Monetary Policy Case Study:
Bimetallism Resolution
Compelling Policy Question: Should American Monetary Policy support expansion, or stability in the economy?
Policy Case Study:
William E. Chandler’s (R)NH - Bimetallism resolution. (modified/link to original) Chandler's biography
Resolved, The United States should not permanently accept the single gold standard. The efforts of the Government in all its branches should be steadily directed to secure and maintain the use of silver as well as gold as standard money, with the free coinage of both, under a system of bimetallism to be established through international agreement or with such safeguards of legislation as will insure the equality of the value of the two metals at a fixed ratio, provide a sufficient amount of metallic money, and give immunity to the world of trade from violent fluctuations in exchange.
Timeline of the Populists and the Bimetallism/Free-Silver Movement
1792: Secretary of U.S. Treasury Alexander Hamilton suggests the U.S. use a gold and silver-based monetary system.
1794: Coinage Act of 1792 leads to minting of first official U.S. silver dollar.
1862: Congress passed a law authorizing paper "greenbacks" as legal tender.
1873: Coinage Act of 1873 ends the use of silver coins. called the “Crime of 73”
1875: The Resumption Act of 1875 makes gold the unofficial standard money.
1876 - “Farmer’s Alliances” form. Farmers unhappy about low prices for farm products and high prices for farming machinery; the monopoly of railroads; the Gold Standard; their debt to banks, and Wall Street speculators.
These farmers thought inflation would solve their problems.
1878 Bland-Allison Act requires Government to buy between 2 to 4 million $ worth of silver every month to turn into coins. Congress overturned President Hayes veto of the Act.
1890: The Sherman Silver Purchase Act required the Government to buy 4.5 million ounces of silver monthly with notes to be exchanged for gold or silver.
1892: 1st national Convention of the People’s Party held in Omaha, Nebraska. Platform included government owned railroads and free coinage of silver.
The “Free Silver” movement wants the United States Government to switch from the Gold Standard money policy to “BiMetallism”. If a country follows a “gold standard” it means money can be exchanged for gold. If the amount of gold in circulation changes, the value of money changes.
(Bi-Metalism means two metals - Gold AND Silver). This would lead to more money coming into the economy which would make money worth less. This sounded good to many people who were in debt. (The phrase “16 to 1” means if silver is used as currency, 16 ounces of Silver will equal 1 ounce of gold).
Hypothetical- You owe $10,000 for your house. Under the gold standard if you made $1,000 a year, it will take you ten years to pay off the debt. If Silver is added to the monetary system, money would lose some value, but your wages could increase. If you started making $2,000 a year your debt would basically be cut in half.
1893- People blame an economic depression in 1893 on the Sherman Silver Purchase Act. President Grover Cleveland has Congress repeal the law.
1896 -Populist Party supports Democratic presidential candidate William Jennings Bryan (Nebraska). Bryan gives his “Cross of Gold” Speech at the Democratic Convention, making Free Silver a focus of his campaign.
1896 Republican William McKinley defeats Bryan 271 to 176 (electoral votes) 7,104,779 to 6,502,925 (popular vote)
1897 William E. Chandler (R)NH introduces a Bimetallism resolution.
Section #1: Why do people believe the Government's monetary policies should be expansionary?
In 1896, at the Democratic National Convention, the Presidential Candidate William Jennings Bryan gave his “Cross of Gold” Speech. In his speech he said...
The merchant at the corner store and the farmer in the field are as much businessman as the merchant of New York and the man who works on Wall Street. We speak for this class of businessmen. We are fighting in the defense of our homes and our families. We asked, we petitioned, and we begged, but we were ignored and mocked
We beg no longer. We defy them! You come to us and tell us that the great cities are in favor of the gold standard. I tell you that the great cities rest upon these fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic. But destroy our farms and grass will grow in the streets of every city.
Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them: you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.
