Illinois During the Gilded Age
Lesson Plan 6: "You shall not crucify mankind upon a cross of gold!"
The Issue of Bimetallism in the Late Nineteenth-Century
by Tara L. Dirst
- Students will discuss the basis of the monetary system during the late 19th-century.
- Students will show how given economic events influenced people's opinions of monetary policy.
- Students will justify whether they find the pro-silver or pro-gold standard arguments more valid.
- For homework option 1, you will need the Economic Events of the Late Nineteenth Century worksheet.
- For homework option 2, you will need the primary source readings.
Students should read the textbook section dealing with the issue of bimetallism, which usually is in a part dealing with farmers and populism. This section usually will end with a discussion of the presidential campaign of 1896 and William Jennings Bryan's famous "Cross of Gold" speech.
If students have access to the Internet, or if the previous day, you have access to the Internet in the classroom for 10 minutes, students can watch the video: The Presidential Campaign of 1896, Part 2, by Michael Kazin, Ph.D., Georgetown University. This video gives an excellent overview of the money standard issue. The video clip lasts 8 minutes 11 seconds, but it can be stopped after 7 minutes if time is limited.
Danzer, Gerald A., et al. The Americans. "Farmers and the Populist Movement." Evanston, IL: McDougal Littell, 2003. 425-429.
Boyer, Paul. The American Nation. "Farmers, Populism, and Depression." Austin: Holt, Rinehart and Winston, 1998. 497-501.
Terms to know:
- Fiat money
- Market value
- Mint value
I. Introduction (10 minutes)
Write on the board or overhead "What is Money?" Ask this question and others to begin a discussion of the concept of contemporary money and its value:
- What is money based on?
- What is its value?
- Where does its value come from?
- What happens when there is more money circulating?
- What does it mean when people say the value of the dollar is dropping?
- How does inflation affect debtors? Creditors?
- What would it mean if money was actually backed by an actual object, such as gold? How would the supply of that commodity impact the value of money?
This should result in some interesting comments and ideas, not all of which will be correct, so do clarify students when they have an incorrect assumption.
II. Lecture/Discussion (35 minutes)
Provide an overview of nineteenth-century U.S. monetary policy, largely emphasizing the value of money being tied to a commodity or commodities, specifically silver and gold. As you lecture, try to engage the students in a discussion over the concepts involved. The following is a suggested lecture/discussion:
Since the beginning of the United States, currency was backed by the gold and silver owned by the U.S. Treasury. The government set the value of silver in relation to gold and it remained at that "mint value" according to government policy regardless of the actual "market value" of silver and gold. Over the years, silver became unused as a monetary object because the market value for silver was greater than the mint value. That meant that it was in the best interest of silver owners to sell their silver on the market for use in jewelry, utensils, etc., because they would make a greater profit.
Discussion Questions: What would happen if the market value of silver decreased to less than the mint value? What would silver owners do? (Redeem their silver for gold at the Treasury.)
In 1873, Congress passed a law discontinuing silver coinage, but almost simultaneously the market value of silver began to decline. (Reasons: 1. European governments were moving to a gold standard, ridding themselves of their silver holdings. — When the world supply of silver increased, the value declined. 2. New lodes of silver were being discovered in the west. — Again, when supply increased, the value declined.) The Panic of 1873, where several New York financial companies failed and resulted in an economic depression, caused many people to partially blame the economic crisis on the demonetization of silver. Farmers and persons involved in silver mining began agitating for silver to be minted at the old silver-to-gold mint ratio.
Discussion Question: What would the banking institutions do if they were failing and how would this affect debtors? (They would call in the loans, causing people like farmers to have to pay back loans when prices for their products would be less.)
The Free Silver backers wanted the unlimited coinage of silver and gold standard advocates wanted exactly that — only specie backed by gold. There was also a Greenback movement which sought a paper-based currency not based on either silver or gold. Those that supported free silver or greenbacks essentially wanted more money in circulation, while those who supported the gold standard wanted less. More money in circulation would cause inflation of the currency, so there would be more money available but it would be worth less. Debtors (like farmers who had borrowed money from banks to buy new equipment) wanted easier access to money that was worth less because that would meant that the set debt they owed could be paid back for less…obviously creditors (like financial institutions) did not support expansion of the currency.
Example (write on board): say in 1872 you were a wheat farmer with a mortgage on your property of $1000/year and your wheat was selling on the market for $1.40/bushel. The next few years of panic and commodity price-drops didn't cause your mortgage to decrease…by 1875 you are still paying $1000/year, but your wheat is only selling on the market for $1.10/bushel.
While the prices for agricultural products were falling because of increased supply and the competition of the world market, other American manufactured goods' costs to the consumer were kept high because of tariffs. Tariffs were put on items like farm machinery in order to protect U.S. industry (to the benefit of the corporate interests), but farmers were in a real bind — their products were not fetching as much at market, yet to remain competitive they had to take out high interest-rate loans to purchase equipment that was not getting cheaper!
