Online Library of Liberty: Economics, vol. 2: Modern Economic Problems

much less than the change in its ratio to gold would indicate, gold having risen in terms of most other goods as well as of silver. However, the “free-silver movement” to open the mints to the free coinage of silver at the ratio of 16 to 1, supported by one of the leading political parties in the year 1896, threatened a sudden and marked cheapening of money. Probably gold would have been entirely driven out as money for the time and silver would have taken its place as the standard. It is not impossible, however, that the substitution of silver for gold in the United States would have brought the two metals to parity at a level of prices much less than 100 per cent higher than the existing one, possibly not more than 20 or 30 per cent higher. In any event, “free silver” would have accomplished the purpose of making the standard of deferred payments cheaper. It was at first a debtors’ movement, but to succeed it had to enlist the support of other large classes of voters. And thus it developed into the more sweeping theory that wages, welfare, and prosperity were favored by a larger supply of money quite apart from the effect it would have upon debts.

In its extreme form the free-silver plan was a fiat scheme; for some of its supporters believed that by the mere passage of the law the two metals could be made to bear to each other any ratio desired. But its most intelligent advocates recognized that the force of the law was limited by economic conditions. The victory of the gold standard in the campaign of 1896 was, it would seem, due more to the well-founded fear that a sudden change of the money standard would cause a panic than to a popular understanding of the question.

References.

Anderson, B. M. Jr., Effects of the war on money, credit and banking in France and the U. S. Carnegie Endowment for International Peace. P. 227. New York. Oxford University Press. 1919.

Mitchell, W. C., History of prices during the war. P. 95. Washington War Industries Board. 1919.

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