Free Silver refers to one of the key American policies in the late 1900s, an inflationary monetary policy in which “free coinage of silver” was favoured above a less inflationary gold standard. There were more silver discovered and available than gold at the time, this is why the “free coinage of silver” was seen as an inflationary monetary policy compared to a less inflationary gold standard.

The advocates or supporters of “Free Silver” were called “Silverites” and were despite their support of “free coinage of silver” very balanced in their views, since they promoted bimetallism, “…the use of both silver and gold as currency at the ratio of 16 to 1 (16 ounces of silver would be worth 1 ounce of gold)” (Wikipedia). This was despite the fact that the gold/silver ratio was 1:32 at the time and that “…most economists warned that the cheaper silver would drive the more expensive gold out of circulation” (Wikipedia). The general consensus was that “free coinage of silver” would lead to an increase in prices, but whether it would be beneficial to the U.S. economy remained an open question. “The issue peaked from 1893 to 1896, when the economy was in a severe depression — called the Panic of 1893 — characterized by falling prices (deflation), high unemployment in industrial areas, and severe distress for farmers” (Wikipedia).

“The debate pitted the pro-gold financial establishment of the Northeast, along with railroads, factories and businessmen, who were creditors and would be hurt by inflation, against poor farmers who would benefit from higher prices for their crops. Free silver was especially popular among farmers in the wheat belt (the western Midwest) and the cotton belts (the Deep South), as well as silver miners in the West. It had little support among farmers in the Northeast and the Corn Belt (the eastern Midwest). Free Silver was the central issue for Democrats in the presidential election of 1896 and that of 1900, under the leadership of William Jennings Bryan. The Populists also endorsed Bryan and Free Silver in 1896, which marked the effective end of its independence. In major elections Free Silver was consistently defeated, and after 1896 the nation moved to the gold standard. The debate over silver lasted from the passage of the Fourth Coinage Act in 1873, which demonetized silver and was called the “Crime of ’73” by opponents, until 1913, when the Federal Reserve Act completely overhauled the U.S. monetary system” (Wikipedia).

Bimetallism

Bimetallism, a monetary standard where a fixed rate of exchange is set between gold and silver, didn’t work, because they fixed the prices of both gold and silver, separately and in relation to each other. This caused distortions in the market, because the one pushed the other out of the market, creating unnatural and unhealthy shortages. This is not to say that gold and silver are not money or cannot be used as money successfully within the same monetary system, it is to say that the free market should set gold and silver prices (not even to mention other prices!). Yes, natural shortages can develop when honest money such as gold and/or silver is used, but it gives the incentive to mine more gold and/or silver, to expand the money supply in a more healthy and gradual way. What is after all healthy and gradual about monetary expansion when an estimated 9+ tons of ink is used daily just to print fiat dollar notes alone, not even to mention the fiat dollars they create electronically with a few strokes on a keyboard?

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