Free silver

Free silver was a major policy issue in late 19th-century American politics. Its advocates were in favor of an inflationary monetary policy using the "free coinage of silver" as opposed to the deflationary gold standard. Its supporters were "Silverites". The Silverites promoted bimetallism, the use of both silver and gold as currency at the ratio of 16 to 1 (16 ounces of silver would be worth 1 ounce of gold). Because the actual value ratio was about 32 to 1 at the time, most economists warned that the cheaper silver would drive the more expensive gold out of circulation. Everyone agreed that free silver would raise prices; the question was whether or not this inflationary measure would be beneficial. The issue peaked from 1893 to 1896, when the economy was in a severe depression—called the Panic of 1893—characterized by falling prices (deflation), high unemployment in industrial areas, and severe distress for farmers.^[1]

The debate pitted the pro-gold financial establishment of the Northeast, along with railroads, factories and businessmen, who were creditors who would benefit from disinflation (resulting from demand pressures on the relatively fixed gold money supply against a backdrop of unprecedented economic expansion), against poor farmers who would benefit from higher prices for their crops (resulting from the prospective expansion of the money supply by allowing silver to also circulate as money). Free silver was especially popular among farmers in the wheat belt (the western Midwest) and the cotton belts (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). Free silver was the central issue for Democrats in the presidential election of 1896 and that of 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]

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.

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]

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

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

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.

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

Freemen's Protective Silver Federation - Founded in 1894 in Spokane, Washington. It adopted a constitution, bye-laws and ritual at Pullman, Washington late that year. Their stated goal was "to unite the friends of silver under one banner to battle for the white metal and to wage war against the gold monopoly". It was reportedly an outgrowth of the National Order of Videttes. The order spread through the Pacific Coast states and east to the Missouri River. It claimed as many as 800,000 members in late 1896, though Stevens considered this "extravagant". Nevertheless, there was no doubt of its popularity and influence west of the Rocky Mountains during the 1896 free silver campaign. The obligation of the order was said to be "most emphatic and binding" and lawyers and bankers were barred from membership.^[5] The order was apparently defunct by the early 1920s.^[6]
Silver Knights of America - Founded early in 1895 to campaign for free silver. Headquarters was in Washington, D.C., where it had a literary bureau. The governing body, the Supreme Temple, was incorporated as a stock company with $100,000 capital. Senator W. M. Stewart of Nevada was president, James Pait was vice-president, Oliver Sabine secretary, James A. B. Richard treasurer and S. S. Yoder director general. Many well known current and former members of the House of Representatives were members. The organization was "pushed simultaneously" in Missouri, Illinois, Kentucky and Arkansas, from which it invaded the Democratic-leaning areas. There was a female branch, the Silver Ladies of America, which was "intended to strongly develop the social feature of the organization". The order had a ritual, grips, passwords and a burial service. The order became defunct after 1896.^[7]
Patriots of America - Founded in late 1895 by William Harvey to organize for free silver in the 1896 campaign. Officers of the order included First National Patriot William Harvey, National Recorder Charles H. McClure of Michigan and National Treasurer James F. Adams of Michigan. Each state was also expected to have a First State Patriot and these officers would constitute the Congress of Patriots. Each county was also supposed to have a First Patriot. The "First Patriots" of the national, state and county level were expected to make an oath refusing to ever serve in elective or appointive offices or to have property over $100,000. There was an auxiliary organization, the Daughters of the Republic, which was tasked with looking after the poor of the Patriots of America. There were no dues and the order was financed through voluntary contributions. The order's object was to swing one of the parties to a free silver platform in 1896 and, if that failed, to launch an independent free silver ticket. The order was expected to hold a ballot every four years to determine what cause and candidate it would support, however the order appeared to become defunct after 1896.^[8] Headquartered in Chicago.^[9]

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.^[10]

Symbolism of free silver

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."^[11]

References

^ Charles Hoffmann, "The Depression of the Nineties," Journal of Economic History (1956). Vol. 16, No. 2) 16 (2): 137–164. in JSTOR
^ Williams, 1910
^ Walter T. K. Nugent, Money and American Society, 1865–1880 (1968)
^ Milton Friedman, "Bimetallism Revisited", Journal of Economic Perspectives Vol. 4, No. 4 (Autumn, 1990), pp. 85–104 in JSTOR
^ 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
^ Preuss, Arthur A Dictionary of Secret and other Societies St. Louis: B. Herder Book Co. 1924 p.137
^ Stevens p.322
^ Stevens p.321
^ Stevens p.322
^ 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.
^ 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."

External links

The Money Question of the 51st Congress: Speeches before the 51st Congress (1889-1891) regarding "free silver", digitized and available on FRASER
The Money Question of the 52nd Congress: Speeches before the 52nd Congress (1891–1893) regarding "free silver", digitized and available on FRASER
The Money Question of the 53rd Congress: Speeches before the 53rd Congress (1893–1895) regarding "free silver", digitized and available on FRASER
Free silver cartoons from Judge