The 1892 Platform of the People's (Populist) party said... (modified/link to original)
The People’s Party National political platform demands include government owned railroads, free coinage of silver, a graduated income tax, an eight hour day, the popular election of senators, the secret ballot, government ownership of telegraphs and telephones.
The conditions surrounding us are the best reason for us to cooperate. Our nation is on the edge of moral, political, and material ruin. Corruption dominates the Government. The people are unhappy and their opinion is silenced, small businesses are ruined, homes covered with mortgages, the land belongs to the capitalists, workers are impoverished. denied the right to organize for self protection.
The national power to create money is used to help the rich. Even though Silver has been used as money since the dawn of history it is not being used in America. Not using Silver increases the power of those who have gold, bankrupting small businesses, and enslaving workers. If this conspiracy against mankind is not stopped at once it will result in the destruction of civilization.
We pledge ourselves that if given power we will work to end these evils by wise and reasonable laws. We believe that the power of government—in other words, of the people—should be expanded as rapidly and as far as the good sense of an intelligent people and the teachings of experience shall justify, to the end that oppression, injustice, and poverty shall eventually cease in the land.
Mary Lease Raises Hell Among the Farmers, 1891 (modified/link to original)
Mary Lease was a teacher from Kansas and an influential speaker in the Populist movement
This is a nation of inconsistencies. We fought England for our liberty and enslaved four million blacks. We wiped out slavery and our laws and banks began a system of white wage slavery worse than the first.
Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street.
The great common people of this country are slaves, and monopoly is the master. Money rules, and our laws reward rascals punish honesty. The Political parties lie to us and the politicians mislead us.
The politicians said we suffered from overproduction. Overproduction, when 10,000 little children starve to death every year in the United States. Over 100,000 shop girls in New York are forced to sell their values and purity for the bread their low wages deny them.
We will stand by our homes and stay by our fireside by force if necessary, and we will not pay our debts to the loan-shark companies until the government pays its debts to us. The people are at bay; let the bloodhounds of money who dogged us thus far beware.
People's Party Paper, 16 October 1896 (Times-Democrat, Idaho)
The continuance of the "present gold standard" means:
Ruin;
Rage;
Riots;
Debts;
Crime;
Strikes;
Tramps;
Poverty;
Mortgages;
Hard times;
Sheriff sales;
More panics;
Less churches;
Close factories;
Business failures;
Fewer preachers;
More soup houses;
Homeless families;
A debauched ballot;
Twenty-cent wheat;
Less improvements;
Uneducated children;
Suffering and misery;
Crowded alms houses;
A dearth of marriages;
Two-dollars-a-ton hay;
Idleness and stagnation;
Two-cent-a-pound hogs;
Five-cent-a-pound butter;
Ten-dollars-a-head mules;
Falling prices for all product;
Hungry women and children;
Ten-cent-a-bushel potatoes;
Pauper prices for vegetables;
Two-dollars-and-a-half horses;
A contraction of the currency;
A dear dollar and a cheap man;
Twenty-five-cents-a-day labor;
Half clothed women and children;
Coxey armies marching through the land.
J. W. Harris, To the Editor, Boston Daily Globe, 1896 (modified/link to original)
I am a voter upward of 60 years of age. Never exercised my right to vote, and never considered politics worth my attention, as I have never considered the “machinery of politics” is a square deal with the masses. Lies are told constantly by both democratic and republican newspapers and speechmakers.
Not until the speech of William J. Bryan at Chicago, which caused his nomination, have I ever wanted to vote. The ringing ideas of that speech has aroused my patriotism, and I must as a duty to my country vote the silver ticket.
We want no class candidates elected.
Let us have 16 to 1, and continue that ratio. The speech of Mr. Bryan is remarkable. It will go down in the history of ages and be remembered as long as the English language is spoken.
My first vote will be for a president who is fearless, firm and right, and a master of his convictions
“The Farmer Is the Man”, a popular rallying song of the 1890s.
