WEBVTT NOTE 24. The Post Civil War Era: 1865-1879 1 00:00:00.000 --> 00:00:06.000 The Post Civil War Era, 1865 to 1879 2 00:00:06.000 --> 00:00:13.000 The United States ended the war with a depreciated, inconvertible greenback currency and a heavy burden of public debt. 3 00:00:13.000 --> 00:00:18.000 The first question on the monetary agenda was what to do about the greenbacks. 4 00:00:18.000 --> 00:00:25.000 A powerful group of industrialists, calling for continuation of greenbacks, opposing resumption and, of course, 5 00:00:25.000 --> 00:00:30.360 Of course, any contraction of money to prepare for specie resumption was headed by the Pennsylvania 6 00:00:30.360 --> 00:00:32.960 Iron and Steel Manufacturers. 7 00:00:32.960 --> 00:00:37.120 The Pennsylvania Iron Masters, who had been in the forefront of the organized protective 8 00:00:37.120 --> 00:00:43.040 tariff movement since its beginnings in 1820, were led here and instructed by their intellectual 9 00:00:43.040 --> 00:00:49.640 mentor, himself a Pennsylvania Iron Master, the elderly economist Henry C. Carey. 10 00:00:49.640 --> 00:00:54.660 Carey and his fellow iron manufacturers realized that during that inflation, since the foreign 11 00:00:54.660 --> 00:00:59.900 When an exchange market anticipates further inflation, domestic currency tends to depreciate 12 00:00:59.900 --> 00:01:02.820 faster than domestic prices are rising. 13 00:01:02.820 --> 00:01:08.780 A falling dollar and a rising price of gold, they realized, make domestic prices cheaper 14 00:01:08.780 --> 00:01:13.340 and imported prices higher and hence function as a surrogate tariff. 15 00:01:13.340 --> 00:01:19.740 A cheap money, inflationist policy then, could not only provide easy credit for manufacturing, 16 00:01:19.740 --> 00:01:24.100 it could also function as an extra tariff because of the depreciation of the dollar 17 00:01:24.100 --> 00:01:26.740 and the Rise in the Gold Premium. 18 00:01:26.740 --> 00:01:31.820 Inbibers of the Kerry Gospel of High Terrace and Soft Money were a host of attendees at 19 00:01:31.820 --> 00:01:38.460 the famous quote, Kerry Vespers, evenings of discussion of economics and politics. 20 00:01:38.460 --> 00:01:43.900 Influential Kerry disciples included economist and Pennsylvania iron master Stephen Cowell, 21 00:01:43.900 --> 00:01:49.460 Eber Ward, president of the Iron and Steel Association, John A. Williams, editor of the 22 00:01:49.460 --> 00:01:56.400 Association's Journal, Iron Age, Representative Daniel Morrell, Pennsylvania iron manufacturer, 23 00:01:56.400 --> 00:02:02.060 I. Smith-Homans Jr., editor of the Bankers Magazine, and powerful U.S. Representative 24 00:02:02.060 --> 00:02:07.620 William D. Kelly of Pennsylvania, whose lifelong devotion to the interest of the iron masters 25 00:02:07.620 --> 00:02:12.460 earned him the proud sobriquet, quote, old pig iron. 26 00:02:12.460 --> 00:02:16.820 The Kerry Circle also dominated the American Industrial League, which spread the Kerry 27 00:02:16.820 --> 00:02:22.440 Doctrines of Protection and Paper Money Influential allies in Congress, if not precisely 28 00:02:22.440 --> 00:02:27.240 carry followers, were the radical leader, Representative Thaddeus Stevens, himself a 29 00:02:27.240 --> 00:02:32.280 Pennsylvania iron master, and Representative John A. Griswold, an iron master from New 30 00:02:32.280 --> 00:02:33.600 York. 31 00:02:33.600 --> 00:02:39.260 Also sympathetic to greenbacks were many manufacturers who desired cheap credit, gold speculators 32 00:02:39.260 --> 00:02:43.720 who were betting on higher gold prices, and railroads, which as heavy debtors to their 33 00:02:43.720 --> 00:02:58.080 One of the influential carry disciples, for example, was the leading railroad promoter, 34 00:02:58.080 --> 00:03:03.280 the Pennsylvanian Thomas A. Scott, leading entrepreneur of the Pennsylvania and the Texas 35 00:03:03.280 --> 00:03:05.680 and Pacific railroads. 