The American Coin That Couldn't

In these days of concern about America's foreign trade deficit, there are few who are aware that, after the Civil War, America underwent a period when the nation had difficulty in exporting one of its most valuable and plentiful commodities--silver. At least in monetary form.

During the 1870s, the standard monetary unit of trade used around much of the world, and particularly in the emerging markets of the Orient, was the Mexican silver peso. The peso, nearly identical to the American silver dollar in size and silver content, had the advantage of being slightly heavier; the peso weighed in at 418 grains while the dollar weighed 412 1/2 grains.

The solution to having American dollars received abroad on an equal footing with pesos seemed obvious--make the dollar heavier. So a "trade" dollar weighing 420 grains was authorized by Congress in 1873, and the weight was boldly printed on the reverse side of the coin. "That should do the trick," everybody thought.

But somebody goofed. Nobody seemed to have taken into account the fact that Mexican pesos were 97% silver, while the trade dollar (and the standard American silver dollar) were only 90% silver. So the trade dollar still contained less silver than the peso and they were accordingly shunned by the trading nations.

Worse than that, they were even a source of embarrassment at home. When Congress saw that they were not being accepted overseas, they revoked the trade dollar's legal tender status in 1876, and, lacking the government's financial backing in a time of declining silver prices, the trade dollar fell in value and became something of a disgrace. They were snatched up at a discount by unscrupulous employers who used them to pay immigrant laborers as if they were equal in value to regular dollars, which they were not. This was a paradox, indeed, because they actually contained more silver. Finally, Congress threw up its collective hands over the whole matter, and mintage of the trade dollar was discontinued in 1885.

But it had the last laugh. Prime examples of this once-scorned coin now trade for hundreds of "regular" dollars in the coin market. It is a prime example of dollars over history often having done exactly the opposite of what officials want and expect.