The Bland-Allison Act of 1878 called for a return to the minting of silver coins, in what was considered a controversial move for the day. During the late 19th century there was no federal reserve and money was backed by tangible deposits of gold and silver, known as the “bimetallic standard.”
Five years prior to the 1878 legislation, Congress decided to follow the lead of many European nations that had ended buying and minting silver coins since silver was a scarce resource.
The Coinage Act of 1873 acknowledged the gold standard over silver. The price of gold was much more stable than silver; the price of silver to gold declined from 16-to-1 in 1873 to nearly 30-to-1 by 1893. The reason why this become such a contentious issue was because an influx of silver hit the market between 1860 and 1871.
There was a large scale backlash among western farmers who had relied on using silver as a means to pay off debts—they called it the “Crime of ’73.” From then on, the push to a bimetallic standard began. It was backed by western congressmen and miners.
On January 14, 1875 the Specie Payment Resumption Act became a law in the United States and restored the nation to the gold standard. This was achieved through the redemption of previously-unbacked U.S. Notes and reversed inflationary policies that took effect after the Civil War.
Missouri Congressman Richard Bland, whose name was placed on the act, recognized the struggle of his constituents and helped push the Bland-Allison Act forward. Americans could once again use silver as a form of legal tender, although it was not allowed to be used in unlimited fashion like the old policy permitted. At the sadness of the individuals involved in the free-silver movement, who advocated for the unlimited coinage of silver, they would argue that it didn’t reach far enough.
The act required the U.S. Treasury to purchase between $2 and $4 million worth of silver bullion each month at market prices. President Hayes and others attempted to weaken the act’s effect by purchasing only a minimum amount of bullion.
The struggle between gold and hard money would not die with the Bland-Allison Act. It remained a fiercely debated issue during the 1880 presidential election, especially in reference to the Resumption Act. Bland-Allison remained law until it was replaced by the Sherman Silver Purchase Act of 1890.
The creation of the Federal Reserve was designed to end the debate over monetary policy. Unfortunately, it’s done the opposite. Will this conversation ever end? No.