circulation.

currency"

CHAPTER LXIII

GREENBACKS AND FREE SILVER

750. For thirteen years after the War, the "Treasury notes (§ 674) and the National bank notes were the only money in The government redeemed part of this "War by issuing new bonds in exchange for it—but gold did not come out of hiding. This paper money remained below par, usually at about 80 cents, and its value fluctuated somewhat, as Wall Street speculators forced gold up or down.

In the summer of 1869 Jay Gould and "Jim" Fiske made an extreme attempt to "corner" gold, and on a certain "Black Friday" they drove its price up to 162. In other words, a dollar of paper money was driven down in value to 61 cents, and business everywhere was tottering to bankruptcy. Gould and Fiske had tried zealously to cultivate intimacy with President Grant and to woo him to their plans; but now, with the President's approval, the Secretary of the Treasury saved the business of the country, and crushed the Wall Street pirates, by throwing upon the market many millions of the government's gold reserve.

751. The government paid the interest on all its bonds in gold. This policy was necessary to preserve the nation's credit, but it had a repulsive side. The man who earned fifty dollars in the field, or who received that amount as interest on a small loan, had to take his pay at its face in paper; but the wealthy holder of a government bond, to whom fifty dollars of interest was due, could exchange his gold for sixty or seventy dollars in paper.

Another kind of wrong was still more serious. In war time, paper money was worth perhaps fifty cents on a dollar. If a

§ 753]

GREENBACKS AND RESUMPTION

625

farmer then mortgaged his two thousand dollar farm for half its value, he received $1000 in greenbacks (or $500 in gold). Now, as paper appreciated, approaching par, prices fell until the farm was worth perhaps only $1000 in all, and the farmer must pay all of that to redeem. His property was halved, or his debt doubled, by the juggling tricks of a varying currency.

752. Many men who saw the abuse jumped at a deceptive remedy. The Democratic platform of 1868 called for "one currency for the producer and the bond holder," and urged that the government should pay its interest in greenbacks except when the bond specified gold. Local "Greenback" parties arose, to demand "fiat money" as a permanent policy. In 1876 the Greenback organization became national, with a candidate for the Presidency; and two years later, it cast a million votes.

But meantime the Republican party stood victoriously for the "resumption of specie payment." Congress provided for the accumulation of a gold reserve for that purpose, and, January 1, 1879, the Treasury announced its readiness to exchange gold for its greenbacks. Paper money rose at once to par "as good as gold" — and no one cared longer to make the exchange. third of a billion remained in circulation; but ever since then the notes have been redeemable on demand.

A

753. The paper-money question belonged to the Reconstruction period. From 1890 to about 1900 another "cheap money” agitation cast all other issues into the background. This was an unfortunate demand for "free silver.”

Until 1873 anyone could present gold or silver bullion at any government mint and receive back the value in coin. For forty years the law had fixed the "ratio" between the two metals as "16 to 1." At the beginning of that period, and for long before, an ounce of gold was worth sixteen ounces of silver for commercial purposes; and so the silver dollar was made sixteen times as heavy as the gold dollar. After 1850, the gold discoveries in California cheapened the value of gold; and the little silver that was mined between that time and

1870 could be used more profitably in the arts than at the mint, so that very little silver was coined.1

But, about 1870, new silver mines in Nevada and Colorado began to flood the markets with silver. Then, in 1873, Congress "demonetized" silver, ceasing to authorize its coinage, except in small quantities for the oriental trade, and refusing legal-tender character at home to these "trade dollars." At the same time, European countries began to abandon "bimetallism" for a gold standard. The increased output of silver, together with this decreased demand for it, forced down its value rapidly;2 but the silver mine owners called vociferously for coinage at the old rate. Moreover, the farmers of the West and many ardent reformers were persuaded that the "crime of '73" had been manipulated by the money monopolists of Wall Street to reduce the volume of the currency, and so enhance the value of their capital. The more thoughtful advocates of silver believed that its unlimited coinage by the United States would restore silver to its old market value because of the increased demand; but the larger body of its supporters were animated by the crude fallacies of fiat money, such as had inspired the Greenback party.

754. It was quite true that there was not enough gold coined to make a proper basis for the growing business of the country. Consequently, money was appreciating in value and prices depreciating. Creditors profited; debtors, like farmers with mortgages to meet, suffered.

