The silver dollar denomination has long been regarded as the cornerstone of the American monetary system. First minted in 1794 at the Philadelphia Mint, it was among the first silver coins struck under the name of the United States of America. However, before the Morgan Dollar series began, the denomination had often been struck with long intervals, and pieces were virtually nowhere to be seen in everyday commerce.
The origins of the Morgan Dollar can be traced back to the Mint Act of 1873, which discontinued the Seated Liberty Dollar design. In its place the Trade Dollar was created, but intended for use primarily in trade with the Orient. The supply of silver became incredibly high during the period of the Comstock Lode, which had yielded massive fortunes of silver since the 1850s. This increased supply was much too large for the production of Trade Dollars only, causing the silver market to fall into decay. Direct pressure from the silver mining industry, particularly the western states, led to the creation of the Morgan Dollar.
The solution to the problem came in 1878 with the passage of the Bland-Allison Act. The United States government was to buy between two and four million worth of silver every month, and convert it into silver dollars. These coins could be exchanged for gold at a fixed ratio of 16:1, meaning that sixteen ounces of silver were need for a single ounce of gold. The silver buying would be done at the current market rate, but the ratio would remain fixed despite fluctuations in the value of both metals. It was meant to restore the circulation of silver dollars, but this every day circulation still remained somewhat limited and large numbers of freshly minted silver dollars remained in storage for a very long time.