Free silver

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Republican campaign poster of 1896 attacking free silver 1896GOP.JPG
Republican campaign poster of 1896 attacking free silver

Free silver was a major economic policy issue in late-19th-century America. Its advocates were in favor of an expansionary monetary policy featuring the unlimited coinage of silver into money on demand, as opposed to strict adherence to the more carefully fixed money supply implicit in the gold standard. Supporters of an important place for silver in a bimetallic money system making use of both silver and gold, called "Silverites", sought coinage of silver dollars at a fixed weight ratio of 16-to-1 against dollar coins made of gold. Because the actual price ratio of the two metals was substantially higher in favor of gold at the time, most economists warned that the less valuable silver coinage would drive the more valuable gold out of circulation.

Monetary policy subclass of the economic policy

Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the money supply, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Gold standard monetary system in which the standard economic unit of account is based on a fixed quantity of gold

A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. Three types can be distinguished: specie, bullion, and exchange.

Bimetallism monetary standard

Bimetallism is the economic term for a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.

Contents

While all agreed that an expanded money supply would inevitably raise prices, at issue was whether or not this inflationary tendency would be beneficial. The issue peaked from 1893 to 1896, when the economy was wracked by a severe depression—remembered as the Panic of 1893—characterized by falling prices (deflation), high unemployment in industrial areas, and severe distress for farmers. [1]

Panic of 1893 financial crisis

The Panic of 1893 was a serious economic depression in the United States that began in 1893 and ended in 1897. It deeply affected every sector of the economy, and produced political upheaval that led to the realigning election of 1896 and the presidency of William McKinley.

In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0%. Inflation reduces the value of currency over time, but deflation increases it. This allows more goods and services to be bought than before with the same amount of currency. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines to a lower rate but is still positive.

The "free silver" debate pitted the pro-gold financial establishment of the Northeast, along with railroads, factories, and businessmen, who were creditors deriving benefit from deflation and repayment of loans with valuable gold dollars, against farmers who would benefit from higher prices for their crops and an easing of credit burdens. Free silver was especially popular among farmers in the Wheat Belt (the western Midwest) and the Cotton Belt (the Deep South), as well as silver miners in the West. It had little support among farmers in the Northeast and the Corn Belt (the eastern Midwest).

Cotton Belt

The Cotton Belt is a region of the Southern United States where cotton was the predominant cash crop from the late 18th century into the 20th century.

Deep South cultural and geographic subregion in the Southern United States

The Deep South is a cultural and geographic subregion in the Southern United States. Historically, it was differentiated as those states most dependent on plantations and slave societies during the pre-Civil War period. The Deep South is commonly referred to as the Cotton States, given that the production of cotton was a primary cash crop.

Corn Belt Region of the Midwestern United States

The Corn Belt is a region of the Midwestern United States that, since the 1850s, has dominated corn production in the United States. More generally, the concept of the "Corn Belt" connotes the area of the Midwest dominated by farming and agriculture.

Free silver was the central issue for Democrats in the presidential elections of 1896 and 1900, under the leadership of William Jennings Bryan, famed for his Cross of Gold speech in favor of free silver. The Populists also endorsed Bryan and free silver in 1896, which marked the effective end of their independence. In major elections free silver was consistently defeated, and after 1896 the nation moved to the gold standard. [2]

William Jennings Bryan United States Secretary of State

William Jennings Bryan was an American orator and politician from Nebraska. Beginning in 1896, he emerged as a dominant force in the Democratic Party, standing three times as the party's nominee for President of the United States. He also served in the United States House of Representatives and as the United States Secretary of State under Woodrow Wilson. Just before his death he gained national attention for attacking the teaching of evolution in the Scopes Trial. Because of his faith in the wisdom of the common people, he was often called "The Great Commoner".

Cross of Gold speech

The Cross of Gold speech was delivered by William Jennings Bryan, a former United States Representative from Nebraska, at the Democratic National Convention in Chicago on July 9, 1896. In the address, Bryan supported bimetallism or "free silver", which he believed would bring the nation prosperity. He decried the gold standard, concluding the speech, "you shall not crucify mankind upon a cross of gold". Bryan's address helped catapult him to the Democratic Party's presidential nomination; it is considered one of the greatest political speeches in American history.

