1896 free silver

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grant.w.underwood Posted: Fri, May 25 2012 10:50 AM

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So Ive a essay question for my history class and I don't know much about it besides a couple short paragraphs in my book. Here is the question:

It would be hard to imagine American voters today  getting excited about the money supply.  So why was 'free silver' the hot topic in the 1896  election?

I was wondering if someone can give me a brief description in their own opinion about it.  And I would love to know any books, chapters, or articles that relate to this subject.

Thanks.

Grant

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Autolykos replied on Fri, May 25 2012 11:04 AM

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IIRC, the issue basically had to do with legal-tender laws. In 1896, gold was the only legal tender in the US. That meant all debts had to be paid with gold. However, some people (e.g. farmers) didn't have enough gold to pay off their debts, in spite of possibly having other things which had enough monetary value to settle the debts. One kind of thing they apparently had a lot more of was silver. Including silver as legal tender would then (presumably) make it easier for their debts to be settled.

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SkarnkaiLW replied on Fri, May 25 2012 12:13 PM

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From my basic survey courses on US History, basically farmers were heavily indebted (especially in the South, due to the collapse in world cotton prices), and as such they agitated for "Free Silver" to create inflation. This would make their assets (land/agricultural products) have a higher nominal price and thus enable them to more easily pay off their debts.

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Autolykos replied on Fri, May 25 2012 12:20 PM

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Actually, gold being legal tender didn't mean creditors couldn't accept other forms of payment. What strikes me as strange is why the creditors demanded only gold from people who didn't have any (but did have other assets that could cover the debt).

Edit: apparently the key to the "free-silver" movement was establishing the exchange ratio between silver and gold at 16:1, whereas the actual ratio was about 32:1. So it wasn't so much a matter of being able to cover debts with assets besides gold - the supporters of "free silver" wanted to effectively double their purchasing power by legislative fiat.

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SkarnkaiLW replied on Fri, May 25 2012 12:32 PM

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Indeed, but this is very period where yeoman/family farms were basically going away. They bet/sold the farm, to cover their debts, and many independant farmers opposed this shift to the sharecropping system. Basically if Gold and Silver were legal tender, the money supply as a whole would increase, which would undo or combat the falling prices/price deflation (which made their debts more costly) which was occuring. Additionally, credit was difficult to come by in the South/Midwest, and thus higher rates of interest were the norm as well. All this, plus the introduction of fertilizers and so forth made the independant farm uncompetitative.

Most of the farmer's debts were in the form of crop liens, where they owed a certain percent of the harvest in exchange for the credit. The continuing lowering of prices worldwide made the remaining crop unable to support the costs of the next planting, and thus farmers were in a permanent debt cycle.Poor understanding of economics also did not help, as most lien holders demanded cotton as their share, as it is more durable and can be stored, which aggravated the fall in cotton prices.

Edit: Yeah, basically they wanted a bailout, and were slightly more sophisticated about it, compared to how they are handled nowadays.