the hs. CHAPTER XVII SILVER CONTEST OF 1896 1891 TO 1896 in 1890. THE retention of the national bank system was vir- The currency tually settled by the law of 1882 enabling banks to extend their charters for a period of twenty years. Although opposition did not thereafter cease, it very materially subsided. The Supreme Court having decided that Congress had unlimited power to issue legal tender notes at any time, these notes became a settled factor in our currency system, with little hope, in view of popular sentiment, of their retirement. The status of silver was undetermined and in sharp controversy,free coinage at the ratio of 16 to 1 the contention of one party, the repeal of the existing silver purchase law, the contention of the friends of the gold standard. Gold was the standard of value, but silver was being purchased at the rate of 4,500,000 ounces per month and legal tender coin notes issued in payment therefor. It was only a question of time when the continued purchase of this vast amount of silver, practically redeemable in gold, would exhaust the credit of the government and force it upon a silver basis. The question whether the standard should be gold or silver was paramount, and all forms of our currency were so closely related to the standard that they will be considered together in this and the following chapter. The financial and monetary conditions of the whole The silver danger. The Baring crisis. commercial world were affected by the position which this country had assumed respecting silver. By careful management the gold surplus of the Treasury had been increased to nearly $219,000,000 in 1888. The estimated stock of gold in the country at the same time was over $700,000,000. We had retained all of our gold product, then averaging more than one-quarter of the world's output, and had imported more than we exported. The embarrassment of Baring Brothers of London, which culminated in November, 1890, precipitated a severe stringency in the money market in London which had its counterpart in New York. The Barings were financing vast undertakings in South America and elsewhere, which they were unable to carry through. The Bank of England took charge of their affairs, managed the same most successfully, and eventually restored the Barings to solvency and strength. In order to do this the Bank of England at that time found it convenient to borrow from the Bank of France $15,000,000 in gold. The incident was regarded as a warning, and in order to strengthen their reserves European banks generally began to make extraordinary efforts to obtain gold from all points, but mainly from the United States. The Bank of England, by raising its discount rate and by raising the price which it will pay for gold bars or foreign coin, can measurably protect its gold supply. In addition to these safeguards the Bank of France goes farther and refuses to pay notes and drafts entirely in gold, offering a portion in gold, the balance in silver, or exacts a premium on gold desired for export. The United States Treasury has no safeguards whatever against withdrawals of gold, and hence ours is the easiest market from which other nations' necessities may be supplied. By the end of the fiscal year 1890 over $54,000,000 gold had been exported notwithstanding a favorable causes gold trade balance, showing conclusively a return of Ameri- Inflation can securities from abroad. The inflation resulting exports. from the silver purchase act made money easier, and accelerated the drain of gold. Following the return flow of money to New York after the crops of 1890 were harvested, heavy exports of gold were resumed in January, 1891, the net exports for the fiscal year having been $68,000,000. General business activity and a continuous demand for money in the fiscal year ending June 30, 1892, together with a favorable trade balance resulting largely from bountiful crops in 1891 and a general shortage in Europe, caused heavy importations of gold, so that the net loss in that year was only $500,000. In July, however, large exports again began. The banks finding it impracticable to furnish the gold from their vaults exporters of gold were paid in notes, thus the demand was transferred to the Treasury, and as a consequence its gold reserve steadily diminished. In the seven months following June, 1892, more gold was drawn out of the Treasury in redemption of legal tender notes than in the thirteen years preceding. The hope that the purchase of silver under the law of 1890 would restore that metal to a parity with gold was not realized. The rise in price to $1.21 per ounce fine ($1.2929 being par) was largely speculative and was followed by a rapid decline. The monometallists experienced the sad satisfaction of having their predictions verified; the bimetallists saw their arguments against independent action proven by the test of experience. The keen foresight of the business world clearly perceived the impending struggle and realized the baleful effect upon all forms of industry whatever the eventual result might be. New enterprises were abandoned, present business was curtailed, and the more timid proceeded to hide their talent in a napkin. Price of silver not sustained. Democratic victory of 1890. Harrison's views. Senate for free coinage. The party in power was held responsible for unsatisfactory conditions, and the congressional election in 1890 favored the Democrats, giving them the enormous majority of 149 in the House. This spurred the Republicans in the remaining short session (1890-1891) to endeavor to pass some decisive legislation A bill was reported in the Senate providing for an increased purchase of silver under the law of 1890 for a period of one year, in order to absorb the surplus in the market, which seemed to keep down the price. The silver Republicans, however, held the balance of power, and uniting with the silver Democrats passed a measure for free coinage pure and simple by a vote of 39 to 27. Fifteen Republicans voted for and 18 Democrats against it. The House voted down all attempts to consider the bill Windom died, and was succeeded by Charles Foster, of Ohio. The Treasury note-issues continued, and silver fell to 96 cents per ounce. Harrison, in pursuance of authority granted him by Congress, invited the principal nations to join in another conference to consider the question of international bimetallism, but the negotiations were not successful until 1892. Harrison believed that the scarcity of gold in Europe would incline European nations to favor international bimetallism, and hence urged the accumulation of gold in the Treasury. He felt satisfied that we could maintain parity, expressed sympathy with the silver producers, and was gratified that the surplus was not large and no longer deposited in banks. Notwithstanding the pendency of this international conference, those favoring independent free coinage persisted in their efforts to force action in both branches of Congress in the session of 1891-1892. The silver advocates in the Senate were strongly reënforced by mem bers from the recently admitted Rocky Mountain states, and proceeded to pass a bill for free coinage at the ratio of 16 to 1 by a vote of 29 to 25. Seven Democrats, including Carlisle, opposed it. The House rejected the bill by a vote of 136 to 154, the negative including 94 Cleveland Democrats. 1892. In the political campaign of 1892 the Republican plat- Presidential form declared for both gold and silver and for interna- campaign of tional bimetallism. The Democratic platform, dictated by the Cleveland wing of the party, denounced the silver purchase law as a "cowardly makeshift," demanded that both gold and silver should be used without discrimination, and declared in favor of the repeal of the 10 per cent tax on state bank-notes. An important element, particularly representatives from the South, regarded the restoration of state bank circulation as the best solution of the currency question, and a popular substitute for the silver issue in the campaign. A new party appeared in the field, composed largely Populist of the old Greenback element. It was called the "Peo- party. ple's Party," afterward "Populists," and nominated Weaver, of Iowa, for the presidency. The declarations of its state conventions favored various "isms," including subtreasuries in every important locality for the reception of wheat and other farm products, and the issue of paper money against the same, in a manner similar to the issuing of notes against silver bullion purchased. In the national Populist platform gold monometallism was declared a "vast conspiracy against mankind." A circulation of $50 per capita was demanded. Silver demonetization, it was asserted, added to the purchasing power of gold, and the national power to create money had been used to favor the bondholders. The fact that a candidate appealing for public support as the representative of such policies polled 1,041,000 votes, |