VI THE STANDARD QUESTION: THE SILVER Introduction The discussion of bimetallism in chapter iv ended, so far as the United States was concerned, with the year 1873. The present chapter is a continuation of our bimetallic history and treats of the acute stage of the controversy that followed close upon the general demonetization of silver by the leading countries of the world. The reason for having broken the continuity of the discussion by introducing the chapter on paper money is that in the United States the "greenbackers" and the "silverites" possessed in many respects a common philosophy-actually joining forces, in the main, after 1878. An understanding of the greenback movement is, therefore, essential to an appreciation of the last stage in the bimetallic controversy in this country. The silver movement began about 1875, when it was discovered that the standard silver dollar was no longer coinable at the mints. For many years prior to 1873, when the silver dollar was dropped from the list of coins that might be struck, the legal ratio of silver to gold had been 16 to 1 while the market ratio was around 15.6 to 1. There was consequently no incentive to coin silver, and none had in fact been coined for generations, except a small quantity for use in oriental trade. But when silver fell in value in 1874 and 1875 so that the market ratio became 16+ to 1, it was promptly presented to the mints for coinage, where minting into standard silver dollars was of course refused. Immediate indignation was aroused; it appeared that the "surreptitious" demonetization of silver that had occurred was nothing short of a vicious crime engineered by and in the interests of the gold conspirators. By a single act of Congress, unknown to and unsanctioned by the general public, it seemed that the country as a whole had been deprived of a large portion of its national wealth. The controversy over this act of 1873 was bitterly waged for more than twenty years. The silver party, so called, was composed of numerous elements, with differing points of view, but imbued with a common purpose of securing the recoinage of silver. In this movement the problem of deferred payments became, even on the popular side, more or less differentiated from the mere question of the volume of money. It appears to have been very clearly appreciated that the fall in prices following the war was rendering the repayment of mortgages and other long-time obligations annually more difficult; and the issue between the debtor and the creditor classes, as shown in numerous selections below, was bitterly contested. One cannot fail to be impressed with the sincerity of conviction manifested on both sides; and it is a matter of much significance, as well as interest, that practically every class, even the economists, became largely imbued with a partisan spirit, and very generally impugned the motives of the opposition; the very air seemed charged with feeling. The result of the silver agitation was to secure a limited coinage of silver and thereby to derange our monetary system for nearly twenty years. It must be said in justice to the advocates of bimetallism, however, that the system did not have a real trial during this period; and their contention in the nineties that a larger rather than a smaller coinage of silver was needed may easily be justified, granting the premise of the bimetallic argument. The state of our currency under the Bland-Allison and Sherman acts served one useful function, however: it demonstrated as nothing else could have done the working of monetary principles and the evils of an uncertain standard of deferred payments. The issues of 1896 appear to have been settled by the geographical distribution of our population and the relative numerical strength of the opposing interests, rather than by logic or virtue or honesty or devotion to the public welfare. And, similarly, the failure of the agitation to arise again since then does not denote so much an increased knowledge of the principles of sound money, as it does a change in the fundamental conditions governing the supply of gold. The productivity of the world's mines since 1896 has given an enormously increased volume of currency, enough at least to dull the edge of that insistent desire for more money which characterizes the true inflationist. At the same time the high prices of the present era serve effectively to remove the grievance of the debtor classes. In fact, it is now a horse of a different color; for it is the creditor class that is feeling the ill consequences of a changing price level. The quotations from the national party platforms of 1896 and 1912 reveal the complete reversal of opinion on the part of both parties with reference to the underlying relations of money and prices; political expediency still appears to be of more practical significance than analysis or truth. By way of reviewing the whole history of monetary evolution one should compare the statistics of production of the precious metals at various periods with the monetary controversies that have come and gone. It will be found that monetary history may be very largely explained by reference to the conditions of production of gold and silver at the mines. A. The Agitation for the Recoinage of Silver 120. THE CRIME OF 1873: THE INDICTMENT' The bill which was presented to the Senate for amendment and passage contained provision for a standard silver dollar as well as for a trade dollar. In the words of Mr. Sherman: "This bill proposes a silver coinage exactly the same as the French, and what are called the associated nations of Europe, who have adopted the international standard of silver coinage; that is, the dollar provided for by this bill is the precise equivalent of the five-franc piece. It contains the same number of grains of silver, and we have adopted the international gram instead of the