In 1875 the American Oleograph Company made an oleograph titled “I feed you all!”.
Library of Congress summary
Sometime between the 1880's and 1890's, the Chicago newspaper “The Farmer’s Voice”, published a cartoon titled “The Eastern Master and his Western Slaves”.
Bernard Gillam, “'The Silver Sun of Prosperity”, Puck, 1890
Caption: “The passage of the Republican Silver Bill (The Sherman Silver Purchase Act) establishes Silver on a Parity with Gold. This raises the value of the products of labor, and has already been the cause of greatly increased prosperity throughout the West and South.”
"The Farmer and Demonetization" Southern Mercury, Texas, 1893 (source)
In 1894, artist William Hope Harvey published a cartoon titled "Take your Choice", in his book Coin's Financial School.
(excerpt from book)
L.D. Bradley, “A Vain Effort”, St. John, KS County Capital
Caption: This country will never be prosperous again until silver is restored to full and unlimited coinage
Jacob S. Coxey, “Sound Money”, 1895
We Want No Crown of Thorns, No Cross of Gold-- Like This.
Labor Advocate, Their Argument Misses Fire, 1896
Explanation of Labor Advocate’s “Their Argument Misses Fire”
Banker and Life Insurance President (in pathetic double snuffle):--
“My dear sir, you won't vote for free silver and the cutting in two of
the bank balance and insurance policy, will you?”
Despairing Worker-- “Gentlemen, I'm less worried about bank balances and insurance policies than I am about getting work to support my family.”
Sign on building- “We Subscribe liberally to the free soup house and other charities for victims of monometallism”
The Silver Dog With the Golden Tail, Boston Globe, from the Salt Lake Utahnian, 1896
WILL THE TAIL WAG THE DOG, OR THE DOG WAG THE TAIL?
ELECTORAL VOTE.
Gold states: 151, Silver states: 226 White, doubtful: 70
Total: 447 Necessary for election: 224
PRODUCTION OF SILVER STATES.
100% of all the gold, 100% of all the silver, 100% of all the cotton, 97% of all the corn. 92% of all the wheat, 92% of all the barley, 87% of all the oats.
Amount of mortgage debt on farms: $6,019,679,985
Amount of public debt: $17,174,879,990
TOTAL: $23,194,559,975
VALUE OF FARM PRODUCTS
Gold states: $418,309,068 Silver states: $2,041,798,422
Soliloquy, Rocky Mountain News, 1896
Caption: Miss Democracy, with a sigh of relief--'There's a good day's work and the path is clear for decent people."
The Coming Nation, Our Farmers' Situation, The Coming Nation, 1896
Text of the "Song of the Sainted." from above in the cartoon.
Little factory child is dead,
Jam him in his coffin.
Don't let this fill you with dread,
These things happen often.
God is always good and kind,
Grief and sorrow filled Him,
Had the boy been left behind,
Slavery would have killed him.
Take him to the potter's field
In his shabby coffin;
Jesus Christ will be his shield;
These things happen often.
The Almighty's work be done;
We must all bow to it
Willie's little race is run;
God knows how to do it.
He was born a little slave, Parents had no money;
He is better in the grave,
God does some things funny.
Man who owns that factory
Sends his boy to college;
That is just as it should be,
God loves boys with knowledge.
God lives on his gilded throne,
Not by poor man's hovel;
He wills woes upon the drone,
They're the angel's level. Still somehow he loves the poor
Just enough to watch 'em
When we take them to death's door,
God is there to snatch 'em.
--A MAN WITHOUT A SOUL.
The Great National Currency Race, County Capital Newspaper, St. John, KS
Caption: "Cleveland--'This blasted wheel wobbles too much. I never can catch that fellow ahead and you might as well save your breath. I am in a perplexing and delicate predicament as a result of ill-advised financial expedients.'"