36 00:03:05.680 --> 00:03:10.400 One of the most flamboyant advocates of greenback inflation in the post-war era was the Wall 37 00:03:10.400 --> 00:03:16.880 Wall Street Stock Speculator, Richard Schell In 1874, Schell became a member of Congress, 38 00:03:16.880 --> 00:03:21.880 where he proposed an outrageous pre-Keynesian scheme in the spirit of Keynes's later dictum 39 00:03:21.880 --> 00:03:27.200 that so long as money is spent, it doesn't matter what the money is spent on, be it pyramid 40 00:03:27.200 --> 00:03:30.040 building or digging holes in the ground. 41 00:03:30.040 --> 00:03:35.040 Schell seriously urged the federal government to dig a canal from New York to San Francisco, 42 00:03:35.040 --> 00:03:38.120 financed wholly by the issue of greenbacks. 43 00:03:38.120 --> 00:03:42.920 Israel's enthusiasm was perhaps matched only by that of the notorious railroad speculator 44 00:03:42.920 --> 00:03:48.520 and economic adventurer, George Francis Trane, who called repeatedly for immense issues of 45 00:03:48.520 --> 00:03:50.040 greenbacks. 46 00:03:50.040 --> 00:03:57.600 Trane thundered in 1867, Quote, Give us greenbacks, we say, and build cities, plant corn, open 47 00:03:57.600 --> 00:04:04.440 coal mines, control railways, launch ships, grow cotton, establish factories, open gold 48 00:04:04.440 --> 00:04:17.880 The Panic of 1873 was a severe blow to many overbuilt railroads, and it was railroad men 49 00:04:17.880 --> 00:04:21.320 who led in calling for more greenbacks to stem the tide. 50 00:04:21.320 --> 00:04:27.240 Thomas Scott, Collis P. Huntington, leader of the Central Pacific Railroad, Russell Sage, 51 00:04:27.240 --> 00:04:31.060 and other railroad men joined in the call for greenbacks. 52 00:04:31.060 --> 00:04:37.500 So strong was their influence that the Louisville Courier-Journal in April 1874 declared, 53 00:04:37.500 --> 00:04:43.820 The strongest influence at work in Washington upon the currency proceeded from the railroads. 54 00:04:43.820 --> 00:04:49.700 The great inflationists, after all, are the great trunk railroads. 55 00:04:49.700 --> 00:04:53.940 The greenback problem after the Civil War was greatly complicated by the massive public 56 00:04:53.940 --> 00:04:56.880 debt that lay over the heads of the American people. 57 00:04:56.880 --> 00:05:03.760 A federal debt, which had tallied only $64.7 million in 1860, amounted to the huge amount 58 00:05:03.760 --> 00:05:07.980 of $2.32 billion in 1866. 59 00:05:07.980 --> 00:05:13.880 Many ex-Jacksonian Democrats, led by Senator George H. Pendleton of Ohio, began to agitate 60 00:05:13.880 --> 00:05:18.560 for further issue of greenbacks solely for the purpose of redeeming the principle of 61 00:05:18.560 --> 00:05:22.560 federal debts contracted in greenbacks during the war. 62 00:05:22.560 --> 00:05:27.660 In a sense, then, hard money hostility to both inflation and the public debt were now 63 00:05:27.660 --> 00:05:33.520 at odds. In a sense, the Pendletonians were motivated by a sense of poetic justice, of 64 00:05:33.520 --> 00:05:38.640 paying inflated debts in inflated paper. But in doing so, they lost sight of the broader 65 00:05:38.640 --> 00:05:44.600 hard money goal. This program confused the party struggles of the post-Civil War period. 66 00:05:44.600 --> 00:05:48.480 But ultimately, it is safe to say that the Democrats had a far greater proportion of 67 00:05:48.480 --> 00:05:53.360 of Congressmen devoted to hard money and to resumption, then did the Republicans. 68 00:05:53.360 --> 00:06:00.320 Thus, Secretary of the Treasury Hugh McCullough's quote, Loan Bill of March 1866, which provided 69 00:06:00.320 --> 00:06:05.400 for contraction of greenbacks in preparation for resumption of species payments, was passed 70 00:06:05.400 --> 00:06:13.200 in the House by a Republican vote of 56 to 52 and a Democratic vote of 27 to 1. 