The People's Party was a left-wing, agrarian political party in the United States. The Populist Party emerged in the early 1890s as an important force in the Southern United States and the Western United States, but the party collapsed after it nominated Democrat William Jennings Bryan in the 1896 United States presidential election. A rump faction of the party continued to operate into the first decade of the 20th century, but never matched the popularity of the party in the early 1890s.

The debate over silver lasted from the passage of the Fourth Coinage Act in 1873, which demonetized silver and was called the "Crime of '73" by opponents, until 1913, when the Federal Reserve Act completely overhauled the U.S. monetary system.

Coinage Act of 1873

The Coinage Act of 1873 or Mint Act of 1873, 17 Stat. 424, was a general revision of the laws relating to the Mint of the United States. In abolishing the right of holders of silver bullion to have their metal struck into fully legal tender dollar coins, it ended bimetallism in the United States, placing the nation firmly on the gold standard. Because of this, the act became contentious in later years, and was denounced by some as the "Crime of '73".

Federal Reserve Act

The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.

Definitions and explanation

Under the gold specie standard, anyone in possession of gold bullion could deposit it at a mint where it would be processed into gold coins. Less a nominal seigniorage to cover processing costs, the coins would then be paid to the depositor; this was free coinage of gold by definition. The objective of the free silver movement was that the mints should accept and process silver bullion according to the same principle, notwithstanding the fact that the market value of the silver in circulating coins of the United States was substantially less than face value. [3]

Seigniorage, also spelled seignorage or seigneurage, is the difference between the value of money and the cost to produce and distribute it. The term can be applied in two ways:

As a result, the monetary value of silver coins was based on government fiat rather than on the commodity value of their contents, and this became especially true following the huge silver strikes in the West, which further depressed the silver price. From that time until the early 1960s the silver content in United States dimes, quarters, half dollars and silver dollars was worth only a fraction of their face values. [4] Free coinage of silver would have amounted to an increase in the money supply, with inflation as the result.

Response

Cartoon from Puck showing a silverite farmer and a Democratic donkey whose wagon has been destroyed by the locomotive of sound money 96SILVER.JPG
Cartoon from Puck showing a silverite farmer and a Democratic donkey whose wagon has been destroyed by the locomotive of sound money

Many populist organizations favored an inflationary monetary policy on the grounds that it would enable debtors (often farmers who had mortgages on their land) to pay their debts off with cheaper, more readily available dollars; those who would suffer under this policy were the creditors such as banks and landlords. The most vocal and best organized supporters were the silver mine owners (such as William Randolph Hearst) and workers, and the western states and territories generally, as most U.S. silver production was based there and the region had a great number of highly indebted farmers and ranchers.

Outside the mining states of the West, the Republican Party steadfastly opposed free silver, arguing that the best road to national prosperity was "sound money", or gold, which was central to international trade. They argued that inflation meant guaranteed higher prices for everyone, and real gains chiefly for the silver interests. In 1896 Senator Henry M. Teller of Colorado led many western Republicans to bolt and form a third party that supported William Jennings Bryan, the short-lived Silver Republican Party.

The Sherman Silver Purchase Act of 1890, while falling short of free silver's goals, required the U.S. government to buy millions of ounces of silver (driving up the price of the metal and pleasing silver miners) for money (pleasing farmers and many others). However, the U.S. government paid for that silver bullion in gold notes—and actually reduced their coinage of silver. The result was a "run" on the Treasury's gold reserves which was one of the many reasons for the Panic of 1893 and the onset of the 1890s Depression. Once he regained power, and after the Panic of 1893 had begun, Grover Cleveland engineered the repeal of the Act, setting the stage for the key issue of the next presidential election.

Climax

1896 editorial cartoon equating the free silver movement with Frankenstein's monster. Frankenstein 1896.jpg
1896 editorial cartoon equating the free silver movement with Frankenstein's monster.