Explanation: Fans cheering on the race include the banker J.P. Morgan, who holds government bonds. Morgan would lose money if the United States used Bimetalism
The Republican Idea of Finance, County Capital, St. John, KS
“The Unicycle Won't Work” Rocky Mountain News, Denver, CO, 1893
Caption:
Uncle Sam- “I told you Grover, you couldn’t ride that darned one-wheel concern. When you pick yourself up and brush off your clothes just jump on to this bicycle and you’ll sail along like a daisy through the rest of your administration.”
***Grover Cleveland was the President in 1893 when this cartoon was made.***
Section #2 Guiding Question:
Why do people believe the Federal Government's monetary policies should promote stability?
In 1896, in William McKinley's Acceptance Speech for the Republican Presidential Nomination, he said...
(modified/link to original)
William McKinley was the Republican candidate for President in 1896, he gave this speech from his home's front porch in Ohio. McKinley's biography
It is suggested by one wing of the Democratic Party and its allies, the People's and Silver parties, to move the United States to Bimetallism at a ratio of 16 ounces of silver to one ounce of gold.
We must not be misled by phrases, nor fooled by false theories. Free silver would not mean that silver dollars were to be freely had without cost or labor. It would not make labor easier, the hours shorter, or the pay better. It would not make farming less difficult or more profitable.
It is make believe to blame the hard times to the fact that all our currency is on a gold basis. Good money never made times hard.
Republican Party Platform. Adopted at St. Louis, 1896. (modified/link to original)
The Republican party is unreservedly for sound money. It caused the enactment of the law providing for the resumption of specie payment in 1879; since then every dollar has been as good as gold.
We are unalterably opposed to every measure calculated to debase our currency or impair the credit of our country. We are, therefore, opposed to the free coinage of silver, except by international agreement with the leading commercial nations of the world, which we pledge ourselves to promote; and, until such agreement can be obtained, the existing gold standard must be preserved. All our silver and paper currency must be maintained at parity with gold, and we favor all measures designed to maintain inviolable the obligations of the United States and all our money, whether coin or paper, at the present standard, the standard of the most enlightened nations of the earth.
J. Laurence Laughlin, 'Causes of Agricultural Unrest,' Atlantic, 1896 (modified/link to original)
Laughlin was an Economics professor who taught at Harvard and the University of Chicago. He was the editor of the Journal of Political Economy . Laughlin's biography
Of course, the farmer who has over-traded, or expanded his operation beyond his means during an economic depression is affected just as anyone else is.
We produce more wheat than we consume, and as a result, the price of the whole crop is determined, not by the markets within this country, but by the world-markets, is leading to a situation where the supply is so high, the wheat is not worth as much. That is how supply and demand works.
The sudden enlargement of the supply without any corresponding increase of demand produced that alarming fall in the price of wheat which has been made the farmer's excuse for thinking that silver is the magic cure-for all his problems
Feeling the coils of some mysterious power about them, the farmers, in all honesty, have blamed their misfortunes to the 'constriction" in prices, caused, as they think, not by an increased production of wheat throughout the world, but by the "scarcity of gold."
WOMEN AND FREE SILVER. -Seattle Post-Intelligencer, 1896, from St. Louis Mirror, (modified)
The women of this country dominate it. They keep our morals and our literature and our speech clean and pure. They helped bring about the settlement of the slavery issue.
The healthy public opinion of the entire nation is not what the men think upon a subject, but what the women feel upon it.
What have women to do with political economy? it may be asked. They are at the bottom of all economy. Without women there would be no economy. Woman has everything to do with everything, with political economy especially
The money a woman wants--and the Lord knows she needs more than she gets, usually--is the best money that can be had.
The best money is gold. Silver at 16 to 1, and free coinage will be the end of cheap money. The woman can see this. Her vision has more of the X-ray quality in these things than that of man.
The housewife's pleasure in a dollar, with free silver, would be destroyed.
The dollar William Jennings Bryan offers her is a dollar that is just as hard to earn as before, but once you have it, it is worth only half of what it used to be.
