[heading]What Was “Free Silver?” A Look Back At The Free Silver Movement[/heading]
The late nineteenth century was a curious time for the US. One of robber-barons and captains of industry, the late nineteenth century was also a time of “free silver”, a central American policy in favor of inflation by silver, which might be a foreign concept to todays silver bugs. What did the opponents of free silver support? The gold standard. Hmm…
The supporters of the the inflationary monetary policy of free silver were known as “Silverites,” and they were in favor of bimetallism. That is, the use of silver and gold as currency. Their ratio is familiar to those in the precious metals circles: 16 to 1.
The de fact0 ratio back then was 32 to 1 or therearound. That is where it got to in 2011 when silver tested the $50 handle. During that time, economics warned that cheaper silver would drive expensive gold out of circulation. Silver simply would raise prices. The real question was if this would be beneficial.
The issue came to the fore from 1893 to 1896 as the economy entered into a severe depression. This, the Panic of 1893, was characterized by plummeting prices, high unemployment in the industrial core of American society, and severe distress for farmers, who played a much more central role back then.
The pro-gold elitists of the Northeast, with their railroads and factories, were the creditors who would benefit
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.
In the days of the gold standard, US mints operated differently than today. Basically, a prospector or owner of gold could bring it to one of the US mints and trade it for its equivalent in gold coins, less a small deduction.
Those advocated free-silver wished for the mints to do the same with silver. During the period, silver dollars and smaller denominations were minted in silver. Then, the face value was substantially more than the melt value. The price of silver only fell when there were huge silver strikes in the west.
Many populist organizations favored an inflationary monetary policy, as they believed it would enable debtors to pay their debts off with cheaper, more readily available dollars; those to suffer under such a policy were creditors like banks and landlords.
Outside of the western mining states, the Republican Party was no in favor of free silver. They believed the best road to national prosperity was “sound money” – meaning gold. Their main argument was that inflation meant higher prices for everyone, and real gains for those with silver interests. In 1896, Senator Henry M. Teller of Colorado led western Republicans to bolt and form a third party in favor of William Jennings Bryan, the short-lived Silver Republican Party.
The Sherman Silver Purchases Act of 1890, although it fell short of free silver’s goals, required the US government to purchase millions of ounces of silver, which ultimately drove the price of silver up. The US government paid for their 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 many reasons for the Panic of 1893 and the onset of the 1890s depression. Once Grover Cleveland was elected President for the second time, he repealed the Act.
The Populist Party was another strong free-silver element. When it combined with the Democratic Party, the Democratic Party was moved from a pro gold standard orientation to a free silver position vocalized in 1896 by presidential candidate WIlliam Jennings Bryan, especially in his Cross of Gold Speech.
Bryan’s 1896 candidacy was supported by Populists and “silver Republicans” as well as by Democrats.
The options as to what would back the US currency were threefold: either gold, desired by the goldbugs and William McKinley), and silver (wanted by Silverites and Bryan). A third options was unbacked paper, wanted by the Greenbacks.
Voters in the city rejected free-silver because they believed that it would lead to an economic disaster, unemployment and higher prices. The diversified farmers of the Midwest and East opposed it as well, while the cotton farmers in the South and the wheat farmers in the West were unenthusiastic for free silver. Bryan tried once more in 1900 to raise the issue but lost even more.
Free silver over time became associated with Populism, unions and the fight of ordinary Americans against bankers, railroad monopolies and the robber barons of the laissez-faire capitalism era. Silver 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.” During the Panic of 1893, William H Harvey’s popular pamphlet Coin’s Financial School illustrated the “restorative” properties of silver. He argued that through devaluation of the currency, closed factories would reopen, darkened furnaces would be relit, and the like. Henry Demarest Lloyd disagreed: