The Free Silver Movement of 1873

Article I, Section 8, of the Constitution grants Congress the power “to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.”

The Free Silver Movement was brought on by the “Crime of ‘73” where an act of Congress expunged the silver dollar from the list of authorized coins. Free silver advocates ranged from silver mines owners out West, farmers who figured an expanded currency would drive up the price of their crops, and debtors who hoped it would enable them to wipe their debts. For true silver disciples, it was the shield of economic justice for the American people.

The free market had settled on “parallel standards” of gold and silver, each oscillating within a range relative to market supply and demand. Eventually, the government decided to interfere in the market in order to “simplify” matters. The result was another botched, well-intentioned oversight that foisted a “fixing” of the gold and silver ratio which introduced the policy of bimetallism.

In 1792 with Alexander Hamilton at the helm, the government pegged an official ratio of 15 to 1. If the market ratio had remained the same for as long as the fixed ratio was in effect, then the fixed ratio would have been redundant. But the market ratio varied over time as conditions naturally changed, rendering the fixed bimetallic ratio obsolete. “Gresham’s Law” entered the chat, an operation which states that “bad money drives out good”. e.g. if there are two forms of commodities in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation.

The issue of money is a function of government, and that the banks ought to go out of the governing business. — William Jennings Bryan

The Free Silver Movement called upon political backing at its debut because of the sharp economic depression of the 1870s. Its first significant milestone was the ratification of the Bland-Allison Act in 1878, which reinstated the silver dollar as legal tender and required the U.S. Treasury to buy between $2,000,000 and $4,000,000 worth of silver per month and coin it into dollars. In the early 1880s, pressure for new monetary legislation declined, but the falling land and farm prices in 1887 kickstarted demand by farmers for the unlimited coinage of silver. Congress responded in 1890 by instituting the Sherman Silver Purchase Act, which ran the government’s monthly silver purchases up by 50%.

After 1890, an amalgam of pressures remarkably reduced the amount of gold in the U.S. Treasury, triggering a panic in 1893 characterized by deflation, high unemployment, and overwhelming distress for farmers. (the 11th largest decline in U.S. stock market history) Conservatives retorted that the Sherman Act was to blame for the frenzy, and in 1893 Congress revoked that act. Farmers in the South and West censured this action, blamed the greed of bankers for the crestfallen state of the economy, and doubled down on their demand for the unlimited coinage of silver.

“Upon which side will the Democratic party fight—upon the side of ‘the idle holders of idle capital,’ or upon the side of ‘the struggling masses’?” — William Jennings Bryan

This had been a major landmark of the Populist Party in the election of 1892, and in lieu of strong opposition from President Grover Cleveland, the Dems made unlimited coinage of silver the principal plank in their platform in 1896. They went on to appoint the most devout proponent of free silver, William Jennings Bryant, as their presidential candidate. However, the Republicans won the election, and in 1900 Congress ushered in the Gold Standard Act which crowned gold the standard for all currency.

Fast forward thirty years to 1934, where a debate which was sparked by Grover Cleveland’s 1893 repeal of the Sherman Silver Purchase Act of 1890 was reignited with the passage of the Silver Purchase of Act of 1934. This granted the U.S. President and U.S. Secretary of Treasury the authority to buy up silver, issue silver certificates and also nationalize all U.S. mines. The law includes a 50¢ tax on profits from the transfer of silver bullion and financing a “Silver Tax Stamp”. After passing the law, the Treasury paid handsomely for silver, well over its 1934 value, and the price of silver surged from 45¢ to 81¢ an ounce. However, overprints on the Silver Stamp Taxes presented an issue for nationally owned silver. In 1943, the overprints were abolished and the Sherman Silver Purchase Act of 1934 would be fully rescinded by 1963.

“The free silver jabberwock” in 1896

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