All reformers saw these evils. Some magnified them unduly, and caught impulsively at the proffered remedy of making silver a legal tender at the old rate. Their real problem was to curb the growth of special privilege in business and of corruption in politics, but they turned aside for a misleading economic doctrine. More logical reformers felt that a depreciation of the coinage would entail all the disasters of cheap money and bring in evils worse than those to be cured. This unhappy

1 In 1870, the market ratio of the metals was 15.57. A silver dollar would have been worth $1.03, and they had all been melted down for this profit.

2 By 1876, the ratio of silver to gold had fallen to 17.87; and by 1893 to 28.25. At the latter rate, a silver " dollar" of the old weight was worth only 56 cents in gold.

§ 756]

THE POPULISTS

627

division seriously delayed the reform of fundamental troubles in American life.

755. Both Republicans and Democrats shirked a positive position as to silver. Accordingly, in the West and South there sprang up the new Populist party, with a platform calling for the unlimited coinage of silver at 16 to 1, for a graduated income tax (§ 745), postal savings banks, the "Australian ballot" (§ 824), direct election of United States Senators, an eight-hour day, and government ownership of railroads and of other natural monopolies. To the East all this seemed wildeyed anarchism. But in the Presidential election of 1892, General Weaver, the Populist candidate, secured 22 electors, with more than a million votes, to about five and a half millions to each of the main parties. Two years earlier, the party had captured several State governments in the West and South, and had sent forty representatives to Congress.

This Populist success induced Congress, in 1890, to pass "the Sherman Act," ordering a slight increase in silver coinage. The increase in demand raised silver for a time; but in 1893 the British government demonetized that metal in India, and it shrank to a lower point than ever before. Gold now was exported with a rush, and that remaining in the country was hoarded.

756. A periodic crisis, due once more to over-investment on credit, seems to have been about due; and it was hastened by widespread distrust of the currency and by uncertainty as to future action by Congress. In 1893 the crash came. Creditors began to insist on payments in gold. Nearly six hundred banks closed their doors, and more than fifteen thousand firms went to the wall, with losses amounting to a third of a billion. President Cleveland had to increase the national debt by selling bonds, or the gold reserve in the treasury would have vanished.2 Industry was prostrated as at no previous

1 The student should see that this chapter and the preceding one give two strands of one story.

2 See American History and Government, § 429.

panic. Farmers lost their homes, and the improvements of years, on small mortgages. Cities were thronged with hundreds of thousands of unemployed and desperate men. Every large place had its free" soup kitchen," and many towns, for the first time in America, opened "relief works," to provide the starving with employment.

757. The Campaign of 1896 was a crisis in American history. President Cleveland alienated the radical wing of the Democratic party by uncompromising hostility to silver legislation,1 and the party split on that issue. The National Convention afforded a dramatic scene. William J. Bryan of Nebraska, a young man hardly known in the East, swept the great assembly resistlessly by an impassioned speech of splendid oratory and deep sincerity. The contest between silver and gold he pictured as a contest of wealth against industry. The gold men had made much of what they called the business interests. But, said Bryan, "the farmer who goes forth in the morning and toils all day, and, by applying brain and muscle to natural resources, creates wealth, is as much a business man as is the man who goes upon the Board of Trade and bets on the price of grain." Turning to the "gold" delegates, he exclaimed, "You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon this cross of gold."

With tremendous enthusiasm, the Convention declared, two

1 It is, perhaps, fairer to say that this attitude seemed to the Radicals one more proof of Cleveland's alliance with the "Money Power," seen also, as it appeared to them, in his policy in the Chicago strike (§ 809). Cleveland was a plodding, patient man of rugged honesty, and, for his day, he was a progressive statesman, deserving of more recognition from radical reformers than he received. In his final message to Congress, after his defeat had put him "out of politics," he warned the nation that great fortunes were no longer the result solely of sturdy industry and enlightened foresight, but largely of the "discriminating favor of the government" and of “undue exactions from the masses of our people." After leaving the Presidency, his services as a lawyer were sought by great corporations, but he always refused their retainers. No other president from Lincoln to Roosevelt did so much to arouse a progressive movement in this nation.