ID: Gold Standard
When: 1879 (officially adopted; debates and legislation spanned the late 19th century)
Who:
- Key Figures: Numerous politicians, economists, and financiers debated the issue. No single individual is solely responsible. Supporters included fiscal conservatives and creditors who benefited from stable currency. Opponents included farmers and debtors who wanted inflationary policies.
What:
A monetary system in which the value of a country’s currency is directly tied to gold; a fixed amount of currency could be exchanged for a specific weight of gold. The Coinage Act of 1873 (also known as the “Crime of ‘73”) demonetized silver, paving the way for the gold standard’s dominance. This act officially ended the practice of minting silver dollars, creating a significant shift towards a gold-based monetary system. The Bland-Allison Act of 1878 and the Sherman Silver Purchase Act of 1890 represented attempts to soften the gold standard’s impact by increasing the money supply through limited silver coinage or purchases.
Impact: Why Significant?:
- Deflationary Pressure: The gold standard limited the money supply, leading to deflation. This benefited creditors but harmed debtors (farmers and workers) who found it harder to repay loans and saw their wages decline in real terms. This contributed to agrarian unrest and the rise of Populism.
- Economic Stability (for some): Provided a stable currency that promoted international trade and investment for those who benefited. It was seen as a symbol of fiscal conservatism and responsible government.
- Political Divisions: The gold standard became a major political issue, dividing the country between those who favored it and those who wanted a more inflationary monetary policy (often involving bimetallism, or the use of both gold and silver).
- Increased Political Activism: The economic hardship caused by deflation fueled the rise of populist movements, such as the Farmers’ Alliance and the Populist Party, demanding reforms and an end to the gold standard. This contributed to the increased political participation of farmers and workers.
- International Implications: The U.S. adoption of the gold standard helped to integrate the American economy into the global financial system, although it also made the economy more vulnerable to international economic fluctuations. The gold standard was a common practice amongst many major industrial powers of the time.