This is not what the good women of this country desire. They want money that represents the value of the labor their husbands used to get it.
The National (GOLD) Democratic Platform, 1896 (modified/link to original)
The Democratic Party split in 1896 over the Silver Issue. After the official Democrat party supported Bimetallism legislation, some Democrats broke away and formed the National Democratic, who officially supported the Gold Standard.
This convention has assembled to uphold the principles upon which depend the honor and welfare of the American people. The Democratic party is pledged to the preservation of the Federal Government and the support of the sound money.
The Chicago Convention of the Free-Silver Democrats advocates a reckless attempt to increase the price of silver by legislation.
GOLD AND SILVER IN THE CURRENCY.
Gold is the best and safest money for all who earn a livelihood by labor or the farming. They cannot suffer when paid in the best money know to man, but are the most defenseless victims of a debased and fluctuating currency, which offers continual profits to the money changer at their cost.
We insist on maintaining the gold standard, and are firmly opposed to the free and unlimited coinage of silver and to the compulsory purchase of silver bullion.
We assert the necessity of such intelligent currency reform as will confine the Government to its legitimate functions.
In 1893, artist Louis Dalrymple created the cartoon “Out of the silver flood!” for Puck Magazine.
Library of Congress summary
In 1890, artist F. Victor Gillam illustrated a cartoon titled "Opening the Flood Gates/The Mad Act of Our Crazy Senate.".
A group of politicians lift the “Floodgate” of the “Free coinage Act”.
Columbia is washed away in the flood of silver.
She is holding in her hand a piece of paper reading “Our Credit”
In 1895, artist Louis Dalrymple created the cartoon “Out Nebraska way” for Puck Magazine.
Library of Congress summary
Caption: Puck: “What's the matter with you? Why ain't you getting out your crops? Grain and corn are bringing big prices, and good times have come again.”
Farmer Weedly (Silver Fanatic) “No, sir-ree! What's the use of raising crops for the gold bugs from Wall Street to eat up? Free Silver is the only thing that'll save us!”
J.S. Pughe, The financial fakir fooling the farmers, Puck, 1895
Library of Congress summary
Udo J. Keppler, He Must Be Kept Out, Puck, 1896
Library of Congress summary
J. S. Pughe, He Could N’t Read, Puck Magazine, 1896
Library of Congress summary
Dubious, Wasp Magazine, San Francisco
caption of Dubious:
“What awful poor wages they get in all those free silver countries, John!”
“That’s so, wife, but the politicians say it will be different in America”
“I wouldn’t take any chances on it John. It’s easy to lower wages and hard to raise them. Politicians will tell you anything to get votes. We know there was good wages when we had protection. We could never buy clothes and food for the children on what they get in those free silver countries, could we?”
Signs read:
Vote for Free Silver and be Prosperous like:
India 2¢ a day, South America 20¢ a day, Japan 15¢ a day, China 10¢ a day, Mexico 25¢ a day
Udo J. Keppler, “The free silver jabberwock”, Puck, 1896
Library of Congress summary
Caption: Caption:
And as sound money stands at rest,
The Jabberwock, upon the run,
Comes whiffling from the Wooly West,
Burbling "Sixteen to One!"
One, two! - One, two! - and through and through,
Sound Money's sword goes snicker-snack; -
He'll leave it dead, and with its head,
He'll go galumphing back.
With Puck's acknowledgments to the author of "Alice In Wonderland," and Sir John Tenniel.
Udo J. Keppler, “The true inwardness of it”, Puck, 1896
Library of Congress summary
Caption: Puck Now you can see, gentlemen, that the Bryan campaign is not in the interest of the people, but simply and solely in the interest of the Silver Trust.
