The Republican Party/Chapter XII

CHAPTER XII

SOUND MONEY

Mention has already been made of the successful resistance of the Republican party to the various schemes for repudiating the fiscal good faith of the nation by paying the public debt in, irredeemable greenbacks and by flooding the country with “fiat money” created by the printing press. Its final fight on those lines was against an equally pernicious scheme for flooding the country with depreciated silver. In 1873, as related, Congress dropped the standard silver dollar from the list of coins therafter to be minted, and the next year limited to five dollars the legal tender power of silver coins of any denomination. At that time silver dollars had not been in circulation for more than thirty years. The legal ratio of value between silver and gold had been 16 to 1, and in 1873 the commercial ratio was 15.92 to 1, so that there was no inducement to silver owners to seek to have it coined. But then Germany demonetized silver and the commercial value of that metal began to fall until in 1876 the ratio was 17.87 to 1, and in 1880 it was 18.04 to 1.

When President Grant wisely checked greenback inflation with a veto in 1874, the inflationists began to consider increased silver circulation as a means to their end. New mines in Colorado and elsewhere had enormously increased the output of that metal and the mine owners were eager to realize for it the old coinage value. The Democrats took the lead, followed by some Republicans, in seeking demonetization of the silver dollar and in 1877 Congress passed a bill introduced by Senator Bland, a Democrat, providing for the free coinage of $4,000,000 in silver every month. President Hayes vetoed it but the bill was repassed over his veto. Thus the government, under that Democratic policy, every month bought silver at more than its commercial value and coined it into dollars which nobody wanted to handle and which remained stored in the treasury vaults while paper certificates representing them were put into circulation.

This unsound system continued, with the commercial value of silver steadily falling, until 1890 when the Sherman bill was enacted providing for the continued purchase of a limited amount of silver bullion against which there should be issued treasury notes payable “in coin,” which might be either gold or silver. Following this an attempt was made to pass a bill providing for the free and unlimited coinage of silver which passed the Senate but was rejected by the House. Now although the treasury notes might be paid in silver, the President rightly held that good faith required their payment in gold if that metal was demanded. In consequence the gold reserve in the treasury became nearly exhausted, a financial panic occurred, and in August, 1893 Grover Cleveland called Congress in special session to repeal the Sherman law and stop the purchase of silver and the issuance of “coin” notes. Such repeal was effected after a struggle of months in which the Republicans generally supported and the Democrats generally opposed the President, though both parties were divided on the subject.

This controversy made the silver question paramount in the campaign of 1896. The Republican platform of that year declared unreservedly for the maintenance of the gold standard and opposition to the free coinage of silver, unless under some international agreement with the principal nations of the world which would assure the maintenance of silver at its money value—an agreement which everybody knew it would be impossible to secure. Until that impossible achievement, that is perpetually, “the existing gold standard must be maintained.” At this a faction of the party, chiefly in the western and silver producing states, seceded and joined the Democrats. The Democratic platform demanded the “free and unlimited coinage of both gold and silver at the ratio of 16 to 1” and that such silver dollars should be “full legal tender, equally with gold, for all debts, public and private.” At that a faction of the party seceded and nominated an independent ticket, while many other Democrats openly supported the Republican ticket.

It was recognized throughout the nation that the Democratic free silver proposal meant the flooding of the country with silver “dollars” worth little more than half a dollar each with consequent enormous losses to millions of persons. Every savings bank depositor would find his savings practically cut in half. Every life insurance policy would be paid at a discount of fifty per cent. At such a prospect of repudiation and disaster the nation revolted and the Democratic ticket was overwhelmingly defeated. The Republican party saved the nation from financial dishonor and ruin just as truly as it had saved it from secession and dissolution a generation before.

Following this the Republican government in March, 1900 passed the Gold Standard act, which made gold the sole monetary standard and stopped the coinage of silver dollars. That practically ended the silver controversy and won the fight for sound money. In 1900, it is true, the Democrats perfunctorily repeated the demand for the free and unlimited coinage of silver at 16 to 1, while the Republicans unequivocally denounced such proposals and reaffirmed their allegiance to the gold standard; but that campaign was fought on other issues. Finally in 1904 the Democratic platform was silent upon the subject, while the Democratic candidate in accepting the nomination for the Presidency explicitly declared his acceptance of and adherence to the Republican principle of a gold standard for the money of the Nation.