A well-circulated 1893-S( San Francisco Mint) Bland silver dollar. After the British closed their mints in India to the free coinage of silver on June 26, 1893, the intrinsic value of a silver dollar dipped to 52 cents. That was the lowest value to which silver had ever fallen
Replacing the free silver plan was a requirement that the Treasury purchase, at the official ratio, a minimum of $ 2 million and a maximum of $ 4 million worth of silver bullion each month. That bullion was to be struck, as fast as possible, into silver dollars. The Bland-Allison Act became law on February 28, 1878, after a congressional override of President Rutherford B. Hayes’ veto on the same day.
The silver dollars to be struck under Bland-Allison were valued at the official US Mint ratio of 16:1( silver to gold). However, the market value of silver in the dollar coin in 1878 was around 18:1, giving it an intrinsic value of $ 0.7734. Economist F. W. Taussig wrote of Bland-Allison,“ There was no basis of experience from which to predict the effects of the regular injection into the currency of a country of an overvalued coin, limited in quantity, yet unlimited in its legal tender character.”
When the government made it its business to purchase large quantities of silver bullion for coinage, and paid more for it in gold than it was worth in the marketplace, it forced the volume of silver in circulation to exceed its actual demand. Never before did the US government purchase gold or silver bullion wholly with its income. It never did for gold what it did for silver.
Economist J. Laurence Laughlin wrote,“ This mechanical and forced coinage of fixed amounts of silver each month, irrespective of the desires of the business community or the needs of exchange, was flying in the face of the principal of demand and supply. The legislators in 1878 had committed to repeal the laws of demand and supply.”
The Sherman Silver Purchase Act( 1890)
The free silver movement continued its populist agitation, resulting in congressional legislation that compelled the Treasury to buy even more silver than under Bland- Allison. The Sherman Silver Purchase Act of July 14, 1890 raised the amount of silver bullion the government was forced to purchase each month to 4.5 million ounces— an increase of 50 %. That was about the entire production of American silver mines. Of that amount, $ 2 million each month was to be struck as silver dollars. The remaining silver bullion was made into silver bars and stored in Treasury vaults. Silver certificates continued to be printed unabated along with silver dollar production.
Economist Neil Carothers wrote,“ So open was the intent to take care of the silver market that the framers of the law did
not trouble themselves with provision for the coinage or other disposition of all the metal to be purchased.”
The new law required the Treasury to buy this silver with a special new issue— Treasury notes( issued from 1890 to 1893)— that could be redeemed in either silver or gold. This resulted in a dramatic expansion of the circulating currency, however without a proportional growth of the nation’ s gold reserve. This act did not authorize the free and unlimited coinage of silver that supporters of free silver desired. However, it did put pressure on the Treasury’ s gold reserve and pushed the US economy towards the silver standard.
Pressure on Gold Reserve Leads to Panic
Writing in 1893, economist Francis A. Walker discussed that many people felt that America should“ go it alone” in supporting the value of silver. He felt that this view was disingenuous, and wrote,“ It is done to the influence of the silver-mining interests, reckless as to the general welfare and willing to do anything which will temporarily enhance the value of their products, regardless of what may befall in even a near future.”
34 FINANCIAL HISTORY | Fall 2025 | www. MoAF. org