The Rise and Fall of the Trade Dollar
By R.W. Julian
America's first bullion coin, the Trade Dollar, inherited this title almost
by accident. Intended as a way of sending our surplus silver overseas,
within two years it had become a domestic bullion coin, much to the
annoyance of ordinary citizens. The political uproar that arose was, in the
long run, to destroy it; out of the ashes of defeat grew the now-famous
Morgan dollar. To tell the story of this interesting coin we must travel
back in time. . .
In the early days of the American Republic there was no discussion of
bullion coins because there was a relative shortage of silver and gold. In
the late 1840s, with the great discoveries of gold in California, the
monetary system was disrupted and silver driven from circulation. This was
remedied in February 1853 when silver coins were reduced in weight.
There was a joker in the 1853 law because the weight of the silver dollar
(412.5 grains, .900 fine) was not changed and bullion owners could still
bring silver to the mints in exchange for this coin. Virtually no one did
so because the dollar did not circulate and there was no ready supply of
native silver in the 1850s. However, mining underwent a huge expansion
during the Civil War as silver and gold were urgently needed to pay for war
materials purchased abroad; from less than $50,000 worth of silver produced
in 1849 (primarily as a by-product of gold mining) the value climbed to
$10,000,000 by 1864.
As a result of war-time debts, large quantities of silver and gold
continued to leave for Europe after 1865. Until early 1871, the amount of
silver exported from the United States exceeded new silver from Western
mines, but the difference was made up by imports from Mexico. As long as
the situation remained stable, mine owners and investors did not care how
much silver was produced; they could sell all that was mined.
The difference between the amount exported and newly-mined silver narrowed
in the late 1860s and bullion owners occasionally deposited their silver
for coinage into dollars at Philadelphia. This trend began in mid-1868 and
picked up slowly throughout 1869 and 1870. The stream became a flood in
1871 as newly-mined silver suddenly had difficulties in finding a home;
worse yet, there was a slight weakening of the price. The Franco-Prussian
war of 1870-1871 threw a new dimension into the equation: the victorious
Germans adopted the gold standard; silver bullion and coins were now dumped
on the world market, further weakening demand for the American product. The
handwriting was on the wall.
In the meantime came one of those events best described as a curious
coincidence. There was a shortage in the bullion accounts at San Francisco,
triggering an investigation. Treasury Secretary Boutwell appointed John Jay
Knox to investigate not only the San Francisco ledgers, but also the entire
mint system. Knox was appalled to find that many officers did not even know
the coinage laws and suggested that it was time for a complete
recodification. While Knox was in San Francisco he met with Louis Garnett,
who suggested that the silver dollar be abolished and replaced with a
commercial dollar of 384 grains. Knox agreed.
(Changing the coinage laws in 1869 would not have been a problem.
Throughout most of the country, except the Far West, silver and gold had
vanished from circulation by 1862 and the country was under the rule of
The Knox proposals were put into a coinage bill and introduced to Congress
in 1870. At first, progress was slow as interminable hearings were held,
which accomplished little. By early 1872 silver forces began to gather
strength and had determined to work for a commercial dollar weighing 420
grains, .900 fine. The standard U.S. silver dollar of 412.5 grains
contained less silver than the Mexican peso (eight reales) and therefore
was rarely exported to the Orient. Instead, American merchants had to
purchase pesos in order to transmit funds. An American coin with more
silver than the peso would be readily accepted in the Orient, or so people
Friendly Senators amended the Knox bill in February 1872 to provide for the
420 grain commercial dollar, but it was voted out in May. It was
successfully reintroduced in December; much of the credit for this was
claimed by Henry R. Linderman, a former Mint Director, who was to become
director again in 1873. He lobbied long and hard for this bullion coin.
Towards the end of 1872 silver producers had begun to get nervous and the
commercial dollar seemed their only salvation. They provided political
muscle for passage of the Coinage Act of February 1873 which established
the Trade Dollar of 420 grains. Almost at once, there was great pressure on
the Treasury from silver interests to begin striking the new coins.
However, it was not until June that the final design, by Chief Engraver
William Barber, was selected. Liberty, sitting on bales of American farm
products, was shown at the seashore with an olive branch in her hand and
looking to the West, towards the Orient.
Philadelphia coinage began in July 1873 but within weeks had spread to San
Francisco and Carson City as dies were received and bullion deposited. The
1873 law specified that the new coin was to have limited legal tender in
this country of five dollars, merely to provide the fiction that it was a
circulating U.S. coin. In addition, depositors of bullion had to pay a fee
of one-half per cent to have their silver made into Trade Dollars; this was
to discourage dumping the coins in this country.
The government made strenuous efforts to see to it that these new coins
were readily accepted in the Far East, especially China. Japan and India
were secondary targets and strong attempts were made in those two countries
also. Diplomatic and consular officials were given 'marching orders' to do
everything in their power to put the Trade Dollar into active Far Eastern
By early September Trade Dollars had appeared at Canton in China and the
governor of the Two Kwang Province issued an edict that the "American Eagle
Dollar" had been assayed and found to contain the amount of silver stamped
on the reverse. This cleared the way for Trade Dollar circulation in large
areas of South China.