grain for the standard of our silver coinage. The "trade dollar" has been adopted mainly for the benefit of the people of California and others engaged in trade with China. That is the only coin measured by the grain instead of the gram. The intrinsic value of each is to be stamped upon the coin." (Congressional Globe, 3d sess., 42d Cong., p. 672.) Human perversity cannot misinterpret this language. It means that the bill provided for two dollars. The one, measured in grams, the standard of our silver coinage, and the other, measured in grains, a special coin for convenience in the Chinese trade. The Senate passed this bill and it was referred to the House, which declined to concur in some of the Senate amendments, thus necessitating a Conference Committee. This committee in reporting to the House and Senate made no reference to the omission of the standard silver dollar Adapted from "The Silver 'Grievance,' " Journal of Political Economy, 1892, pp. 436-38. from the list of coins that could be struck. This section of the bill had not been amended by the Senate, and therefore was not a section open for adjustment in the Conference Committee. Someone secretly drew the pen through the silver dollar. The fact that it was done in the Conference Committee, where it was not an issue, is the significant point which is usually overlooked by those who hold that there was no intentional deceit. 121. THE CRIME OF 1873: THE DEFENSE1 The mintage act of 1873 is a subject about which there has been a great deal of misunderstanding. Aspersions galore have been cast upon the methods and the motives of the men who were responsible for its enactment. For twenty years "the crime of 1873" has been held up as one of the most atrocious in the entire political calendar. The original bill was prepared in the Treasury Department in the winter of 1869-70 by John Knox, then Deputy Comptroller of the Currency, under the direction of George S. Boutwell, then Secretary of the Treasury. The laws relating to the mint had not been revised `for more than a generation, and much confusion existed. The first section of the bill was largely a codification of existing law, with such improvements as experience suggested. Then immediately following, and in the precise place where anyone interested in such legislation or attempting to follow its course would most naturally look for a statement of what was contemplated, was a short paragraph headed in large capital letters: PROPOSED AMENDMENTS. In this paragraph an enumeration of "the new features of the bill" is made. There are twelve different amendments specified-one of which is plainly stated to be "discontinuing the coinage of the silver dollar." This is the clause that has given rise to the long controversy. The bill as thus perfected was introduced. in the Senate April 25, 1870, accompanied by a report giving the reasons for its introduction, the method of its preparation, and an explanation of every section in it. (The original bill and the report accompanying it are to be found in the Senate Misc. Document No. 132 of the second session of the Forty-first Congress.) Section 14 of the bill specified the weight and fineness of the gold coins, and made the gold dollar the unit of value. Adapted from Sound Currency, III, 1896, No. 13, pp. 2-10. and 18 were as follows: Sections 15 Section 15. And be it further enacted, That of the silver coin, the weight of the half-dollar, or piece of fifty cents, shall be 192 grains; and that of the quarter-dollar and dime shall be, respectively, one half and onefifth of the weight of said half-dollar. That the silver coin issued in conformity with the above section shall be a legal tender in any one payment of debts for all sums less than $1; Section 18. And be it further enacted, That no coins, either gold, silver, or minor coinage, shall hereafter be issued from the mint other than those of the denominations, standard, and weights herein set forth. Ask the first twenty free-silverites that you meet, "Did the Act of 1873 ever contain the old standard silver dollar of 412 grains?" and nineteen of them, if not all, will promptly answer, "Why, certainly, and it was surreptitiously dropped out just before the passage of the bill." Many a good man has had his righteous indignation aroused by being told this tale. And very frequently it has been told by men who sincerely believed that such was the case. But, as we have seen, the story is not true. The 412-grain dollar was never in the bill from first to last! Its omission was carefully pointed out in the report accompanying the original bill, and the reasons for the omission were plainly given. The dollar for which the trade dollar was finally substituted was a 384-grain dollar, of limited coinage and tender. The change was made for the benefit of the silver-producers, and at their request, to enable them to find a market for their silver in the East. And the bill on its final passage was voted for by every man from the Pacific Coast. They had got exactly what they asked for. That the matter was fully discussed in Congress may be seen by the following extracts from the debates: On January 9, 1872, in reporting H.R. 5, which (like the original bill, S. 859) contained no silver dollar of any kind, Mr. Kelley, chairman of the committee in charge of the bill, said: "The Senate took up the bill and acted upon it during the last Congress and sent it to the House; it was referred to the Committee on Coinage, Weights, and Measures, and received as careful attention as I have ever known a committee to bestow on any measure. We proceeded with great deliberation to go over the bill, not only section by section, but line by line, and word by word; the bill has not received the same elaborate consideration from the Committee on Coinage of this House, but the attention of each member was brought to it at the earliest |