Sherman Silver Purchase Act

SHERMAN SILVER PURCHASE ACT

The free coinage of silver became a political debate in the United States following the Panic of 1873. The period of economic hardship between 1873 and 1878 motivated the demand for cheaper paper money. The market price of silver dropped sharply after 1873 because it was used less often in American and European currency, and it was becoming more expensive to mine.

Although there were still "Greenbackers" around who associated the Civil War paper money with the dynamic northern economy during the Civil War, most of those in favor of inflation did not support the trend toward paper-money and turned instead to silver, believing its free coinage would be as adequate as greenback cash. Silver miners obviously also supported silver coinage. This demand resulted in the 1878 passage of the Bland-Allison Act, which required the government to buy at least $2 million worth of silver bullion each month at market price to coin as legal tender silver dollars. While the act was a law, however, the country's presidential leaders weakened its effect by purchasing only the minimum amount of bullion. The Bland-Allison Act was never able to stop the decline of silver prices or to increase the circulation of money.

The nation's regional preferences for money lead to a clear divide in the country. In the eastern United States, businesses preferred the gold standard and opposed inflated money. In the West and South, however, indebted farmers needed inflation to boost the prices of their products, while owners of the silver mines prevalent in the western territories wanted free silver coinage to stimulate their own financial interests.

By 1890 the political influence of silver advocates in the West had grown so strong that on July 14, the Sherman Silver Purchase Act was passed as a compromise to appease all interests. Named after Ohio Senator John Sherman, it replaced the Bland-Allison Act as a measure to provide a greater government purchase of silver. The Sherman Silver Purchase Act required the U.S. treasury to more than double its monthly purchase of silver to 4.5 million ounces. The direct effect of the Sherman Act was a threat to the U.S. Treasury's gold reserves and a $156 million increase in the amount of paper money in circulation.

Ultimately, the Sherman Act did little to please anyone. Western farmers and silver miners remained dissatisfied with government compromise measures and felt threatened by the 1892 presidential election of Grover Cleveland (1893–1897), another supporter of the gold standard.

The U.S. Treasury's depleted gold reserves led to the Panic of 1893. To restrain public fear of the abandonment of the gold standard, President Cleveland called a special session of Congress, and the Sherman Silver Purchase Act was repealed in the autumn of that year.

See also: William Jennings Bryan, Cross of Gold Speech, Currency, Free Silver, Gold Standard, Gold Resumption Act, Greenbacks

FURTHER READING

Bryan, William Jennings, and Robert W. Cherny. Cross of Gold: Speech Delivered Before the Democratic National Convention at Chicago, July 9, 1896. Lincoln, Neb.: University of Nebraska Press, 1996.

Calhoun, Catherine. Winter with the Silver Queen. American Heritage, November 1995.

Doty, Richard. American Silver Coinage: 1794–1891. New York: American Numismatic Society, 1987.

Eichengreen, Barry J., ed., and Marc Flandreau. The Gold Standard in Theory and History. New York: Routledge, 1997.

Sherman Silver Purchase Act. Dictionary of American History. New York: Charles Scribner's Sons, 1976.