The Local Scene in Nevada
Following the Act of July 22, 1876, which eliminated the legal tender status of trade dollars, such coins began selling at a discount almost immediately. The August 3, 1876 issue of the Territorial Enterprise, Virginia City, Nevada, told of the situation:
"A meeting of the retail dealers of Virginia was held last night in the rooms over the Delta Saloon. For some reason there was a small attendance, only 24 saloons being representedor about one-seventh of the business. There was a great deal of buzzing going on before the meeting commenced, and the proper course to adopt was eagerly discussed.
"Mr. Adams stated that the object of the meeting was to get the voice of the saloon-keepers as to what course should be adopted with regard to trade dollars. He was in favor of discontinuing their acceptance altogether after the second day of next month. Mr. Orndorff states that it was intended as a general meeting, and he desired to hear from all the whiskey men present. Mr. Vucovitch advocated the plan of refusing trade dollars altogether, and thought immediate action necessary. Mr. Oliver favored the 90 cents proposition and immediate action.
"Mr. Riorden gave an instance where a good customerone who would be liable at any time to throw down a five-dollar gold piece if he wanted to drinkwould get the worst of it. The liberal man puts out a piece of gold and takes his change in silver, while the mean man sells his gold for trade dollars and takes one of them to buy a drink. Under the present system he would get back a half, quarter, and a dime, and it would be cheaper to give the man his drink than to give him the change. A speaker said that he was in favor of discounting trades so much there could be nothing made by buying them with gold and paying them out.
"Mr. Sliter of 66 was called upon, but as he was the only representative of the two-bit houses present he declined to commit himself, saying only that he was in favor of the movement if the rest would stand in. J.P. Penhal, commonly known as Captain Jack, thought trade dollars ought to be received for bills contracted during the past month, and Mr. Oliver said he was willing to take them for all that was owing him. On a motion by Mr. Orndorff, a resolution was adopted specifying that trade dollars should only be taken at 87 1/2¢.
"It was ordered by the meeting that the chair appoint a committee of four to obtain signatures to an agreement. The chair appointed a committee and instructed it to report at the same place of meeting this evening at half-past seven oclock. After the agreement had been signed by the majority of those present, the meeting was declared adjourned. Considering the fact that it was a crowd of liquor dealers, the meeting was a very dry one. Not one of them offered to ring the bell during the entire evening."
An Overview of Trade Dollars in 1876
Although it was not the intent of the drafters of the Mint Act of 1873 to have trade dollars circulate domestically in the United States, a rider attached to the legislation made the coins legal tender in domestic transactions up to $5. For this reason, trade dollars circulated within the United States. During the first two years of trade dollar production, 1873-1874, the vast majority of trade dollars were shipped to the Orient, and few were kept on our shores. In 1875 and early 1876, more trade dollars were used in the states. Early in the latter year a decline in the price of silver was the reason that millions of trade dollars, now not as popular for the China trade, were dumped into circulation, particularly in the West Coast. On July 22, 1876, the legal tender status of trade dollars was revoked.
Production of trade dollars for export continued for two more years, but in 1877 and 1878 over 8,600,000 pieces went into circulation in the United States. At that time they were available for bullion value, or sometimes even less. Unscrupulous mine and factory owners, rural mercantile outlets, retailers (especially in areas in which there was little competition), and others bought the coins and put them at face value in the pay envelopes of employees. Banks and other commercial interests accepted trade dollars only at deep discounts. Aggrieved workers complained, and petitions reached Congress seeking recall of the coins or restoration of the legal tender status at $1 each. Later, this was done for just a brief period.
Decade after decade passed, and, finally, the Coinage Act of July 23, 1965 apparently restored legal tender to the trade dollar, although by then both bullion and numismatic values were so high that it was no longer relevant. No one cared. (See text of Act under Additional Information, 1885, below.)
New Machinery to be Used
The Annual Report of the Director of the Mint, 1876, noted that gold coins and trade dollars were weighed and adjusted by hand. The 1876 report said that arrangements had been made to import automatic weighing and sorting machines that would be used for coins other than trade dollars and gold coins.
Specie Payments Resumed
Although the Act of January 14, 1875 provided for the exchange of subsidiary silver coins for Fractional Currency, little was done, and immense quantities of freshly-minted dimes, quarters, and half dollars accumulated in Treasury vaults. The Act of April 17, 1876 directed the secretary of the Treasury to begin such exchange, but still relatively few coins were paid out. Then came the Act of July 22, 1876, which provided that Legal Tender notes could be exchanged for silver coins as well. The doors of the Treasury vaults swung open wide, and beginning in the autumn of 1876 there was an abundance of silver coins in circulation for the first time since early 1862.
A new generation of American citizens saw for the first time the figure of Miss Liberty, seated, on hard money dimes, quarters, and half dollars. Presumably, some long-stored Liberty Seated silver dollars were paid out as well. Interestingly, the specie resumption acts of 1875 and 1876 were illegal under a provision still in effect from the Act of 1873, which stated that silver coins be paid out only in exchange for gold.
