Free Silver was an important political issue in the late 19th century United States. To
understand exactly what is meant by "free coinage of silver", it is necessary to understand
the way mints operated in the days of the gold standard. Essentially, anyone who
possessed uncoined gold, such as successful prospectors, or assayers or refiners to whom
they had sold their holdings, could deposit it at one of the U.S. Mints, where it would be
made into gold coins. The coins would then be given to the depositor, less a small
deduction for processing and funding Mint operations. Possibly in most cases the
depositor would not receive coins made of the actual gold he had deposited, but would
receive his due compensation in coins the mint already had ready. Free silver advocates
wanted silver to be accepted by the mints in the same way; if you deposited enough
silver, by weight, to manufacture a silver dollar, then the mint should pay out a silver
dollar to you.
After the discovery of large silver reserves such as the Comstock Lode in the Western
United States in the 12 years immediately after the American Civil War, one faction in
American politics began to agitate for the federal government (which under the United
States Constitution was responsible for coinage) to allow it to be minted freely at the rate
of $1 per troy ounce. As the gold standard in effect at the time valued gold at the official
price of $20 per troy ounce, the result of this policy would have been a considerable
increase in the money supply and resultant inflation.
At the time, the general price level was in a long term deflationary trend, and so inflation
was seen by many as an appropriate way of maintaining wages and real interest rates.
Modern economists who have studied the period are divided on whether free coinage of
silver would have been inflationary, but it was clear that geographically centered interests
had particular views. Eastern interests, trading with an increasingly gold standard–based
world, wanted gold money; interior interests, and particularly mining interests, wanted
silver money. Since banks were based primarily on the two coasts, deflation's effect of
increasing the real rate of interest for loans already made was popular, for manufacturers
the ability to hold wages down was also popular. For farmers, who borrowed to plant
every year, and for laborers outside of the factory economy, also perpetually in debt, the
idea of higher wages was attractive.
Many populist and radical organizations actually favored a very inflationary monetary
policy on the grounds that it enabled debtors (often farmers, laborers, and industrial
workers) to pay their debts off with cheaper, more readily-available dollars; those who
suffered under this policy were the wealthy creditors such as banks, leaseholders, and
landlords, who under this theory could well afford any loss this caused them. Other
supporters obviously included silver miners and those who supplied them, territorial and
state governments in silver-producing areas, and other interests who desired to see gold
demonetarized or at least reduced in prominence, including many Southerners