Changes

== Bimetallism ==

== Bimetallism ==

Under the Grant Administration, gold was the only standard for money:  debts were payable only in gold, and paper money could be exchanged at any time for a fixed amount of gold.  This prevented inflation because the amount of gold in the world was small and nearly constant.

Under the Grant Administration, gold was the only standard for money:  debts were payable in gold, and paper money could be exchanged at any time for a fixed amount of gold.  This prevented inflation because the amount of gold in the world was small and nearly constant.

But from about 1878 to the end of the century there was strong pressure to return the nation's standard for money to Alexander Hamilton's "bimetallism", under which money and debts were based on two metals rather than one (gold and silver).  Because gold had been the standard, advocating "bimetallism" meant adding a silver standard to the gold standard.   

But from about 1878 to the end of the century there was strong pressure to return the nation's standard for money to Alexander Hamilton's "bimetallism", under which money and debts were based on two metals rather than one (gold and silver).  Because gold had been the standard, advocating "bimetallism" meant adding a silver standard to the gold standard.   

Two forces drove this pro-silver or "free silver" movement:  Westerners had discovered silver mines so they wanted the silver to become more valuable, and farmers wanted more money available in order to cause inflation to increase the prices for their goods and lower the real cost of their debts to the banks.   

Two forces drove this pro-silver or "free silver" movement:  Westerners had discovered silver mines so they wanted the silver to become more valuable, and farmers wanted more money available in order to cause inflation to increase the prices for their goods and lower the real cost of their debts to the banks.   

Westerns and Southerners arranged for passage of the Bland-Allison Act in 1878, which required the government to purchase $2-4 million worth of silver each month.  In addition, a bill passed (over President Rutherford Hayes' veto) allowed for the free and unlimited coinage by the government of silver, such as silver dollars, at a ratio of 16 to 1 relative to gold.  The government began minting silver dollars that are collectors' items today (and worth much more than one dollar now).

Westerns and Southerners arranged for passage of the Bland-Allison Act in 1878, which required the government to purchase $2-4 million worth of silver each month.  In addition, a bill passed (over President Rutherford Hayes' veto) allowing for the free and unlimited coinage by the government of silver, such as silver dollars, at a ratio of 16 to 1 relative to gold.  The government began minting silver dollars that are collectors' items today (and worth much more than one dollar now).

But the price of silver fell as more was mined, because more of something usually means it is less valuable.  The monthly government purchases declined also.  Deflation continued for the next ten years.  $100 in 1878 was equivalent to only $84.43 in 1890.  Imagine that!

But the price of silver fell as more was mined, because more of something usually means it is less valuable.  The monthly government purchases declined also.  Deflation continued for the next ten years.  $100 in 1878 was equivalent to only $84.43 in 1890.  Imagine that! Deflation is devastating to farmers, as their income from goods decreases and their debts grow higher in real value.

Westerners wanted more silver purchased, and the debtors and farmers wanted more inflation.  They forced passage of the Sherman Silver Purchase Act in 1890, which required even greater purchases by the government of silver.  The Silver Purchase Act required the government to issue notes (like large-denomination dollar bills) to purchase 4.4 million ounces of silver each month, regardless of its value in dollars.  The bill passed in a compromise with the Northerners, who obtained a high tariff at the same time through passage of the McKinley Tariff Bill.

Westerners wanted more silver purchased, and the debtors and farmers wanted inflation.  They forced passage of the Sherman Silver Purchase Act in 1890, which required even greater purchases by the government of silver.  The Silver Purchase Act required the government to issue notes (like large-denomination dollar bills) to purchase 4.4 million ounces of silver each month, regardless of its value in dollars.  The bill passed in a compromise with the Northerners, who obtained a high tariff at the same time through passage of the McKinley Tariff Bill.

But the notes used to buy the silver each month were redeemable in gold, which was more valuable than the increasingly plentiful silver.  So pretty soon the public was demanding gold from the government in return for these new notes.  This created a "run" on the government's gold reserves of our Nation, with its total supply falling below $100 million and headed quickly towards zero.

But the notes used to buy the silver each month were redeemable in gold, which was more valuable than the increasingly plentiful silver.  So pretty soon the public was demanding gold from the government in return for these new notes.  This created a "run" on the government's gold reserves of our nation, with its total supply falling below $100 million and headed quickly towards zero.

This became the Panic of 1893, and the Silver Purchase Act was repealed in order to stop the run on gold.  An immensely wealth Wall Street banker, J.P. Morgan, arranged for more gold to be imported from Europe to protect the government reserves.  The "run" on the government's gold reserves then stopped.

This became the Panic of 1893, and the Silver Purchase Act was repealed in order to stop the run on gold.  An immensely wealthy Wall Street banker, J.P. Morgan, arranged for more gold to be imported from Europe to protect the government reserves.  The "run" on the government's gold reserves then stopped.

There was a bestselling and influential pamphlet called "Coin's Financial School" which was published just after the panic and economic depression of 1893.  In this fictional work, professor Coin lectures gold-standard advocates on the benefits of monetizing silver at a 16:1 ratio.  The pamphlet swept the country, much as Thomas Paine's "Common Sense" had been so influential over a century earlier.  Coin's pamphlet laid the foundation for William Jennings Bryan's "Free Silver" presidential campaign in 1896 against pro-gold Republican William McKinley.  Bryan, one of the greatest orators in history, delivered his famous "Cross of Gold" speech to the Democratic National Convention in 1896:<ref name="Cross of Gold">http://historymatters.gmu.edu/d/5354/</ref>

There was a bestselling and influential pamphlet called "Coin's Financial School" which was published just after the panic and economic depression of 1893.  In this fictional work, professor Coin lectures gold-standard advocates on the benefits of monetizing silver at a 16:1 ratio.  The pamphlet swept the country, much as Thomas Paine's "Common Sense" had been so influential over a century earlier.  Coin's pamphlet laid the foundation for William Jennings Bryan's "Free Silver" presidential campaign in 1896 against pro-gold Republican William McKinley.  Bryan, one of the greatest orators in history, delivered his famous "Cross of Gold" speech to the Democratic National Convention in 1896:<ref name="Cross of Gold">http://historymatters.gmu.edu/d/5354/</ref>