71 00:06:13.200 --> 00:06:19.840 And in April 1874, the quote, inflation bill, admittedly vetoed later by President Grant, 72 00:06:19.840 --> 00:06:24.600 which provided for expansion of greenbacks and of national banknotes, was passed in the 73 00:06:24.600 --> 00:06:30.720 House by a Republican vote of 105 to 64, while the Democrats voted against by the narrow 74 00:06:30.720 --> 00:06:34.360 margin of 35 to 37. 75 00:06:34.360 --> 00:06:39.920 In the meantime, despite repeated resolutions for resumption of specie payments in 1865 76 00:06:39.920 --> 00:06:46.020 In 1869, the dominant Republican Party continued to do nothing for actual resumption. 77 00:06:46.020 --> 00:06:51.380 The Pendleton Plan was adopted by the Democrats in their 1868 platform, and the Republican 78 00:06:51.380 --> 00:06:56.160 victory in the presidential race that year was generally taken as a conclusive defeat 79 00:06:56.160 --> 00:06:57.560 for that idea. 80 00:06:57.560 --> 00:07:03.080 Finally, however, the Democratic sweep in the Congressional elections of 1874 forced 81 00:07:03.080 --> 00:07:08.240 the Republicans into a semblance of unity on monetary matters, and, in the lame duck 82 00:07:08.240 --> 00:07:12.640 Congressional Session led by Senator John Sherman, they came up with the Resumption 83 00:07:12.640 --> 00:07:16.040 Act of January 1875. 84 00:07:16.040 --> 00:07:20.720 Despite the fact that the Resumption Act ultimately resulted in specie resumption, it was not 85 00:07:20.720 --> 00:07:24.240 considered a hard money victory by contemporaries. 86 00:07:24.240 --> 00:07:28.440 Sherman had forged a compromise between hard and soft money forces. 87 00:07:28.440 --> 00:07:32.800 It is true that the US government was supposed to buy gold with government bonds to prepare 88 00:07:32.800 --> 00:07:36.680 for resumption on January 1st, 1879. 89 00:07:36.680 --> 00:07:41.380 But this resumption was four years off, and Congress had expressed intent to resume several 90 00:07:41.380 --> 00:07:43.060 times before. 91 00:07:43.060 --> 00:07:47.260 And in the meantime, the soft money men were appeased by the fact that the bill immediately 92 00:07:47.260 --> 00:07:53.580 eliminated the $300 million limit on national banknotes in a provision known as quote, free 93 00:07:53.580 --> 00:07:54.820 banking. 94 00:07:54.820 --> 00:08:00.660 The only hard money compensation was an 80% pro-rata contraction of greenbacks to partially 95 00:08:00.660 --> 00:08:03.780 offset any new national banknotes. 96 00:08:03.780 --> 00:08:08.740 The bulk of the opposition to the Resumption Act was by hard-money congressmen, who, in 97 00:08:08.740 --> 00:08:13.720 addition to pointing out its biased ambiguities, charged that the contracted greenbacks could 98 00:08:13.720 --> 00:08:16.680 be reissued instead of retired. 99 00:08:16.680 --> 00:08:20.380 Hard-money forces throughout the country had an equally scornful view of the Resumption 100 00:08:20.380 --> 00:08:21.380 Act. 101 00:08:21.380 --> 00:08:26.000 In a few years, however, they rallied as resumption drew near. 102 00:08:26.000 --> 00:08:30.920 That the Republicans were generally less than enthusiastic about specie resumption was revealed 103 00:08:30.920 --> 00:08:35.160 by the Grant Administration's reaction to the Supreme Court's decision in the first 104 00:08:35.160 --> 00:08:37.120 Legal Tender case. 105 00:08:37.120 --> 00:08:40.920 After the end of the war, the question of the constitutionality of Legal Tender came 106 00:08:40.920 --> 00:08:42.560 before the courts. 107 00:08:42.560 --> 00:08:49.040 We have seen that the California and Oregon courts decided irredeemable paper to be unconstitutional. 108 00:08:49.040 --> 00:08:54.440 In the large number of state court decisions on greenbacks before 1870, every Republican 109 00:08:54.440 --> 00:09:00.600 judge but one upheld their constitutionality, whereas every Democratic judge but two declared 110 00:09:00.600 --> 00:09:08.800 The Greenback Question reached the U.S. Supreme Court in 1867 and was decided in February 111 00:09:08.800 --> 00:09:12.700 1870 in the case of Hepburn v. Griswold. 