Trade Dollar (United States Coin) - Reception

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. 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, 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 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, the question of the redemption of the trade dollar became caught up in controversy over the heavy coinage of the new Morgan dollar 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 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." In fairness it should be noted that during the 1870s an attempt by Japan to introduce its own trade dollar to China fared no better.

Trade dollars were again 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." However, the numismatic and bullion value of any trade dollar far exceeds its face value of one dollar. Because of its demand by collectors a large number of counterfeits exist made with base metal, and buyers should exercise caution when purchasing specimens.