The silver dollar was a mainstay of United States commerce for over two centuries. It was one of the very first denominations produced by the United States Mint in 1794 and was struck in massive quantities until the 1930s. Given its prominent place in everyday American life, it may come as a surprise that the silver dollar was discontinued in 1935. Even while the smaller silver denominations (the dime, quarter and half dollar) were still in production well into the 1960s, the ever-popular silver dollar was phased out in the 1930s. The reason for this paradoxical situation: overproduction.
In the 1870s, Nevada mining interests began putting pressure on Congress to authorize federal silver purchases. Massive silver discoveries like the Comstock Lode threatened to flood the market; federal silver acquisitions would help stabilize prices. Congress eventually acquiesced with the passage of the Bland-Allison Act in 1878, which mandated that the US government purchase a certain amount of silver per year.
The famed Morgan dollar was introduced that same year and, by 1879, the new coin was already being produced in excessive quantities. Mintage figures far outpaced demand for the Morgan dollar, but the Philadelphia, New Orleans, San Francisco and Carson City mints continued to make the coin in gigantic quantities. The overages were simply stored in 1000-piece bags and held in reserve.
Federal silver purchases remained robust in the 1890s, but silver dollar mintages actually dropped temporarily. The Sherman Silver Purchase Act of 1890 forced the Treasury to buy 4.5 million ounces of silver per year, but the law only required that 2 million silver dollars be struck. Given the existing surplus, silver dollars mintages were scaled back to the 2,000,000 minimum and remained at that level for a number of years. Finally, in 1898, Congress demanded that all of the government’s silver be converted into coinage.
Silver dollar production ceased from 1905-1920, but returned in full force in 1921 thanks to yet another piece of silver legislation. The Pittman Act of 1918 called for even more unnecessary governmental silver purchases which led to even more silver dollars coming off the dies. Intense production levels continued in the early-mid 1920s until surpluses reached unmanageable levels. Mintages gradually curtailed before the denomination was discontinued entirely in 1935. Mint officials knew inventories far outweighed demand, so the master dies for the silver dollar were destroyed in 1937.
It would take decades for the market to absorb the silver dollar overstock. Nevada casinos were heavy users of the coins in the 1940s and 1950s, but otherwise the general public was beginning to favor paper one dollar notes. Amazingly, the last batch of silver dollars was auctioned off in the 1970s—some of the coins in that sale had been stashed in original mint bags since the 1880s.