112 00:09:12.700 --> 00:09:18.240 The court held by a vote of 5 to 3, with all the Democratic judges voting with the majority 113 00:09:18.240 --> 00:09:20.700 and the Republicans in the minority. 114 00:09:20.700 --> 00:09:25.040 Chief Justice Salmon P. Chase, who delivered the decision denouncing his own action as 115 00:09:25.040 --> 00:09:30.580 Secretary of the Treasury as unnecessary and unconstitutional, had swung back to the Democratic 116 00:09:30.580 --> 00:09:46.580 The Grand Administration was upset by Hepburn v. Griswold, as were the railroads, who had accumulated a heavy long-term debt, which would now be payable in more valuable gold. 117 00:09:46.580 --> 00:09:54.580 As luck would have it, however, there were two vacancies on the court, one of which was created by the retirement of one of the majority judges. 118 00:09:54.580 --> 00:10:01.580 Grant appointed not only two Republican judges, but two railroad lawyers whose views on the subject were already known. 119 00:10:01.580 --> 00:10:13.580 The new 5 to 4 majority dutifully and quickly reconsidered the question and, in May 1871, reversed the previous court in the fateful decision of Knox v. Lee. 120 00:10:13.580 --> 00:10:18.580 From then on, paper money would be held consonant with the U.S. Constitution. 121 00:10:18.580 --> 00:10:22.580 The national banking system was ensconced after the Civil War. 122 00:10:22.580 --> 00:10:23.580 War. 123 00:10:23.580 --> 00:10:30.140 The number of banks, national banknotes and deposits all pyramided upward, and after 1870 124 00:10:30.140 --> 00:10:34.580 state banks began to boom as deposit-creating institutions. 125 00:10:34.580 --> 00:10:39.220 With lower requirements and fewer restrictions than the national banks, they could pyramid 126 00:10:39.220 --> 00:10:41.380 on top of national banks. 127 00:10:41.380 --> 00:10:51.020 The number of national banks increased from 1,294 in 1865 to 1,968 in 1873, while the 128 00:10:51.020 --> 00:10:58.260 The number of state banks rose from 349 to 1,330 in the same period. 129 00:10:58.260 --> 00:11:07.660 Total state and national banknotes and deposits rose from $835 million in 1865 to $1.964 billion 130 00:11:07.660 --> 00:11:16.820 in 1873, an increase of 135.2% or an increase of 16.9% per year. 131 00:11:16.820 --> 00:11:23.820 The following year, the supply of bank money leveled off as the Panic of 1873 struck and caused numerous bankruptcies. 132 00:11:23.820 --> 00:11:28.820 As a general overview of the national banking period, we can agree with Klein that, 133 00:11:28.820 --> 00:11:44.820 The financial panics of 1873, 1884, 1893 and 1907 were in large part an outgrowth of reserve pyramiding and excessive deposit creation by reserve city and central reserve city banks. 134 00:11:44.820 --> 00:11:52.820 These panics were triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up," end quote. 135 00:11:52.820 --> 00:12:02.820 And yet it must be pointed out that the total money supply, even merely the supply of bank money, did not increase after the panic, but merely leveled off. 136 00:12:02.820 --> 00:12:16.820 Orthodox economic historians have long complained about the quote Great Depression that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years until 1879. 137 00:12:16.820 --> 00:12:24.820 Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of species payments in 1879. 138 00:12:24.820 --> 00:12:30.820 Yet what sort of depression is it which saw an extraordinarily large expansion of industry, 139 00:12:30.820 --> 00:12:37.340 of railroads, of physical output, of net national product, or real per capita income? 