Coin's Financial School was an 1894 pamphlet written by lawyer, politician and resort founder William Hope Harvey (1851–1936). It advocated a return to bimetallism, where the value of a monetary unit is defined as a certain amount of two different kinds of metals, often gold and silver. In the book, Harvey charged that the demonetization of silver caused by the Coinage Act of 1873 led to the Panic of 1893 by halving the supply of available redemption money in the economy. This lowered the prices of goods throughout the country and hurt farmers and small business owners, according to Harvey. Harvey argued that by returning silver to the same monetary status as gold, the American economy would benefit from stabilized prices, resulting in higher revenue, and ease of repayment of debts. The pamphlet sold about 1 million copies, which helped popularize the free silver movement with the public. Harvey would go on to aid Democratic candidate William Jennings Bryan’s presidential campaign in 1896, which ran on the platform of free coinage of silver. The issue of bimetallism remained controversial throughout the remainder of the 19th century.
Background
The Founding Fathers
The Coinage Act of 1792, passed under president George Washington, established silver and gold as the legal tender of the United States, as gold was to be coined into eagles ($10), half-eagles ($5) and quarter-eagles ($2.50). Silver was to be coined into dollars ($1), half-dollars ($0.50), quarter-dollars ($0.25), dimes ($0.10) and half-dimes ($0.05). While the Coinage Act provided with coinage of copper as cent ($0.01) and half-cent ($0.005), copper was not accepted as legal tender.
The Gold Rush
In 1848, gold was discovered in Sutter's Mill, and the news of this discovery spread throughout the country. This would start a gold rush to the California territory. While merchants made more money than most miners did, it led to a substantial amount of gold flowing into the Treasury. Debate started in Congress on how to utilize the extra gold flowing into the reserves, and whether to abandon bimetallism in favor of the increasing supply of gold.
The Civil War and Beyond
During the American Civil War, Abraham Lincoln’s administration understood that the federal government would need millions of dollars to finance the war, and as the war dragged on, the government’s deficit and debt grew. It did not help that the previous administration, led by James Buchanan, left over $20 million budget deficit at the end of Buchanan’s term in 1861 as a result of a recession in 1857 that persisted throughout Buchanan’s term. More gold and silver left the nation to finance the war effort, reducing the nation’s resources in the long run, so Congress had metallic payments suspended in 1861 to stop the outflow. Lincoln and his Secretary of the Treasury, Salmon P. Chase, needed more loans to finance the war, but bankers, as a result of shaken public confidence, charged 24 percent in interests for the loans. As a solution, the government issued "demand notes", or federal notes requesting for a certain amount of money to be redeemed in gold or silver. In 1862, the government issued "greenbacks", which were unbacked notes that relied on government credit to retain value by themselves without the backing of metal. By the end of the war, gold was worth 1.5 greenback. This, combined with the amount of debt the government already owed, threatened the war-torn economy as it prepared to pay off its war debts.
As a response to the growing concerns regarding the amount of paper money used and growing debt of the United States, the Congress passed the Fourth Coinage Act in 1873. This law eliminated silver as the legal tender of the United States by abolishing the rights of the silver holders to have their silver bullions struck into U.S. Dollar coins. Proponents of free silver came to criticize the act as the "Crime of ‘73", while proponents of gold standard argued that since most world powers of the time, including England (in 1816) and the German Empire (in 1871), used the gold standard, it would facilitate international commerce.