By 1878, the move to remonetize silver gained enough support and the Bland-Allison Act was enacted. This bill required the U.S. Treasury to mint $2-4 million worth of silver coinage each month. Representative Richard Bland from Missouri introduced the bill and it was amended by Senator William Allison of Iowa. These two congressmen represented largely agricultural constituents (farmers) who wanted silver to be minted freely (without any limits) so their debts could be paid off more easily. President Hayes, a supporter of financial and business interests, vetoed the bill but Congress overrode his veto. The Bland-Allison Act did not have the effect that the farmers and poor laborers wanted, primarily because the Treasury did not mint the maximum and the supply of money in circulation did not increase.
One of the primary arguments against the monetization of silver was that fluctuating standards would result in instability and that a silver dollar was a false dollar — that it wasn't worth the same as a gold dollar. The serious difference between the silver-to-gold mint ratio and the market ratio contributed to an idea among some that a silver dollar wasn't worth as much as a gold dollar — even though both would cover 100 cents worth of goods. The interpretation of the value of money influenced people's monetary policy philosophy.
It is interesting to note the rhetoric of silver versus gold, because those that supported silver believed that they were being taken advantage of by the wealthy Eastern industrial and financial corporations. The anti-silverites cried that the silver supporters were fomenting class warfare and that they (the gold-standard advocates) were actually looking out for the benefit of all. Silver supporters believed that the gold standard would benefit only the wealthiest Americans.
Discussion questions: Contemporaneously, can you think of any examples of this kind of class argument in politics? Do you think either side has a legitimate or convincing argument (either in reference to the silver question of the 19th century, or to contemporary events)?
By 1890, the free silver interests got their bill passed — The Sherman Silver Purchase Act. The Treasury would purchase pretty much the maximum domestic production of silver, but unfortunately the silver that was purchased was not coined…so their efforts to increase the money supply failed again. The gold in reserve in the U.S. Treasury declined because people were exchanging their silver for gold, which helped lead to an economic panic. The Sherman Silver Purchase Act was repealed in 1893.
During the presidential campaign of 1896, William Jennings Bryan, the Democratic candidate campaigned strongly for silver — and thus the rejection of the gold standard. He appealed to farming and laboring interests because of his support for the expansion of the currency. William McKinley, the Republican candidate, won by supporting business interests through tariffs and protection of U.S. industry. In 1900, the United States went to a complete gold standard through the enactment of the Gold Standard Act of 1900. Gold remained the standard for the U.S. dollar until 1975 when the dollar became "fiat-money." Fiat money is that which has no intrinsic value, but its value is determined by the faith in and credit-worthiness of the given issuer (i.e., the United States).
Two homework options are listed here. Option 1 requires students to write an essay where students utilize what they learned from the lecture/discussion and apply their knowledge to specific economic events of the late 19th-century. Option 2 requires students to read primary documents, one for free silver and one against and write an essay supporting one of the arguments.
- the value of money backed by silver and gold
- the effects of market prices and economic depressions, and
- how money standards, tariffs, interest rates, and inflation impacted people and their opinions of monetary policy
students will be given the Economic Events of the Late Nineteenth Century worksheet where they will choose a role and then they will analyze what the impact of the economic events would have been on a person in their role.
Roles: African-American Sharecropper in the South, Exoduster, New York Banker, Midwestern Farmer, Railroad Magnate, Factory Laborer, Silver Miner
Students should examine the events on the sheet and write a 1-page essay describing their reactions to the different events (if any).
Instructions: Students should read the following primary documents and write a 2-page essay in support for or against free silver. There is one document that supports free silver, and another which opposes it. Students should choose a side and make an argument drawing upon ideas raised in the class lecture/discussion and the document that supports their position. At least one paragraph must address the other side's position and why their arguments are "invalid." Also, the student should include one paragraph addressing the perspective of the writer and why they may have used the arguments they did.
Pro-silver: Lane, Edward. Excerpts from "Bimetallism or Monometallism – Which? Speech of Hon. Edward Lane, of Illinois, in the House of Representatives, Tuesday, August 22, 1893." Appendix to the Congressional Record. Washington, D.C.: Government Printing Office, 1895. 85-86.
Pro-gold: Christiancy, Isaac P. Excerpts from "Speech Before the U.S. Senate, January 30, 1878." Congressional Record. Washington, D.C.: Government Printing Office, 1878. 669.
State Standards Addressed:
- 15.A.4c Analyze the impact of inflation on an individual and the economy as a whole.
- 15.A.5b Analyze the impact of economic growth.
- 15.8.5b Analyze how inflation and interest rates affect consumer purchasing power.
- 16.A.4b Compare competing historical interpretations of an event.
Current, Richard N., et al. American History: A Survey. 7th ed. New York: Alfred A. Knopf, 1987.
Carson, Thomas and Mary Bonk, eds. Gale Encyclopedia of U.S. Economic History. Detroit: Gale Group, 1999.
"Money." Wikipedia, the Free Encyclopedia. 25 Apr. 2004. MediaWiki. 27 Apr. 2004. <http://en.wikipedia.org/wiki/Money>.
We would like to thank The Dirksen Congressional Center for their generous support in the creation of this lesson plan.