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The trade dollar was a United States dollar coin minted to compete with other large silver coins already in popular use in the Orient. The idea first came about in the 1860s, when the price of silver began to decline due to increased mining efforts in the western United States. A bill providing for the issuance of the trade dollar was eventually put before Congress, where it was approved and later signed into law as the Coinage Act of 1873. The act made trade dollars legal tender up to five dollars. A number of designs were considered for the trade dollar, and an obverse and reverse created by William Barber were selected.

The coin was first struck in 1873, with most of the production being sent to China. Eventually, the coins made their way into American commerce, causing frustration amongst those who were given them in payment of services. In response, the coins were offically demonetized in 1876, but continued to circulate. Production of proof coins officially ended in 1883, though production of business strikes ceased in 1878. The trade dollar was remonetized in when the Coinage Act of 1965 was signed into law.

Background


Following the California gold rush 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 value of silver. As a result, silver coins rapidly disappeared from circulation due to either hoarding or melting. In response, Congress authorized the Mint to reduce the quantity of silver in all denominations except the three-cent piece 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.

Later, while conducting an investigation of the Mint at San Francisco, deputy comptroller of the currency John Jay Knox began discussing the monetary situation with Louis A. Garret, a man who had worked as both the treasurer and assayer of the San Francisco Mint. Garret 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. The rationale for this was that the coins would be hoarded or melted in Asia and would thus not be redeemable by the United States, allowing the government to make a profit from the seigniorage. During his time in San Francisco, Knox also discussed the proposed commercial dollar with Henry Linderman, who was working as a special agent for the Treasury Department 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. 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 argues that the coin need not hold legal tender status, and could simply consist of a series of uniform ingots stamped with their 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 committee to include authorization for a commercial dollar weighing 420 grains; this was struck three months later when the House voted to include provisions for the production of a standard silver dollar weighing 384 grains. While in the Senate, a provision was added to the bill requiring the Treasury to coin a trade dollar of 420 grains, 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 on February 12, 1873. The bill provided, in part, for the striking of trade dollars which held legal tender status up to five dollars. This was done simply to make the coin more attractive to the Asian market, as trade dollars were never intended to circulate to any degree in the United States.

Design selection
Throughout the years 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 to discuss the design of the newly authorized trade dollar. The two men agreed to request a jewelry and engraving firm, Bailey, Banks & Biddle 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 facing to the viewer's left, representing the direction of the Orient. In June 1873, Linderman reviewed the various patterns created by Barber; he chose an obverse with Liberty seated upon a bale of hay and a reverse depicting the Bald eagle as required by law.

Production


Prior 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. and aegis of the individual mints was handed over to a different superintendent for each establishment. 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 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; Beginning in 1866, during the reign of Emperor Maximilian, the design was changed to show the Emperors portrait, a change which caused widespread unacceptance of the coins in China. The first trade dollars were struck during a ceremony held on July 11, 1873. The Carson City Mint received its first dies for the new coins on July 22, and those intended for the San Francisco Mint arrived shortly after. In total, 396,635 business strikes and 865 proof coins 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 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 of high points of the design. 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 approve 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 due to fears of Chinese disapproval.

Reception


Most of the 1873 production was exported to China, and in October of that year, the Tongzhi Emperor had an assay test conducted on the coins. In a proclamation translated by Chinese consul and interpreter Walter Hillier, 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. After the value of silver began to decline and the intrinsic value of the coins fell below one dollar, bullion depositors began converting their silver into trade dollars and selling them wholesale to be distributed throughout the country. Congress officially devalued the trade dollar on July 22, 1876, however bullion producers continued to place the coins into the American market, resulting in an estimated seven million coins circulating within the United States.

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 reduced price. Americans became frustrated, 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. In an effort to stem the inundation of the coins into American commerce, the Treasury suspended all production of the coins in October 1877, coining only the bullion that had already been deposited to that point. Production resumed briefly at San Francisco and Carson City in 1878, but ended when Treasury Secretary John Sherman halted production, due in large part to the passage of an act calling for resumption of the standard silver dollar, a coin minted with the former silver content of 412½ grains of silver, which would come to be known as the Morgan dollar. Limited production of proof coins continued until 1883, when the final mintage of 979 coins were 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.

In 1887, the United States agreed to redeem any unaltered trade dollars for one dollar each; many coins were not redeemable due to chop marks applied by Chinese businessmen in order to affirm the coin's silver content. Trade dollars were made legal tender by the Coinage Act of 1965, which stated in part: All coins and currencies of the United States (including Federal Reserve notes 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.

Useful
annual report 1878

http://www.usmint.gov/historianscorner/?action=DocDL&doc=annRep2001b0005_0012.pdf

annual report 1883

http://www.usmint.gov/historianscorner/?action=DocDL&doc=annRep2000b0431_0018.pdf