The Gold Standard, Bimetallism, or 'Free Silver'?
The bitter controversy surrounding the issues of "free silver" and "sound money," so central to the 1896
campaign, has proved difficult for historians to explain. Partisans on both sides made exaggerated claims of the
impact monetary policy could have on the nation's economic health. They implied that coinage of silver (on
Bryan's side) or adherence to the gold standard (on the Republican side) was the single key to prosperity--and
sometimes to the nation's honor.
Oddly, before 1896 both McKinley and Bryan had focused more attention on the tariff than on currency issues.
Despite his party's platform, McKinley sought to emphasize the tariff and to avoid being labeled a
"monometallist" or "bimetallist," leading to accusations of waffling. While he was a Congressman, Bryan
allegedly once said that "the people of Nebraska are for free silver, so I am for free silver. I will look up the
arguments later." His 1896 campaign became a free silver crusade.
Since the Civil War, a series of third parties had criticized Republicans' policy of contracting the money supply.
Lincoln's issue of Greenbacks, the first national paper money, had helped finance the war but it also stimulated
inflation. In subsequent decades, national Republican leaders sought to withdraw the greenbacks until each
dollar had 100% backing in metal reserves. During the economic depressions of the 1870s and 1890s, in
particular, this policy was roughly opposite to that which today's Federal Reserve might pursue in an economic
downturn. It drew criticism as tending to favor bankers and lenders--who needed the value of a borrowed dollar
to hold steady, or increase, until it was repaid--and detrimental to borrowers and workers.
Heirs to the Greenback Party of the 1870s believed that paper money was the solution. In post-war decades,
however, the opening of vast silver veins (such as Nevada's Comstock Lode) had sharply increased the nation's
silver supply. To Silver Democrats, federal coinage of silver (at a weight ratio of 16 ounces to 1 ounce of gold,
hence the slogan "16 to 1") was a moderate solution to the currency problem. After all, silver was a precious
metal, not mere paper. "Free silver" thus temporarily allowed a spectrum of currency reformers--from Southern
Democrats to Populists--to unite. To horrified Gold Democrats and Republicans, "free silver" was an appeal for
cheaper dollars. It would cheat lenders of an honest return on their money, allowing profligate borrowers to steal
value from those who had extended loans.
Free silver at "16 to 1" would have expanded the money supply, but as a lone measure it would hardly have
solved the nation's economic woes, and it would have (as Republicans argued) substantially raised the value of
silver in relation to gold. Yet adherence of 'sound money' was not solely--or even primarily--responsible for the
country's return to prosperity after 1896. To the extent that McKinley's victory reassured investors and financial
institutions, whose leaders were frightened of Bryan, resolution of the issue may have had an indirect economic
impact. After the campaign, however, the currency question faded quite rapidly from political debate.
'Free silver' and 'sound money' may have been most important as shorthand slogans for broader philosophies
of finance and public policy, and opposing beliefs about justice, order, and 'moral economy.' Cartoons and
commentary from the campaign, focusing heavily on the currency question, provide insights into these differing
worldviews.
A "Silver Bug Pin" for sale in the
1896 campaign
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Bimetallism and the Gold Standard
In economics, bimetallism is a monetary standard in which the value of the monetary unit can
be expressed either with a certain amount of gold or with a certain amount of silver: the ratio between
the two metals is fixed by law.
This monetary system is very unstable: due to the fluctuation of the commercial value of the
metals, the metal with a commercial value higher than the currency value tends to be used as metal
and is withdrawn from circulation as money (Gresham's Law). This occurred in the United States
throughout the 19th century as the official bimetallic standard became in effect a silver standard.
In the United States, toward the end of the nineteenth century, bimetallism became a center of
political conflict. Newly discovered silver mines in the American West caused an effective decrease in
the value of money. This created a conflict between those that favored inflationary policies caused by a
bimetallic standard and those that favored sound money produced by a gold standard. Bimetallism
and "free silver" were favored by Democrats, populists, and Western states with silver mines, in
contrast to the gold standard which was favored by financial interests in the East Coast.
William Jennings Bryan, the eloquent champion of the cause, gave the famous "Cross of Gold"
speech at the National Democratic Convention on July 9, 1896 asserting that "The gold standard has
slain tens of thousands." He referred to "a struggle between 'the idle holders of idle capital' and 'the
struggling masses, who produce the wealth and pay the taxes of the country;' and, my friends, the
question we are to decide is: Upon which side will the Democratic Party fight?" At the peroration, he
said "You shall not press down upon the brow of labor this crown of thorns, you shall not crucify
mankind upon a cross of gold." However, his presidential campaign was ultimately unsuccessful and
1896 saw the election of William McKinley who implemented the gold standard in 1900.
The phrase “gold standard” is defined as the use of gold as the standard value for the money
of a country. If a country will redeem any of its money in gold it is said to be using the gold standard.
An individual would be able to take any type of legal tender to the proper authorities and redeem that
form of money for gold at a specified rate. In short, the gold standard was a force for stability. Silver,
not nearly as rare as gold, had been the standard for most of the world's currencies until the Industrial
Revolution in the 19th century. The increase in world trade which accompanied industrial development
led to demands for the adoption of the gold standard. Britain, the first industrialized power, adopted the
gold standard around 1820. The United States did not follow suit until 1873 (the Coinage Act of 1873,
or known to its critics as the "Crime of '73"). The gold standard came under bitter attack in the United
States, first by the National Greenback Party in the 1870s and later by the Democrats under William
Jennings Bryan, particularly in the Election of 1896.
The U.S. and many other Western countries adhered to the gold standard during the early
1900’s. Today, however, gold’s role in the worldwide monetary system is negligible. Britain abandoned
the gold standard 1931. In the U.S., President Franklin Roosevelt, in order to end the 1930s general
bank crisis, issued an executive order and, with the Emergency Bank Relief Act (March 1933) and the
Gold Reserve Act (January 1934), outlawed the circulation and private possession of United States
gold coins for general circulation, with an exemption for collector coins. This act declared that gold
coins were no longer legal tender in the United States, and people had to turn in their gold coins for
other forms of currency. This act took the United States off the gold standard, and it also effected the
removal of the statement that United States paper currency could be exchanged for gold at any of the
nation's banks. President Richard Nixon of U.S. closed the “gold window,” meaning the U.S. would no
longer allow foreign governments to redeem dollars in gold. This action broke the last tie between gold
and circulating currency, resulting in our modern financial system which is called a “floating currency”
system. On August 15, 1971, the world entered the first era in its history in which no circulating paper
anywhere was redeemable in gold, by anyone.
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