Puck pulls back a curtain to show a "Laborer, Farmer, and a Business Man" with the Bryan campaign's support of the "Silver Trust", as a man shows a paper to a bloated silver mine owner that states "To Silver Mine Owners: If Bryan is elected we shall make the people pay you an increase of 64 cts. on every ounce of your silver. This means a profit to you of $36,000,000 a year. We ask you to contribute one month's profit of $3,000,000 to elect Bryan. Merrill's Popocratic Circular".
Udo J. Keppler, “A noisy mob; - but the sound money police are closing in on them” Puck, 1896
Library of Congress summary
William Jennings Bryan being carried in a chair by four men, two are labeled "Tillman" and "J.F. Williams"
Down a street, behind a group of crazed men labeled "Free Silver, Riot, Repudiation, Populism, Anarchy, [and] Class Hatred", two of them are carrying small flags that state "Down with Supreme Court" and "Down with Property Holders".
Policemen labeled with the states of the Union and holding billy clubs labeled "Sound Money Vote" are lining both sides of the street
LIGHTNING CHANGES IN POLITICS. Boston Globe 16 October, 1896, from Chicago Record
Caption:
(Left) "MY FRIENDS, THIS IS WHAT YOU NEED."(holding "Free Trade Tonic") --Mr. Bryan in 1892.
(Right) "IT IS NOT NECESSARY TO DISCUSS THE TARIFF QUESTION AT THIS TIME." (holding "Free Silver Tonic")--Extract from Mr. Bryan's letter of acceptance, 1896
Rocky Mountain News: Wall Street's Private Studio 1896
William Jennings Bryan carries a sign reading; "Good for what Ails you- The Barefoot Free Silver Cure"
Victor Gillam, Forewarned is Forearmed, Judge Magazine, 1896
Louis Dalrymple, Buncombe and Boodle, Puck, 1896
Library of Congress summary
Summary of Louis Dalrymple, Buncombe and Boodle
William Jennings Bryan as a puppet being manipulated by a well-dressed man sitting on a large money bag labeled "Silver Mining Syndicate" and listing names and dollar amounts, "Hearst $75,000,000, Fair 40,000,000, Mackay 40,000,000, Wm. Stewart 40,000,000, W.A. Clark 30,000,000, Moffatt 30,000,000 [and] J.P. Jones 25,000,000".
Bryan is holding cymbals labeled "Free Silver and Prosperity" and "Promises of Good Wages".
His audience is a laborer with his lunch pail labeled "Labor" and in his back pocket a "Bank Book".
Grant E. Hamilton, The Temptation, Judge, 1896
Explanation of Grant E. Hamilton’s “The Temptation”
An “American Farmer stands on top of a mountain. A devil (wearing a medallion labeled “Bryan”) is points to a background of “Mountains of Silver”, “Cities of Silver”, “Hills of Silver”, and a “Silver River”.
On the rock at the American Farmer’s feet is a piece of paper reading; “Tremendous Majorities in the Farming Districts of the New England States for Sound Money”
What were the results of the debate?
Congress did not vote for the Bimetallism Resolution. With the end of the 1896 election, the Bimetallism and “Free Silver” movements lost some steam.
In 1900 the Government under President McKinley passed the Gold Standard Act. This Act fixed the ratio of how much gold a dollar was worth (1.5046 grams of gold).
In 1913 the Federal Reserve Act required the Federal Reserve to hold gold equal to 40 percent of the value of the currency it issued (Meaning if they issued 100 million dollars they would have to have 40 million dollars worth of gold), and required the Federal Reserve to convert those dollars into gold at a fixed price of $20.67 per ounce of pure gold.
In 1933, in response to the run on the banks during the Great Depression Congress passed the Emergency Banking Act. This Act gave the president the power to control the exchange of gold within the United States, and prevent gold from going to foreign countries. It also gave the Secretary of the Treasury the power to force people the exchange their gold coins and certificates for other money of equal value. While Americans could no longer exchange their U.S. dollars for gold, foreign Governments were still allowed to trade their U.S. dollars for Gold. President Nixon ended that in 1971.