140 00:12:37.340 --> 00:12:44.660 As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3% per annum increase 141 00:12:44.660 --> 00:12:50.860 in money national products, an outstanding real national product growth of 6.8% per year 142 00:12:50.860 --> 00:12:58.180 in this period, and a phenomenal rise of 4.5% per year in real product per capita. 143 00:12:58.180 --> 00:13:03.400 Even the alleged, quote, monetary contraction never took place, the money supply increasing 144 00:13:03.400 --> 00:13:07.340 by 2.7% per year in this period. 145 00:13:07.340 --> 00:13:13.540 From 1873 through 1878, before another spurt of monetary expansion, the total supply of 146 00:13:13.540 --> 00:13:25.540 of Bank Money rose from $1.964 billion to $2.221 billion, a rise of 13.1% or 2.6% per year. 147 00:13:25.540 --> 00:13:31.940 In short, a modest but definite rise, and scarcely a contraction. 148 00:13:31.940 --> 00:13:37.460 It should be clear, then, that the quote Great Depression of the 1870s is merely a myth. 149 00:13:37.460 --> 00:13:42.500 A myth brought about by misinterpretation of the fact that prices in general fell sharply 150 00:13:42.500 --> 00:13:55.300 Friedman and Schwartz estimated that prices in general fell from 1869 to 1879 by 3.8% 151 00:13:55.300 --> 00:13:56.540 per annum. 152 00:13:56.540 --> 00:14:01.540 Unfortunately, most historians and economists are conditioned to believe that steadily and 153 00:14:01.540 --> 00:14:07.820 sharply falling prices must result in depression, hence their amazement at the obvious prosperity 154 00:14:07.820 --> 00:14:10.180 and economic growth during this era. 155 00:14:10.180 --> 00:14:14.640 For they have overlooked the fact that in the natural course of events, when government 156 00:14:14.640 --> 00:14:19.900 and the banking system do not increase the money supply very rapidly, free market capitalism 157 00:14:19.900 --> 00:14:25.700 will result in an increase of production and economic growth so great as to swamp the increase 158 00:14:25.700 --> 00:14:27.580 of money supply. 159 00:14:27.580 --> 00:14:33.260 Prices will fall and the consequences will be not depression or stagnation, but prosperity 160 00:14:33.260 --> 00:14:38.700 since costs are falling too, economic growth and the spread of the increased living standards 161 00:14:38.700 --> 00:14:44.780 to All the Consumers. Indeed, recent research has discovered that the analogous quote Great 162 00:14:44.780 --> 00:14:50.100 Depression in England in this period was also a myth and due to a confusion between a contraction 163 00:14:50.100 --> 00:14:55.920 of prices and its alleged inevitable effect on a depression of prices and its alleged 164 00:14:55.920 --> 00:15:01.340 inevitable effect on a depression of business activity. It might well be that the major 165 00:15:01.340 --> 00:15:07.940 effect of the Panic of 1873 was not to initiate a Great Depression but to cause bankruptcies 166 00:15:07.940 --> 00:15:12.820 in Overinflated Banks and in Railroads riding on the tide of vast government subsidy and 167 00:15:12.820 --> 00:15:14.900 bank speculation. 168 00:15:14.900 --> 00:15:19.540 In particular, we may note Jay Cooke, one of the creators of the National Banking System 169 00:15:19.540 --> 00:15:22.100 and paladin of the public debt. 170 00:15:22.100 --> 00:15:27.580 In 1866, he favored contraction of the greenbacks and early resumption because he feared that 171 00:15:27.580 --> 00:15:31.140 inflation would destroy the value of government bonds. 172 00:15:31.140 --> 00:15:36.540 By the late 1860s, however, the House of Cooke was expanding everywhere, and in particular 173 00:15:36.540 --> 00:15:39.540 had gotten control of the new Northern Pacific Railroad. 174 00:15:39.540 --> 00:15:45.540 Northern Pacific had been the recipient of the biggest federal largesse to railroads during the 1860s, 175 00:15:45.540 --> 00:15:50.540 a land grant of no less than 47 million acres. 176 00:15:50.540 --> 00:15:54.540 Cook sold Northern Pacific bonds as he had learned to sell government securities, 177 00:15:54.540 --> 00:16:00.540 hiring pamphleteers to write propaganda about the alleged Mediterranean climate of the Northwest. 