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Silver Coinage

On February 16, 1878, the Bland-​Allison Act, which provided for a return to the minting of silver coins, became U.S. law. Today, the value of American money is secured only by public faith in the stability of the government; during the 19th Century, money was backed by actual deposits of silver and gold. 

That is, money was silver and gold. But that did not mean that all was right with the monetary system.

Five years earlier, when Congress had stopped buying silver and minting silver coins — following the lead of European nations — a financial panic ensued. Reasons for the suspension lay in the fact that the exchange value of silver and gold had retained an old, out-​moded fixed ratio that favored silver producers. Had the United States Treasury let the two standards freely float, making a distinction between silver dollars and gold dollars, none of the political strife over bimetallism would have occurred. 

As it was, with silver over-​valued, the silver coins increasingly “drove” gold out of circulation, as well as out of the Treasury and into private hands. 

In 1893, in the midst of another financial panic, this time as a result of depletion of gold reserves in the U.S. Treasury, President Grover Cleveland called a special session of Congress to repeal the bimetallic standard. He was successful, though agrarian inflationists took over the Democratic Party and offered up, for the next election, William Jennings “Cross of Gold” Bryan as a counter to Cleveland’s old-​fashioned fiscal conservative/​social liberalism.

2 replies on “Silver Coinage”

When the Jacksonians were working to drive-​away paper money by reducing the weight of the gold subsidiary coinage, Congress had a little discussion of minting gold coins of a promised weight and purity but not a fix rate of exchange for the dollar (which was a silver coin). 

The lasting problem of adoption of the gold standard was that with it Congress succeeded in claiming a right to redefine “dollar” and thus to change at will all obligations expressed in terms of dollars. The Coinage Act of 1973 and Cleveland’s 1900 Gold Standard Act made it possible for Roosevelt and Nixon to reduce us to the use of fiat money. Historically, the gold standard was the beginning of the end of sound money.

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