USA Coin Album: America’s Coinage Abroad, Part One
Posted by David W. Lange, NGC Research Director on 4/8/2010
Books and articles have been written about the various World coins that formerly circulated as legal tender in the United States, but very little has appeared regarding the circulation of USA coins in other countries. Unlike the former practice, which effectively ended with the demonetization of foreign coins in 1857, the circulation of our own coinage overseas is ongoing. While this commerce pales in comparison to the value of paper dollars being held and used in other countries, it is still worthy of study by numismatists.
In the first decades of the US Mint’s operations, many of our silver and gold coins were exported to Europe, due largely to Congress’s failure to respond quickly to fluctuating bullion values. These coins did not actually circulate in the conventional sense; in fact, most were almost immediately melted and recoined into native issues. Our copper cents, however, served a more utilitarian purpose across the border in Canada. Circulating as half pennies, they were never formally recognized as such by the government and banks, yet the local shortage of copper coin gave them wide acceptance by merchants and the public. When Canadian businesses began to produce their own token coinage in copper, some of these pieces bore reverse dies already familiar from the American large cents. Canada finally received its own bronze cent coinage in 1858–59, and the USA copper cents, already obsolete in our own country, were gradually withdrawn.
In the meantime, United States silver dollars continued to be shipped overseas as just so much bullion. This trend accelerated in 1853, when Congress lowered the weight of fractional silver coins but retained the “standard” value of the silver dollar, thus condemning it to obscurity within our own borders. Though depositors of silver had to pay over their nominal face value to receive dollars from the Mint, they did so with a specific purpose in mind. The silver dollars produced in 1853–73 were made almost exclusively for export to China and India at a profit. The Chinese utilized them as a circulating currency, alongside the eight reales coins of Mexico and other internationally recognized issues. These pieces likely comprise the few survivors known today of the rare 1853–57 and 1861–70 silver dollars, such coins having been repatriated over the past 70 years or so. As for the ones sent to India, these were quickly melted and fashioned into jewelry or ingots and are forever lost.
The onset of America’s Civil War in 1861 soon disrupted our economy. To pay for the war, both the USA and the CSA issued paper currency. Initially exchangeable for hard money at par, by the end of 1861 these notes were no longer being redeemed in gold. By the middle of 1862, this suspension of specie payment spread to silver coins, as well, for both banks and the two respective governments. Gold and silver could be had, but only in exchange for ever-increasing premiums as measured in paper money. This situation did not apply in the American West, where paper currency was either shunned by common consent or actually prohibited by law, and both metals were in daily circulation throughout the war years.
United States fractional silver coins did find other homes during this period, most notably north of the border. Canada received only a limited silver coinage of its own until 1870, though New Brunswick and Newfoundland had likewise been provided a small issue of fractional silver pieces during the 1860s. USA silver coins had long enjoyed circulation in Canada at face value, an awkward situation when Canada’s trade was officially tied to the British pound and its fractional pence. Nevertheless, American fractional silver was widely used there. In fact, the Bank of Montreal purchased for import approximately 1/8 of the half dimes and dimes minted in 1838.
With the United States stepping up its purchases of goods from Canada during the Civil War, and with gold no longer available for such payments, millions of additional USA silver coins made their way north after 1861. As with any invasive species, however, these coins soon overpopulated and became a nuisance. They quickly accumulated in the hands of merchants who had no choice but to sell them to brokers at a discount. As USA coins enjoyed no legal tender status in Canada, banks would not redeem the coins in lawful money nor accept them in deposits beyond their own needs. The USA would redeem its silver coins only in federal paper money, the value of which declined throughout the war.
So much silver in circulation actually reduced the circulation of Canadian bank notes, which distressed their issuing banks even more. Demands for action by the government led to the announcement in January 1870 that it would buy up American silver coins at discounts ranging from 5–6% below their nominal face value on a basis of the amounts received. This discount would increase to 20% after April 15 and even further in stages thereafter. The place of these coins would be taken by an issue of fractional paper notes redeemable in gold, the notes to later be retired through an issue of Canadian silver coinage. Though money brokers fought this challenge by offering holders of foreign silver a bit over the government rate, eventually the program was successful in replacing American coins with Canada’s own pieces dated 1870.
David W. Lange's column, “USA Coin Album” appears monthly in The Numismatist, the official publication of the American Numismatic Association.