178 00:16:00.540 --> 00:16:05.540 Many leading government officials and politicians were on the Cook Northern Pacific payroll, 179 00:16:05.540 --> 00:16:10.340 including President Grant's private secretary, General Horace Porter. 180 00:16:10.340 --> 00:16:16.940 In 1869, Cook expressed his monetary philosophy in keeping with his enlarged sphere of activity, 181 00:16:16.940 --> 00:16:17.940 quote, 182 00:16:17.940 --> 00:16:22.420 Why should this grand and glorious country be stunted and dwarfed? 183 00:16:22.420 --> 00:16:27.940 Its activities chilled in its very lifeblood curdled by these miserable hard-coined theories, 184 00:16:27.940 --> 00:16:31.140 the musty theories of a bygone age. 185 00:16:31.140 --> 00:16:35.940 These men who are urging on premature resumption know nothing of the great growing West, which 186 00:16:35.940 --> 00:16:41.180 would grow twice as fast if it was not cramped for the means necessary to build railroads 187 00:16:41.180 --> 00:16:46.460 and improve farms and convey the produce to market." 188 00:16:46.460 --> 00:16:51.720 But in 1873, a remarkable example of poetic justice struck Jay Cooke. 189 00:16:51.720 --> 00:16:56.540 The overbuilt northern Pacific was crumbling, and a Cooke government bond operation provided 190 00:16:56.540 --> 00:16:57.820 a failure. 191 00:16:57.820 --> 00:17:03.300 So the mighty House of Cook, quote, stunted and dwarfed by the market economy, crashed 192 00:17:03.300 --> 00:17:07.980 and went bankrupt, touching off the panic of 1873. 193 00:17:07.980 --> 00:17:12.640 After the passing of the Resumption Act in 1875, the Republicans finally stumbled their 194 00:17:12.640 --> 00:17:18.820 way into resumption in 1879, fully 14 years after the end of the Civil War. 195 00:17:18.820 --> 00:17:23.400 The money supply did not contract in the late 1870s because the Republicans did not have 196 00:17:23.400 --> 00:17:27.740 the will to contract in order to pave the way for resumption. 197 00:17:27.740 --> 00:17:32.860 was finally achieved after substantial sales of U.S. bonds for gold in Europe by Secretary 198 00:17:32.860 --> 00:17:34.980 of the Treasury Sherman. 199 00:17:34.980 --> 00:17:40.420 Return to the gold standard in 1879 was almost blocked in the last three years before resumption 200 00:17:40.420 --> 00:17:45.180 by the emergence of a tremendous agitation heavily in the West but also throughout the 201 00:17:45.180 --> 00:17:48.880 country for the free coinage of silver. 202 00:17:48.880 --> 00:17:55.780 The United States mint ratios had been undervaluing silver since 1834 and in 1853 de facto gold 203 00:17:55.780 --> 00:18:00.380 Gold Monometalism was established because silver was so far undervalued as to drive 204 00:18:00.380 --> 00:18:03.820 fractional silver coins out of the country. 205 00:18:03.820 --> 00:18:09.900 Since 1853, the United States, while du jour on a bimetallic standard at 16 to 1, with 206 00:18:09.900 --> 00:18:15.020 the silver dollar still technically in circulation, though nonexistent, was actually on a gold 207 00:18:15.020 --> 00:18:20.620 monometallic standard with lightweight subsidiary silver coins for fractional use. 208 00:18:20.620 --> 00:18:26.140 In 1872, it became apparent to a few knowledgeable men at the U.S. Treasury that silver, which 209 00:18:26.140 --> 00:18:32.220 had held at about 15.5 to 1 since the early 1860s, was about to suffer a huge decline 210 00:18:32.220 --> 00:18:33.360 in value. 211 00:18:33.360 --> 00:18:37.760 The major reason was the realization that European nations were shifting from a silver 212 00:18:37.760 --> 00:18:41.920 to a gold standard, thereby decreasing their demand for silver. 