The Populist Party had a strong free-silver element. Its subsequent combination with the Democratic Party moved the latter from the support of the gold standard which had been the hallmark of the Cleveland administration to the free-silver position epitomized by 1896 presidential nominee William Jennings Bryan in his Cross of Gold speech. Bryan's 1896 candidacy was supported by Populists and "silver Republicans" as well as by most Democrats.

The issue was over what would back the US currency. The two options were: gold (wanted by the Goldbugs and William McKinley) and silver (wanted by the Silverites and Bryan). Unbacked paper (wanted by the Greenbacks) represented a third option. A fourth option, currency backed by land value, was advocated by Senator Leland Stanford through several Senate bills introduced in 1890-1892, but was always killed by the Senate Finance Committee. [5]

Silver fraternal orders

Three fraternal organizations rose to prominence during the mid-1890s and supported the silver campaign in 1896. They all disappeared after the failure of the campaign.

List of Silverite fraternal orders

Result

The city voters—especially German Americans—overwhelmingly rejected the free-silver cause out of conviction that it would lead to economic disaster, unemployment, and higher prices. The diversified farmers of the Midwest and East opposed it as well, but the cotton farmers in the South and the wheat farmers in the West were enthusiastic for free silver. Bryan tried again in 1900 to raise the issue but lost by larger margins, and when he dropped the issue it fell out of circulation. Subsequent actions to revive the issue were unsuccessful. [11]

Symbolism

Entitled, "A down-hill movement" by C.J. Taylor in 1896 "FREE SILVER" "REPUDIATION" "DEMOCRACY" Detail, A down-hill movement - C.J. Taylor. LCCN2012648553 (cropped).jpg
Entitled, "A down-hill movement" by C.J. Taylor in 1896

Free silver became increasingly associated with populism, unions, and the fight of ordinary Americans against the bankers, railroad monopolists, and the robber barons of the Gilded Age capitalism era and was referred to as the "People's Money" (as opposed to the gold-based currency, which was portrayed by the Populists as the money of "exploitation" and "oppression"). William H. Harvey's popular pamphlet Coin's Financial School , issued in the aftermath of the Panic of 1893, illustrated the "restorative" properties of silver; through devaluation of the currency, closed factories would reopen, darkened furnaces would be relit, and the like. But Henry Demarest Lloyd was much harsher, writing: "The free silver movement is a fake. Free silver is the cow-bird of the reform movement. It waited until the nest had been built by the sacrifices and labor of others, and then it lay its own eggs in it, pushing out the others which lie smashed on the ground." [12]

See also

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References

  1. Charles Hoffmann, "The Depression of the Nineties," Journal of Economic History (1956). Vol. 16, No. 2) 16 (2): 137–164. in JSTOR
  2. Williams, 1910
  3. Walter T. K. Nugent, Money and American Society, 1865–1880 (1968)
  4. Milton Friedman, "Bimetallism Revisited", Journal of Economic Perspectives Vol. 4, No. 4 (Autumn, 1990), pp. 85–104 in JSTOR
  5. Congressional Record, 51 Congress, 1 Sess.: 2068-2069, March 3, 1890. 1890. Retrieved August 7, 2017.
  6. Stevens, Albert C. The Cyclopædia of Fraternities; a compilation of existing authentic information and the results of original investigation as to more than six hundred secret societies in the United States New York city, Paterson, N.J., Hamilton printing and publishing company p.301
  7. Preuss, Arthur A Dictionary of Secret and other Societies St. Louis: B. Herder Book Co. 1924 p.137
  8. Stevens p.322
  9. Stevens p.321
  10. Stevens p.322
  11. Russell L. Mahan, "William Jennings Bryan and the Presidential Campaign of 1896". White House Studies (2003). 3 (1): 41. doi : 10.2307/1917933. JSTOR   1917933.
  12. The Populist Response to Industrial America p142 Norman Pollack – 1976 "This was followed by his blistering indictment of silver: "The Free Silver movement is a fake. Free Silver is the cow-bird of the Reform movement."

Further reading