I’m
not advanced in politics,
I cannot make a speech;
For
me the sweet politic form
Has e’er been out of reach.
Bimetalism’s
Greek to me,
Free coinage the same;
And
monometalism, why,
I only know in name,
The
Wilson law I’ve quite forgot,
Likewise McKinley’s bill;
Protection
I don’t understand,
And guess I never will.
Sixteen
to one I cannot grasp,
Nor want to, I’ll be bound;
But
I’ve good ears, and this I know,
I like the money sound.
Sept.
23, ‘96
Pub.
in B. Post,
Nov.
2, 1896
In economics, bimetallism is a monetary
standard in which the value of the monetary unit is defined as
equivalent both to a certain quantity of gold and to a certain quantity of
silver; such a system establishes a fixed rate of exchange between the two
metals. The defining characteristics of bimetallism are:
Both gold and silver
money are legal tender in unlimited amounts.
The government will convert
both gold and silver into legal tender coins at a fixed rate for individuals in
unlimited quantities. This is called free coinage because the quantity is
unlimited, even if a fee is charged.
In the United States, bimetallism became a
center of political conflict toward the end of the 19th century. During the Civil
War, to finance the war the U.S. switched from bimetallism to a fiat money currency.
After the war, in 1873, the government passed the Fourth Coinage Act and
soon resumption of specie payments began without the free and unlimited coinage
of silver. This put the U.S. on a mono-metallic gold standard. This angered the
proponents of monetary silver, known as the silverites. They referred to
this act as "The Crime of '73," as it was judged to have inhibited
inflation. The Panic of 1893 was a severe nationwide depression that
brought the money issue to the fore. The "silverites" argued that
using silver would inflate the money supply and mean more cash for everyone,
which they equated with prosperity. The gold advocates said silver would
permanently depress the economy, but that sound money produced by a gold
standard would restore prosperity.
Bimetallism
and "Free Silver" were demanded by William Jennings Bryan who
took over leadership of the Democratic Party in 1896, as well as the Populist and Silver
Republican Parties. The Republican Party nominated William
McKinley on a platform supporting the gold standard which was favored by
financial interests on the East Coast. A faction of Republicans from silver
mining regions in the West known as the Silver Republicans endorsed Bryan.
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; this can be partially attributed to the discovery of the cyanide
process by which gold could be extracted from low grade ore. This process and
the discoveries of large gold deposits in South Africa (Witwatersrand Gold Rush of
1887 - with large-scale production starting in 1898) and the Klondike Gold
Rush (1896) increased the world gold supply and the subsequent increase in
money supply that free coinage of silver was supposed to bring. The McKinley
campaign was effective at persuading voters that poor economic progress and
unemployment would be exacerbated by adoption of the Bryan platform. 1896 saw
the election of McKinley. The direct link to gold was abandoned in 1934 in FDR’s New
Deal program and later the link was broken by Nixon when he closed
the gold window.
monometalism - The theory or system of a single
metallic standard in coinage.
From San
Francisco Call, Volume 80, Number 82, August 21,1896, p. 6:
WILSON LAW AND
McKINLEY LAW.
Chicago
Inter Ocean.
The title
of the McKinley law is: "An act to reduce revenue and to equalize duties
on imports, and for other purposes." Nevertheless, it was assailed by the
Democratic press as though it were an act to increase revenues at a time when
the prudent administration of affairs by Republican Presidents and Congresses
had created a yearly surplus. It accomplished its purpose by reducing or
repealing tariff duties on such manufactures as by a long course of protection
had become wholly or partially self-sustaining and by adding to the duties on
industries that evidently, needed more protection.
Thus it
increased the duty on tinplate, and by so doing created an American industry
that gave employment to thousands. It reduced the duties on most forms of
manufactured iron. It increased the duties on pottery ware and gave a new
impetus to ceramic art in the United States. It increased the duty on wools and
multiplied the flocks and fleeces of the country. It added to the duty on
shoddy and by so doing well nigh banished that filthy and disease-engendering
substitute for wool from the American market. It repealed the duty on sugar,
and by so doing it brought sugar down to ''twenty pounds for a dollar,"
for the first time in American history. But while cheapening the price to the
consumer by repeal of the duty, it stimulated the production by a bounty upon
every pound of maple, beet, sorghum or cane sugar made in the United States;
this bounty, virtually, if not specifically, was payable out of the surplus of
revenue that remained after the reduction of duties.
It cannot
be too clearly understood that the McKinley law did not add to the volume of revenue;
it reduced it. Its merit lay in its wise and equitable readjustment of tariff
duties. It admitted a larger number of articles to the free list than any
previous tariff law had done. It strengthened the weaker industries, while it
withdrew some measure of aid from the stronger ones. It was the most equitable
revenue law ever devised. The men that repealed it have brought a deficit where
there previously was a surplus, and they have done this by crushing the weaker
industries while leaving the stronger ones as well protected as they found them
The McKinley law was constructive, the Wilson law is destructive in character.
Free
silver was a major policy issue in late 19th century American politics.
Its advocates were in favor of an inflationary monetary policy using
the "free coinage of silver" as opposed to the deflationary gold
standard. Its supporters were "Silverites". The Silverites promoted bimetallism,
the use of both silver and gold as currency at the ratio of
16 to 1 (16 ounces of silver
would be worth 1 ounce of gold). Because the actual ratio was about 32 to
1 at the time, most economists warned that the cheaper silver would drive the
more expensive gold out of circulation. Everyone agreed that free silver would
raise prices; the question was whether or not this inflationary measure would
be beneficial. The issue peaked from 1893 to 1896, when the economy was in a
severe depression—called the Panic of 1893—characterized by falling prices
(deflation), high unemployment in industrial areas, and severe distress for
farmers.
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