In 1876 there was a very curious double standard between the San Francisco Mint and the Philadelphia Mint. Silver coins were placed into circulation in quantity when specie payments were resumed. However, the San Francisco Mint had never stopped specie payments to begin with, but in recent times had been selling silver coins to anyone who wanted them, with the purchasers paying for them in gold (for paper money did not circulate in San Francisco). On the other hand, in Philadelphia silver coins in 1876 were obtainable at face value in greenback notes, but the notes themselves were selling at a discount in terms of gold coins. Thus, in effect, there were two different purchase prices for subsidiary silver coins depending upon from which mint they were purchased.
By December 31, 1876 more than $15 million worth of the despised, and often dirty and tattered, Fractional Currency notes had been exchanged for coins (by October 1877 the total was $23 million). An additional $13 million worth of Legal Tender "greenback" notes had been exchanged for Liberty Seated silver ($3 million more than the law allowed for, but Congress was generally unaware of the niceties of coinage and currency laws and, in any event, typically forgot to repeal the provisions of old ones when enacting new ones).
Ever innovative, Secretary of the Treasury John Sherman came up with an idea. It was certainly the case that large amounts of paper money had been lost in the 1871 Chicago fire, shipwrecks, and other disasters. Obligingly, the Treasury Department staff determined that $8 million of "greenback" notes had met various fates over the years. Sherman then declared that additional coins could be paid out in an amount equal to such lost paper money (after all, Congress didnt say that it couldnt). Now, the "legal" limit of $10 million worth of Legal Tender to be exchanged was raised to $18 million.
Neil Carothers continues the story: "The estimate of $8 million as the amount lost turned out to be too conservative. By the end of October 1877 there was still $16 million in fractional notes officially outstanding. More than $36 million worth of silver coins had been issued, making a total of $2 million in excess of the $50 million limit stipulated in the resolution of 1876. More than $6 million worth of additional coins had been produced and stored in vaults. Further sales were brought to a complete stop by an unexpected and dramatic developmentthe winter of 1877 there reappeared in circulation hundreds of millions of silver three-cent pieces, silver half dimes, dimes, quarters, and half dollars that had gone to Canada in 1862. These came in from Canada, Central America, from South America, and from the West Indies. Some may have come from domestic hoards. People were startled, for many thought in 1862 all of these coins had been melted. This great influx showed that they had not been melted or exported to Europe as bullion, but instead, gone to Latin America [and Canada] and served as local currency for 15 years and then brought back. In 1880 Sherman estimated that $22 million worth of silver coins had come back, and even more came back after 1880."
There was much criticism leveled against the designs used by the Mint during the nineteenth century. An article in Galaxy Magazine, June 1876, contained this commentary:
"Why is it that we have the ugliest money of all civilized nations? for such undoubtedly our silver coinage is. The design is poor, commonplace, tasteless, characterless, and the execution is like thereunto. Our silver coins do not even look like money. They have rather the appearance of tokens or mean medals. One reason of this is that the design is so inartistic and so insignificant. That young woman sitting on nothing in particular, wearing nothing to speak of, looking over her shoulder at nothing imaginable, and bearing in her left hand something that looks like a broomstick with a woolen nightcap on itwhat is she doing there? What is the meaning of her?
"She is Liberty, we are told, and there is a label to that effect across a shield at her right, her need of which is not in any way manifest. But she might as well be anything else as Liberty, and at the first glance she looks much more like a spinster in her smock, with a distaff in her hand. Such a figure has no proper place upon a coin. On the reverse the eagle has the contrary fault of being too natural, too much like a real eagle. In numismatic art animals have conventional forms, which are far more pleasing and effective than the most careful and exact imitation of nature can be. "
A Glut of Trade Dollars
The American Journal of Numismatics, April 1876, reprinted the following newspaper commentary from the San Francisco Chronicle:
"The new trade dollar is fast becoming a drug in the market. Our banks and money-broker offices are becoming glutted with them. Their greater intrinsic value as well as their novelty threatened for awhile to crowd the familiar half dollar and the handy quarter out of sight.
"Chinamen remitting their hard-earned savings to their far-distant land would have nothing but trade dollars. Oriental commerce was, and still is to a large extent, conducted on the solid basis of this bright, new and ringing silver representation of value.
"But the Orient, like San Francisco, is beginning to find that it is possible to be surfeited with even so much coveted a treasure as the trade dollar. The result is that reaction has set in against that coin in this market, and it no longer enjoys a preference over other silver. On the contrary, although a trade dollar is intrinsically worth eight cents more than two half dollars, the two halves will sell in the street from a half to three-quarters of a cent more than the dollar. The reason for this is primarily because of the super abundance of the latter. But there is another reason which is not generally understood. Halves and quarters of the United States are a legal tender for all payments up to a certain amount; the trade dollar is not a legal tender at all for any amount. It is merely a stamped ingot, having a certain value, like an ounce of gold, a diamond, or a bushel of wheat. It is a commodity, the value of which fluctuates according to the supply and demand."