BI-METALLISM & THE FREE SILVER MOVEMENT
In 1837, Congress established a relationship between silver and gold at the ratio of 16 to 1 (meaning that 16 ounces
of silver were to be equal in value to one ounce of gold). During the war years of the 1860s, little silver was mined and
the open market price rose sharply. Miners stopped selling their silver to the government and instead found buyers
from the ranks of jewelers and other users of the product.
In 1873, reacting to market realities, the Grant administration demonetized silver, leaving gold as the sole standard of
the nation's currency. Silver became simply another commodity whose value would be set by supply and demand.
There was little reaction to this move initially and certainly no outrage.
However, following the Panic of 1873, a severe depression descended upon the country, reviving interest in the
monetization of silver. Pressure was exerted from two sources.
1. The silver miners. Ironically, at about the same time that silver was demonetized, new silver discoveries were
made in the West. As the newly mined silver hit the market in ever larger quantities, the price declined. Mine
operators remembered the advantage of having a ready market through government purchase and began to
refer to demonetization as the "Crime of '73." The mining interests were still a small force, but they found that
they could increase their clout by allying with the farmers.
2. The farmers. Traditionally farmers were often mired in debt, depending upon banks for the funds to
purchase seed and equipment in the spring and hoping for a successful harvest to pay off their debt in the fall.
The 1870s saw declining farm prices that worsened the farmers' already precarious position. They eagerly
latched on to the National Greenback Party and later came to support various silver remedies.
Conservative forces representing the interests of many eastern bankers and businessmen were successful in gaining
passage of the Specie Resumption Act (1875), a measure that provided for the redemption of the greenbacks in gold
(you can “redeem” your paper $ for actual gold).
The miners and farmers pressured Washington and won a partial victory in the Bland-Allison Act (1878), which restored
silver as legal tender and pledged the government to purchase a minimum amount of the metal each month.
Nevertheless, the government notes were still backed by gold alone. True bimetallism would have allowed redemption
in either metal (gold or silver) and established a set ratio of value between the two.
The early 1880s saw the return of farm prosperity and the resulting decline of interest in the silver coinage issue.
However, hard times hit again in 1887, prompting renewed demands from farmers and miners to reinstitute the coinage
of silver at the old 16:1 ratio. Again a compromise was reached, this time in the form of the Sherman Silver Purchase
Act (1890). This measure obligated the government to purchase the mines' nearly entire output each month, but these
purchases were to be at market rates, not at the predetermined ratio favored by the farmers and miners. New western
states had recently joined the Union and were responsible for this limited victory. In addition, under this Act redemption
could be in either gold or silver …. and people chose gold.
Panic and depression struck the country again in 1893. Conservative leaders pointed to the Sherman
Silver Purchase Act as the root of the nation's ills, but the farmers blamed eastern economic interests. Indeed, the
country had split over the silver issue. The Democratic Party, despite the prominence of Cleveland, was largely in the
hands of the free silver forces. The Republicans called for strict adherence to gold alone. Silver played a prominent,
if ill-fated role in the presidential elections in 1892, 1896 and 1900.
By 1900, Republican forces were firmly in control and advanced the passage of the Gold Standard Act, which
established gold as the sole standard for all U.S. currency.
The silver movement ultimately failed for the following reasons:



It was presented to a national audience in several presidential elections and failed to sway a sufficient number
of voters.
Worldwide gold discoveries increased its supply, relieving gold currency shortages.
The depression of the 1890s ended and general prosperity returned.