It soon became obvious that San Francisco and Carson City would be more
important than Philadelphia in the coinage of Trade Dollars since the
intended market was closer to the West coast. However, as much of the
commercial shipping going to the Orient still originated along the Eastern
seaboard, Philadelphia continued to strike its share of the coinage.
The annual Mint report for fiscal 1873 (published in the late fall of that
year) was cautiously optimistic about the chances for the Trade Dollar in
the Orient but that for 1874 had a very positive outlook. Glowing
dispatches were printed about how well the new coins were received,
especially in China. These reports, however, were all from the South and it
was ominous that Trades were not being accepted in North China.
In the meantime, beginning in 1873, the government was finally able to
issue minor silver coins to the public for the first time since 1862, but
for some months it was touch and go. The shifting value of paper currency
with respect to silver made this a risky gamble. And while the government
was buying some silver, it did so at market prices which was not of great
help in reducing the ever-growing silver surplus.
During the spring and summer of 1873 excess silver had begun to force the
price down in an ever-increasing spiral. In July 1873 the Trade Dollar
contained $1.05 worth of silver but within three years this had fallen to
only 85 cents. The rapid collapse in value forced mine owners to produce
even more in a futile effort to shore up profits. The Orient could not
absorb enough silver and the glowing 1874 reports were replaced by grimmer
stories in 1875 that it would take years to introduce the Trade Dollar to
the region. For the mine owners it was a no-win situation.
Urgently needed ready funds, bullion depositors began to dump Trade Dollars
onto the domestic market. There was a provision for legal tender of $5, but
no one had expected this to be used. By early in 1875 more Trades were
being dumped in the U.S. than sent abroad and the government retaliated by
raising the coining fee to one per cent.
Since the bullion owner got a dollar coin for less than 90 cents worth of
silver, there arose a domestic market for silver in which individuals
bought the metal and then deposited it at the mints for coinage. Now, not
only were mine owners and bullion dealers dumping Trade Dollars, but so
were entrepreneurs anxious to make ready cash because of the quirk in the
law allowing legal tender status.
The government struck back in July 1876 by removing legal tender from the
coins but dumping continued. A new twist arose, however, when owners of
Trade Dollars made arrangements with factory owners to pay workers in this
coin. Shopkeepers, who received the coins in exchange for their
merchandise, objected because they had no place to vend them, the banks
refusing to accept Trade Dollars. Great pressure was now exerted on
Congress from all directions. Mine owners demanded even easier terms for
getting Trade Dollars while merchants and workers demanded an end to the
By late in 1876 the Trade Dollar had become a domestic bullion coin in
reality, but it was being 'purchased' by workers and merchants who were now
unwillingly subsidizing the mine owners and bullion dealers. In 1877 it was
estimated that at least 9,000,000 pieces were in circulation.
The Treasury announced an end to coinage in October 1877, but within two
months had been forced by political pressure to reopen the doors. When
coinage resumed depositors were supposed to prove that the coins would be
exported and the era of the instant fake shipping manifest now arose.
Coinage was finally halted in April 1878, San Francisco striking the last
pieces for circulation.
During the latter part of 1877 a fresh disaster struck mine owners. In
1862, when silver coins had been driven from circulation by the Civil War,
many of them went to Canada and Central America. All of a sudden, and to
everyone's amazement, large quantities of these coins returned to this
country. Government purchases of silver for minor coinage ceased and the
large number of repatriated silver coins virtually destroyed any
possibility for dumping Trade Dollars. The U.S. silver market was nearly
From sheer desperation the silver forces charged that the 1873 law had been
a trick by bloated Eastern capitalists to defraud them of their rightful
wealth (the legislation was now called "The Crime of '73") although the
silver interests themselves were the chief beneficiaries of the 1873 law!
The silverites saw that their only hope was for a massive government
subsidy. The result was the law of February 1878, which authorized the
return of the standard (Morgan) dollar. The Treasury was required to
purchase large amounts of silver each month and coin much of it into
dollars that nobody wanted.
There still remained the problem of what to do with the Trade Dollars in
domestic circulation. Finally, in 1887, the government authorized their
redemption for one dollar providing they had not been mutilated with
chopmarks, put on by Chinese merchants to verify the correct weight and
value of the coin. Less than 8 million coins were redeemed.
One of the more interesting Trade Dollars is from 1875 in which the S
mintmark is superimposed over that of Carson City, CC. This was done in the
engraver's department at Philadelphia and perhaps one sultry afternoon a
sleepy employee got a die order mixed up; using the CC punch by mistake.
Someone later corrected the error and shipped the die to San Francisco.
When the making of Trade Dollars for circulation ceased in 1878, the Mint
at Philadelphia continued to strike proofs for collectors. The demand went
up considerably in 1879 because the coins were no longer available on the
open market. Proofs were priced at $1.25 to collectors until 1883, when
proof coinage halted. A few were struck clandestinely by Philadelphia Mint
Superintendent A. Loudon Snowden in 1884 and 1885 (but did not surface
until 1908!) for favored parties.
The collector seeking decent specimens of the Trade Dollar for a type set
will not have to pay all that much. Although the two most common dates
(1877-S and 1878-S) book at about $400 in MS-60, specimens can occasionally
be obtained for less. An XF coin will cost in the range of $130 to $140
while one in VF can be obtained for just over $100. Proof coins in MS-65
condition generally bring over $7000, except that dates after 1878 are
worth a few hundred dollars less.