Thursday, February 04, 2010

Battle of the Standards

We spent last week discussing the issue of gold vs. silver standards in my US history class as part of the Election of 1896, so I thought I'd share this fun lesson plan you can do with middle and high school students on the same topic. There are tons of links here that help students explore the issue and then discussion questions at the end as well as an interative activity.

Here is some background on the currency issue to start with:
The bitter controversy surrounding the issues of "free silver" and "sound money," so central to the 1896 campaign, has proved difficult for historians to explain. Partisans on both sides made exaggerated claims of the impact monetary policy could have on the nation's economic health. They implied that coinage of silver (on Bryan's side) or adherence to the gold standard (on the Republican side) was the single key to prosperity--and sometimes to the nation's honor.

Oddly, before 1896 both McKinley and Bryan had focused more attention on the tariff than on currency issues. Despite his party's platform, McKinley sought to emphasize the tariff and to avoid being labelled a "monometallist" or "bimetallist," leading to accusations of waffling. While he was a Congressman, Bryan allegedly once said that "the people of Nebraska are for free silver, so I am for free silver. I will look up the arguments later." His 1896 campaign became a free silver crusade.

Since the Civil War, a series of third parties had criticized Republicans' policy of contracting the money supply. Lincoln's issue of Greenbacks, the first national paper money, had helped finance the war but it also stimulated inflation. In subsequent decades, national Republican leaders sought to withdraw the greenbacks until each dollar had 100% backing in metal reserves. During the economic depressions of the 1870s and 1890s, in particular, this policy was roughly opposite to that which today's Federal Reserve might pursue in an economic downturn. It drew criticism as tending to favor bankers and lenders--who needed the value of a borrowed dollar to hold steady, or increase, until it was repaid--and detrimental to borrowers and workers.

Heirs to the Greenback Party of the 1870s believed that paper money was the solution. In post-war decades, however, the opening of vast silver veins (such as Nevada's Comstock Lode) had sharply increased the nation's silver supply. To Silver Democrats, federal coinage of silver (at a weight ratio of 16 ounces to 1 ounce of gold, hence the slogan "16 to 1") was a moderate solution to the currency problem. After all, silver was a precious metal, not mere paper. "Free silver" thus temporarily allowed a spectrum of currency reformers--from Southern Democrats to Populists--to unite. To horrified Gold Democrats and Republicans, "free silver" was an appeal for cheaper dollars. It would cheat lenders of an honest return on their money, allowing profligate borrowers to steal value from those who had extended loans.

Free silver at "16 to 1" would have expanded the money supply, but as a lone measure it would hardly have solved the nation's economic woes, and it would have (as Republicans argued) substantially raised the value of silver in relation to gold. Yet adherence of 'sound money' was not solely--or even primarily--responsible for the country's return to prosperity after 1896. To the extent that McKinley's victory reassured investors and financial institutions, whose leaders were frightened of Bryan, resolution of the issue may have had an indirect economic impact. After the campaign, however, the currency question faded quite rapidly from political debate.

What surprised me most, in discussing this in my class, was that many of my students actually believed we were still on the gold standard before last week.

1 comment:

Anonymous said...

I think if you ask the parents the question you asked your students about the gold standard you would get much the same results.