Owner Comments:
The Trade Dollar was a good idea that went awry. For almost three centuries the coinage of the Spanish empire had been a de facto world currency. When Mexico won its independence from Spain, the Mexican dollar continued to be a popular coin, especially in China and the rest of Asia. In to do business in China, U.S. merchants had to pay a premium for Mexican dollars, so why not produce an American Trade Dollar?
The Trade Dollar was authorized as a part of the Coinage Act of 1873 which had many provisions. At first the Trade Dollar was given a limited legal tender status in the U.S., but it was assumed that most of the coins would be exported to Asia.
Soon after the Trade Dollar was authorized the price of silver began to fall because of huge silver strikes that occurred in the American west. Large numbers of Trade Dollars began to appear in circulation on the American west coast. Congress became alarmed because if the situation continued the unrestricted use of more and more Trade Dollars in the U.S. economy would increase the money supply and undermine the value of the U.S. dollar. This threat prompted Congress to rescind the legal tender status of the Trade Dollar but continue its production by the U.S. mint system.
That policy created new problems. As the price of silver went lower and lower, using Trade Dollars in the U.S economy became more profitable. Quite often immigrants were cheated by the coins when they accepted them for payment for work. From the immigrants’ here was a large impressive U.S. coin that was made of silver. It even had the word “dollar” on the reverse. Yet when they went to spend it, merchants would only recognize the value of the silver that the coin contained, which was ultimately only about 50 cents.
Finally Congress decided to end the production of business strike Trade Dollars after 1878. A few pieces were struck for collectors from 1879 to 1883. There were even two clandestine issues of Trade Dollars in 1884 and ’85. Yet Congress refused to redeem the coins for a number of years. Finally a redemption program did begin well after those who had been hurt by the Trade Dollar fiasco had taken their losses.
For a long time the Trade Dollar was the only U.S. that has even been demonetarized. Congress reversed that situation with the passage of the Coinage Act of 1965. By then, of course, the Trade Dollar had a numismatic value that was well over a dollar.