The free silver movement was a populist movement in the United States during the last quarter of the nineteenth century. “Free silver” meant that silver could be brought to the mint and struck into coins without a seigniorage charge; that is, without taking any of the precious metal to pay mint expenses. Also, the amount of silver that could be brought to the mint was to be unlimited.
Before 1873 anyone who brought 3.7125 grains of silver to the mint could receive a legal-tender silver dollar, and the campaign for free silver fought for a return of these conditions.
Between the mid-1830s and 1873 the market price of silver exceeded the mint price of $1.29 cents per ounce; therefore, very little silver found its way to the mint. Silver dollars had largely disappeared from circulation when Congress enacted the Coinage Act of 1873, an act that made no provision for the coinage of silver, and put the United States on an unofficial gold standard. Proponents of free silver later condemned the act as the “Crime of ’73.”
The deletion of the silver dollar drew little attention at the time, but the United States was already in the clutches of a deflationary downswing that would last three decades. From 1870 until 1896 prices plunged 50 percent, a deflationary wave that hit hard at farmers in the West and South, where debt incidence stood at high levels.
These groups quite rightly saw that a return to free and unlimited coinage of silver would raise the domestic money stock, raise prices, and reduce their debt burden. Much of the populist flavor of the free silver movement came from the hopes it lifted among large numbers of low-income farmers.
Silver prices felt an added deflationary force because the world was rushing toward a gold standard that left little role for silver as a monetary metal. Major silver discoveries in the American West further depressed the market for silver. From 1850 until 1872 the market price of an ounce of silver stood above $1.32, clearly above the mint price, but the price had slipped to $1.24 by 1874, and from there it tumbled to $0.65 by 1895. Silver-mining interests in the United States saw free silver as a way of increasing the demand for silver, and putting a floor under silver prices. They would have been delighted to sell silver to the Treasury for $1.29.
The free silver proponents achieved limited success in Congress. On 28 February 1878 Congress enacted, over a presidential veto, the Bland-Allison Act, which required the Treasury to coin between $2 million and $5 million worth of silver per month. The bill had begun as a free silver bill but had been amended to restrict the amount of silver the Treasury purchased. In 1890 the Sherman Silver Act required the Treasury to purchase $4 million of silver per month, and issue silver certificates.
The Sherman Silver Act was blamed for sparking a crisis of confidence in the American monetary system, and Europeans began withdrawing gold from the United States. President Cleveland, a staunch advocate of the gold standard, prompted Congress to repeal the silver purchase provisions of the Sherman Silver Act.
The silver controversy loomed as a major issue in the presidential election of 1896, coinciding with the nadir of the 30-year deflationary wave. William Jennings Bryan won the Democratic nomination after his famous “Cross of Gold” speech, denouncing the gold standard, and defining himself as the free silver candidate. Bryan lost the election and in 1900 the United States went squarely on the gold standard.