The Sherman Silver Purchase Act of 1890
Instructor:
Christina Boggs
Chrissy has taught secondary English and history and writes online curriculum. She has an M.S.Ed. in Social Studies Education.
Did you know you used to be able to change American dollars for either gold or silver? In this lesson, you will learn about the factors and laws that changed the way we use money in the United States today.
A Sack of Coins or a Stack of Money?
Imagine you're on your way to the Apple Store to buy the newest iPhone. You don't have any credit cards or paper money; instead you only have coins. A new smartphone can cost hundreds of dollars...think about how heavy hundreds of dollars worth of coins would be, not to mention how much space it would take up! Luckily, in the United States, our currency, or system of money, is a combination of both paper and coins. It's much easier to carry around a hundred dollar bill than four hundred quarters.
The Gold Standard and the Bimetallic System
Paper currency has been used in the United States since the late 1600s. During the mid-1800s, the U.S. Treasury, along with other countries around the world, adopted a system called the gold standard. Instead of actually paying for things with gold coins, the government purchased gold and then issued treasury notes or money that represented the value of the gold. If gold went up in price, then the value of a dollar also increased; if gold went down in price, so did the value of the dollar. Under the gold standard, you could take your paper money and actually trade it in for the amount of gold it represented. If you walked into a bank today and asked to trade your money for gold, they'd probably laugh at you!
There were a few issues with the gold standard. The Gold Rush in the United States caused the value of gold to go up and down; as a result the value of a dollar went up and down as well. Farmers were the ones that suffered the most from the devaluation of our currency. Over time, the U.S. adopted a bimetallic system, where the government purchased both gold and silver and printed money that was backed by both metals. Both silver and gold are precious metals but think about it...which would you rather trade your paper currency in for and which one is worth more? Even though the Treasury used both metals, they purchased very little silver.
The Bland-Allison Act
In 1873, the Treasury decided to stop minting silver dollars. The people who owned silver mines and farmers were furious. Because the government stopped making silver dollars, the demand for silver dropped and so did the price. The Free Silver Movement began to take shape; people all over the country pushed the government to mint silver dollars again. In 1878, the Bland-Allison Act required the government to purchase a certain amount of silver every month (anywhere from $2 million to $4 million) and mint silver dollars with it. They also used the silver to back treasury notes.
Within a few years, the country was struggling with another depression. Democrats, mine owners, and farmers continued to push for more silver in the U.S. Treasury. These 'Silver Democrats' believed that if they increased the amount of silver in the Treasury, the government would have more precious metal to back the currency, and they could then print more money. More money in circulation would make it easier to pay off debts and would help farmers. The majority of Republicans, however, disagreed with this idea. Instead, they wanted to stick to the gold standard.
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