213 00:18:41.920 --> 00:18:47.900 A subsidiary reason was the discovery of silver mines in Nevada and other states in the West. 214 00:18:47.900 --> 00:18:52.620 Working rapidly, these treasury men, along with Senator Sherman, slipped through Congress 215 00:18:52.620 --> 00:18:58.500 in February 1873 a seemingly innocuous bill which in effect discontinued the minting of 216 00:18:58.500 --> 00:19:00.880 any further silver dollars. 217 00:19:00.880 --> 00:19:06.720 This was followed by an act of June 1874 which completed the demonetization of silver by 218 00:19:06.720 --> 00:19:12.220 ending the legal tender quality of all silver dollars above the sum of $5. 219 00:19:12.220 --> 00:19:17.720 The timing was perfect, since it was in 1874 that the market value of silver fell to greater 220 00:19:17.720 --> 00:19:41.840 In short, after 1874, silver was no longer undervalued but overvalued, and increasingly 221 00:19:41.840 --> 00:19:45.640 so in terms of gold at 16 to 1. 222 00:19:45.640 --> 00:19:52.200 Except for the Acts of 1873 and 1874, labeled by the pro-silver forces as, quote, the crime 223 00:19:52.200 --> 00:19:57.400 of 1873, silver would have flowed into the United States and the country would have been 224 00:19:57.400 --> 00:20:01.680 once again on a de facto monometallic silver standard. 225 00:20:01.680 --> 00:20:06.440 The champions of greenbacks, the champions of inflation, saw a, quote, hard money way 226 00:20:06.440 --> 00:20:11.640 to increase greatly the amount of American currency, the re-monetization of a flood of 227 00:20:11.640 --> 00:20:13.860 new overvalued silver. 228 00:20:13.860 --> 00:20:19.660 The agitation was to re-monetize silver by quote, the free and unlimited coinage of silver 229 00:20:19.660 --> 00:20:21.900 at 16 to 1. 230 00:20:21.900 --> 00:20:25.220 It should be recognized that the silverites had a case. 231 00:20:25.220 --> 00:20:30.700 The demonetization of silver was a quote crime in the sense that it was done shiftily, deceptively 232 00:20:30.700 --> 00:20:35.300 by men who knew that they wanted to demonetize silver before it was too late and have silver 233 00:20:35.300 --> 00:20:37.140 replace gold. 234 00:20:37.140 --> 00:20:42.180 The case for gold over silver was a strong one, particularly in an era of rapidly falling 235 00:20:42.180 --> 00:20:46.540 and Value of Silver, but it should have been made openly and honestly. 236 00:20:46.540 --> 00:20:51.480 The furtive method of demonetizing silver, the quote, crime against silver, was in part 237 00:20:51.480 --> 00:20:56.340 responsible for the vehemence of the silver agitation for the remainder of the century. 238 00:20:56.340 --> 00:21:01.140 Ultimately, the administration was able to secure the resumption of payments in gold, 239 00:21:01.140 --> 00:21:07.200 but at the expense of submitting to the Bland-Allison Act of 1878, which mandated that the Treasury 240 00:21:07.200 --> 00:21:12.800 Murray purchased $2 million to $4 million of silver per month from then on. 241 00:21:12.800 --> 00:21:18.280 It should be noted that this first silver agitation of the late 1870s, at least, cannot 242 00:21:18.280 --> 00:21:22.960 be considered an agrarian or a particularly southern and western movement. 243 00:21:22.960 --> 00:21:28.400 The silver agitation was broadly based throughout the nation, except in New England, and was, 244 00:21:28.400 --> 00:21:30.980 moreover, an urban movement. 245 00:21:30.980 --> 00:21:33.000 As Weinstein points out, 246 00:21:33.000 --> 00:21:39.000 Silver began as an urban movement, furthermore, not an agrarian crusade. 247 00:21:39.000 --> 00:21:47.000 Its original strongholds were the large towns and cities of the Midwest and the Middle Atlantic states, not the country's farming communities. 248 00:21:47.000 --> 00:21:58.000 The first batch of bi-metalist leaders were a loosely-knit collection of hard-money newspaper editors, businessmen, academic reformers, bankers, and commercial groups. 249 00:21:58.000 --> 00:22:07.000 With the passage of the Silver Purchase Act of 1878, silver agitation died out in America, to spring up again in the 1890s.