Thursday, June 27, 2013
Jun 27 (1893) Silver Prices Crash on Wall Street: "You shall not crucify mankind upon a cross of gold"
On this day in 1893, the San Francisco Call reports the Government of India ceased its free silver monetary policy in favor of adopting the gold standard. At the time, India was the largest purchaser of silver in the world. As a result of the announcement, silver prices on Wall Street crashed, exacerbating a financial crisis which would become one of the worst depressions in US history.
After a failed experiment to eliminate silver as a currency in 1873, congress was operating under two Acts--The Bland-Allison Act (1878) and Sherman Silver Purchase Act (1890)--that required the treasury to purchase up to $4,000,000 in silver per month.
Those in favor of this policy were called "Silverites," and they argued that an inflationary monetary policy--with unlimited silver coins in circulation--helped famers payoff debt, Western miners increase revenue, and, by providing more currency, spread prosperity.
Shouts from bankers to repeal the Sherman Silver Purchase Act and stabilize markets were loud on this day in 1893. Democratic President Grover Cleveland eventually did in August.
This did not deter the Silverites, who continued to call for a free silver monetary policy, making the issue less about currency and more about a fight between Eastern bankers and Western miners, urban merchants and rural farmers, capital and labor.
In the 1896 Presidential election, William Jennings Bryan stole the Democratic nomination with his now famous "Cross of Gold Speech" excerpted below. (The "sound money" candidate William McKinley won the election.)
"The man who is employed for wages is as much a businessman as his employer. The attorney in a country town is as much a businessman as the corporation counsel in a great metropolis. The merchant at the crossroads store is as much a businessman as the merchant of New York. The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world...
If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold."
Image is from the Library of Congress with the following description: Print shows a highwayman identified as a "Silverite", holding two handguns labeled "Free Coinage" and "McKinleyism", and with papers extending from a pocket labeled "Paternalism" and "Wild Cat Schemes"; he is holding-up a stagecoach labeled "National Prosperity" with passengers labeled "Lawmaker, Banker, Farmer, Workingman, Manufacturer, [and] Merchant". The "Lawmaker" and the "Merchant" have both hands raised, while the "Banker, Farmer, Workingman, [and] Manufacturer" are reaching into their pockets.
The “Wizard of Oz” as a Monetary Allegory,’ from the Journal of Political Economy (1990)