Orient. Linderman apparently selected the designs from two different patterns. In June 1873, Linderman reviewed the various patterns created by Barber; he chose an obverse which one contemporary reporter described as "a female figure seated on bales of merchandise, holding in her left hand a scroll bearing the word 'Liberty'. At her back is a sheaf of wheat, expressing, with the bales of goods, the commercial character of the coin: the right hand extended holds the olive branch." The selected reverse depicts the bald eagle
Bald Eagle
The Bald Eagle is a bird of prey found in North America. It is the national bird and symbol of the United States of America. This sea eagle has two known sub-species and forms a species pair with the White-tailed Eagle...

 as required by law. The eagle has three arrows in the right claw and an olive branch in the left, a reversal to most other U.S. silver coins of the era. A set of six patterns, four with variations on the adopted obverse, and two showing portraits of Liberty, was sold by the Mint to the public in limited quantities.

Production

Linderman assumed the position of Director of the Mint and Pollock became Superintendent of the Philadelphia Mint. In July 1873, production began on the dies
Die (manufacturing)
A die is a specialized tool used in manufacturing industries to cut or shape material using a press. Like molds, dies are generally customized to the item they are used to create...

 needed to strike the coins. During this time, in a telegram to Pollock, Linderman asked that production of trade dollars be hastened because Mexico was preparing to issue another series of dollars with the older design popular in Asia, a design that was discontinued in 1866. The first trade dollars were struck during a ceremony held on July 11, 1873. Forty thousand pieces were issued in the first release, on July 14. The Carson City Mint
Carson City Mint
The Carson City Mint was a branch of the United States Mint in Carson City, Nevada. Built at the peak of the silver boom, 50 issues of silver coins and 57 issues of gold coins minted here between 1870 and 1893 bore the "CC" mint mark...

 received its first dies for the new coins on July 22, and those intended for the San Francisco Mint
San Francisco Mint
The San Francisco Mint is a branch of the United States Mint, and was opened in 1854 to serve the gold mines of the California Gold Rush. It quickly outgrew its first building and moved into a new one in 1874. This building, the Old United States Mint, also known affectionately as The Granite Lady,...

 arrived shortly after. In total, 396,635 business strikes and 865 proof coins
Proof coinage
Proof coinage means special early samples of a coin issue, historically made for checking the dies and for archival purposes, but nowadays often struck in greater numbers specially for coin collectors . Many countries now issue them....

 were struck at the Philadelphia Mint during the first year of production. The Carson City and San Francisco mints struck 124,500 and 703,000 coins respectively.
There were complaints that year from officials at all three of the mints concerning the quality of the coins produced. In the summer of 1874, coiner A. Loudon Snowden issued a formal complaint to Pollock about the quality of the strikings, most notably on the high points of the design; Barber began modifying the design later that year, reducing the relief. The modified dies began service in 1875. In the fall of that year, Linderman suggested that the reverse of the trade dollar should be altered in 1876 to commemorate the centennial of American independence; Pollock opposed the idea, noting that such a change would be difficult to carry out because Congressional approval would be necessary and that it might cause the coin to lose favor in the Orient. In May 1876, former assistant engraver Anthony C. Paquet created a reverse die after being hired by Linderman to improve the striking quality of the coins. Linderman approved of the new design, but it was ultimately rejected by Mint officials due to fears of Chinese disapproval.

Though production of business strikes ended in 1878, the striking of proof coins continued in limited numbers until 1883, when the final mintage of 979 coins was struck at the Philadelphia Mint. In 1908, it was discovered that ten proofs dated 1884 and five dated 1885 were produced, but these pieces are not listed in official records and it is unknown when they were created.

Reception

Most of the 1873 production was exported to China, and in October of that year, the Tongzhi Emperor
Tongzhi Emperor
The Tongzhi Emperor , born Aisin-Gioro Dzai Šun, was the tenth emperor of the Manchu-led Qing Dynasty, and the eighth Qing emperor to rule over China, from 1861 to 1875. His reign, which effectively lasted through his adolescence, was largely overshadowed by the rule of his mother, the Empress...

 had an assay test conducted on the coins. In a proclamation translated by Chinese consul and interpreter Walter Hillier
Walter Hillier
Sir Walter Caine Hillier KCMG CB was a British diplomat, academic, author, Sinologist and lProfessor of Chinese at King’s College London.-Early life:...

, the Emperor stated:
This Proclamation, therefore, is for the information of you merchants, traders, soldiers and people of every district. You must know that the 'Eagle Trade Dollar' that has lately come to Hong Kong has been jointly assayed by officers specially appointed for the purpose, and it can be taken in payment of duties, and come into general circulation. You must not look upon it with suspicion. At the same time rogues, sharpers, and the like, are hereby strictly forbidden to fabricate spurious imitations of this new Eagle Dollar, with a view to their own profit.
And should they dare to set this prohibition at defiance, and fabricate false coin, they shall, upon discovery, most assuredly be arrested and punished. Let every one obey with trembling! Let there be no disobedience!

