Serious students of finance are almost unanimous in their belief that the adoption of free silver would have brought into operation the Gresham Law and would have resulted in a reduction of the value of the dollar. But the motives which divided the United States were less economic law than personal interest. The creditor foresaw the shrinkage of his property, and feared it. The debtor saw the lightening of his debt, and easily convinced himself that the ethics of the case required such relief for him.
It appeared to the West that the declining prices of the eighties had been due not so much to overproduction and mechanical invention as to an appreciation of the dollar. The silver advocate claimed that the money supply was inadequate to the demands of increasing business, that the overworked dollars were acquiring a scarcity value, and that their increase in value was placing an unfair burden upon every person with a debt to pay. It was the old attitude of the Greenback Northwest, brought out by a period of debt and depression. In accounting for the scarcity of money the Act of 1873 seemed important to the West. The demonetization of silver became a crime, and justice from the Western standpoint demanded the restoration of the dollar to its old value,—the value of its silver. Before 1893 the discontent was serious, but had not come to be the primary interest of the West. Men were not yet willing to leave their parties for the sake of silver. The panic drove them to the final step.
Through the campaign of 1892 the major parties had dodged the issue of free silver by adopting evasive planks, while the general ignorance respecting the laws of money prevented the evasion from being seen. Until 1890 neither organization had been unfavorably disposed towards free silver and Congressmen catered to the movement when they dared. As its accomplishment became more probable, the selfish interests that would be adversely affected, and the economists who saw its theoretical danger, and the moralists who disliked repudiation, made common cause in a wide campaign of education.
With the exception of extreme inflationists, all had declared that they wanted "honest" or "sound" money, and both parties insisted, in 1892, that all dollars, of whatever sort, must remain equal in value and interchangeable. They insisted, too, that silver must be used as well as gold, and neither platform saw that the demands were either inconsistent or improbable of realization. The pledge of equality pleased the creditor East, while that of equal use of both metals satisfied the debtor West and South.
Bimetallism was a cry of many who disliked free silver, yet feared that a demand for the gold standard would wreck the party. As long as the traditional ratio of sixteen to one remained the commercial ratio, the free use of both metals was theoretically possible, but the experience of the United States showed that a slight variation in the commercial ratio inevitably drove the more valuable dollar into retirement and left the cheaper in use. The truth of Gresham's Law was believed by most economists, who doubted whether the commercial ratio was ever sufficiently permanent to make bimetallism possible. With the silver declining rapidly it was out of the question. If the silver in circulation ever got beyond the power of the government to control it through redemption in gold nothing could avoid the silver standard. No law of the United States could prevent it. There was only a bare possibility that an international agreement always to regard sixteen ounces of silver as worth one ounce of gold might establish the ratio, but to this straw the bimetallist turned, trying to ward off the demand for free silver with his plea for international bimetallism.
Click on image for larger version
The Flood of Silver
Gold and Silver Output of the World, 1861-1911 In Ounces
(Based on United States Statistical Abstract, 1912, pp. 796, 797)]
The panic of 1893, the decline of silver, and the repeal of the Sherman Law stimulated the activities of those who believed in free silver and produced formal steps to bring it into politics. A silver convention, held in Chicago in August, 1893, denounced the "Crime of 1873," and Governor Waite recommended to the Colorado Legislature that it open a mint of its own for the coinage of legal-tender silver dollars. At state conventions, in 1893 and 1894, both parties adopted silver planks. The Nebraska Democrats rejected such a plank in 1893, but in 1894, after a caucus of free-silver Democrats in Omaha, they adopted a demand for the immediate restoration of free-silver coinage "without waiting for the aid or consent of any nation on earth."
At the congressional election of 1894 the Republicans regained control of both Senate and House and many of the silver candidates were left at home. Some thirty, who had sat in the Fifty-third Congress, joined in March, 1895, in a call for the adoption of free silver as a party measure. To the iniquity alleged to exist in the gold standard was added the aggravating fact that its defenders had wealth and were often directors of corporations. The measure had become a class contest. Its textbook was found in Coin's Financial School, a little book with simple dialogue and graphic illustration, that popularized the Western view of free silver and reached hundreds of thousands with its apparent frankness. Free silver had by 1895 outgrown the Populists, and had overshadowed other measures of reform before either party had taken a frank attitude respecting it. "I have been more than usually despondent," wrote the originator of the Wilson Bill, who had lost his seat in 1894, "as I see how the folly of our Southern people, in taking up a false and destructive issue, and assaulting the very foundations of public and private credit, are throwing away the solid fruits of the great victory, solidifying the North as it never was solid in the burning days of reconstruction, and condemning the South to a position of inferiority and lessening influence in the Union she has never before reached."