Gold Resumption Act
GOLD RESUMPTION ACT
Passed by Congress in 1873, the Gold Resumption Act officially revoked the bimetallic standard that was adopted by the U.S. government in 1792. The legislation was passed in recognition of the fact that by 1873 there were few silver coins in circulation. One hundred years earlier, in adopting the bimetallic standard (by which both gold and silver coins are minted), the legal mint ratio of 15:1 was established—silver coins contained 15 times as much silver as the gold coins contained gold. But, during the nineteenth century, fluctuations in the market prices of the two metals wreaked havoc on the supply of coins in circulation. (Whenever silver's value was higher on the open market than it was at the mint, people would hoard their silver coins for sale on the open silver market, effectively taking them out of circulation.) Even after the ratio was adjusted to 16:1, silver continued to be undervalued by the mint. Due to the under-valuation of silver—and the discovery of gold in California in 1849—gold gradually replaced silver in the nation's money supply. In passing the Gold Resumption Act of 1873, Congress put into law what had long ago been put into practice: silver coins were no longer considered legal tender. But shortly after enacting the law, political factions began agitating for the government to resume issue of silver coins. The Free Silver forces, mostly silver miners in the West, indebted farmers, and poor workers, believed the depressed economy of the 1870s would improve if silver coins were issued. This action, they said, would increase the supply of money to produce a mild inflationary effect, which would raise prices and allow debtors to pay their loans. The silver interests succeeded in influencing government: In 1878, five years after taking silver coins out of circulation, Congress passed the Bland-Allison Act which required the government to purchase and mint between two- and four-million dollars in silver each month. This amount was increased by the Sherman Silver Purchase Act of 1890; an enormous quantity of silver was put into circulation. As a result the value of silver dropped. Americans exchanged their silver dollars for gold, and the gold reserve in the U.S. Treasury was depleted. After the financial panic of 1893, the Sherman act was revoked that same year. In 1900 the Gold Standard Act reaffirmed gold as the standard unit of value for the nation's currency.
RESUMPTION ACT. Late in 1861, the federal government suspended specie payments, seeking to raise revenue for the war effort without exhausting its reserves of gold and silver. Early in 1862 the United States issued legal-tender notes, called greenbacks. By war's end a total of $431 million in greenbacks had been issued, and authorization had been given for another $50 million in small denominations, known as fractional currency or "shin plasters."
During Reconstruction a new coalition of agrarian and labor interests found common cause in the promotion of inflationary monetary policies. At the end of 1874, a total of $382 million of these notes still circulated. The Resumption Act of 14 January 1875 provided for the replacement of the Civil War fractional currency by silver coins. It also reduced the greenback total to $300 million. The secretary of the Treasury was directed to "redeem, in coin" legal-tender notes presented for redemption on and after 1 January 1879.
Riding a wave of electoral success in 1878, the inflationists, then organized as the Greenback Party, succeeded in modifying this law by securing the enactment of a measure stopping the destruction of greenbacks when the total outstanding stood at $346,681,000. Specie payments resumed during the presidency of Rutherford B. Hayes. Aided by the return of prosperity, Secretary of the Treasury John Sherman accumulated gold to carry out the intent of the Resumption Act. But when people found greenbacks to be on a par with gold, they lost their desire for redemption, thus making possible complete success for the legislation.
Ritter, Gretchen. Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America. Cambridge: Cambridge University Press, 1997.
Erick McKinleyEriksson/a. r.