In 1874, trade dollars began appearing in American commerce. In early 1875, Congress passed the Specie Redemption Act, allowing the Treasury to pay out silver coins in exchange for paper currency. That act, combined with a drop in the price of silver, caused hoarded or exported silver coins to reappear in commerce within the United States. Many trade dollars were reimported, especially to California. After the value of silver began to decline and the intrinsic value of the coins fell below one dollar, bullion depositors began having their silver struck as trade dollars and selling them wholesale to be distributed throughout the country. Bullion producers opted to coin their silver into trade dollars because the Coinage Act of 1873 specified that silver brought to the Mint could only be struck as such or cast into bars.

Congress considered raising the five-dollar legal tender limit on trade dollars, but instead passed a bill that officially demonetized the trade dollar on July 22, 1876; the Secretary of the Treasury was directed by the act to strike no more of the coins than necessary for use in trade. Despite the demonetization of the trade dollar, bullion producers continued to place the coins into the American market, resulting in an estimated seven million coins circulating within the United States, of which more than four million were placed in circulation in 1877. Despite the 1876 act, it was not until October 15, 1877 that Sherman (now Secretary of the Treasury) finally ordered that the mints not accept orders for trade dollars. On November 5, apparently believing a false report that additional supplies were needed for the Chinese New Year
Chinese New Year
Chinese New Year – often called Chinese Lunar New Year although it actually is lunisolar – is the most important of the traditional Chinese holidays. It is an all East and South-East-Asia celebration...

, he rescinded his order, finally ending orders for trade dollars on February 22, 1878.

Linderman ordered a review of the successfulness of the trade dollar in China. It was discovered that the coins circulated reasonably well in southern China, but usage in the north was limited. As the price of silver decreased, employers in the United States began paying workers in trade dollars purchased at a discount. The situation frustrated the public, as the coins were widely disliked and many banks and businesses refused to accept the coins. In response, many towns set a fixed value on trade dollars. Businesses which did accept trade dollars to avoid offending customers could not deposit them in banks or use them to pay taxes, and sold them to brokers. The brokers in turn recirculated the coins by selling them at a discount from face value to employers who included them in workers' pay packets. In 1883, members of the New York Mercantile Exchange
New York Mercantile Exchange
The New York Mercantile Exchange is the world's largest physical commodity futures exchange. It is located at One North End Avenue in the World Financial Center in the Battery Park City section of Manhattan, New York City...

 petitioned Congress to allow redemption of the coins by the government.
Bullion prices continued to drop through the 1880s, increasing the loss by anyone forced to sell at melt value after accepting a trade dollar at face value. Despite the support of Secretary of the Treasury Charles J. Folger
Charles J. Folger
Charles James Folger was an American lawyer and politician. He was U.S. Secretary of the Treasury from 1881 until his death.-Early life:...

, the question of the redemption of the trade dollar became caught up in controversy over the heavy coinage of the new Morgan dollar
Morgan Dollar
The Morgan dollar was a United States dollar coin minted intermittently from 1878 to 1921. It was the first standard silver dollar minted since production of the previous design, the Seated Liberty dollar, ceased due to the passage of the Fourth Coinage Act, an act which also ended the free coining...

 under the inflationary Bland–Allison Act. Silver interests objected to the silver from redeemed trade dollars being counted towards the Mint's monthly quota under the act, preferring to sell newly mined silver instead, and opposed acts which so provided. It was not until 1887 that Congress, ostensibly to relieve the poor (though most trade dollars were by then in the hands of speculators), provided for the redemption of unmutilated trade dollars. The act, which did not count the redeemed silver towards the Bland–Allison Act quota, passed into law on February 14, 1887, when the ten-day period which President Grover Cleveland
Grover Cleveland
Stephen Grover Cleveland was the 22nd and 24th president of the United States. Cleveland is the only president to serve two non-consecutive terms and therefore is the only individual to be counted twice in the numbering of the presidents...

 had to either sign or veto it expired with no action by the President. Many coins were not redeemable due to chop marks applied by Chinese businessmen, which was done to affirm the coin's silver content. The dollars were only redeemable for six months, and the recovered silver was struck into dimes, quarters, and half dollars.

Numismatic historian Walter Breen criticized both the legal tender provision and the coin in general, stating that the coin's issuance was "an expensive mistake – its motivation mere greed, its design a triumph of dullness, its domestic circulation and legal tender status a disastrous provision of law leading only to ghastly abuses." Trade dollars were again made legal tender by the Coinage Act of 1965
Coinage Act of 1965
The Coinage Act of 1965, , eliminated silver from the circulating dimes and quarter dollars of the United States, and diminished the silver content of the half dollar from 90% to 40%...

, which stated in part "All coins and currencies of the United States (including Federal Reserve note
Federal Reserve Note
A Federal Reserve Note is a type of banknote used in the United States of America. Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. They are the only type of U.S...

s and circulating notes of Federal Reserve banks and national banking associations), regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties and dues." However, the numismatic and bullion value of any trade dollar far exceeds its face value of one dollar.

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