Crime of ’73 (United States)

Page 79

The Coinage Act of 1873, a piece of legislation that caused hardly a political ripple in Congress, subsequently acquired the odious title of the “Crime of ’73.” The act rather informally dropped the bimetallic standard in the United States in favor of the gold standard, an action that incurred the wrath of debtors and western farmers as deflationary trends gathered force in the late 1800s. Since the days of Alexander Hamilton the United States had been on a bimetallic standard combining gold and silver in a fixed ratio. The Crime of ’73 made it into the folklore in the United States, including references in the famous book, The Wizard of Oz.

A movement of economic and social protest lifted William Jennings Bryan to the leadership of the Democratic Party, and inspired his famous “Cross of Gold” speech, which compared the gold standard to the crucifixion of mankind on a cross of gold. Debt-ridden farmers and unemployed workmen quite rightly pointed the finger of suspicion to the unforgiving discipline of the gold standard, and saw something sinister in quietly removing silver from the monetary standard without the airing of a public debate. With vast holdings of silver in western states, coinage of silver could have infused additional monetary reserves in the economy, raising prices and easing pressure on debtors.

The offensive portion of the act downgraded the silver dollar to subsidiary coinage of the same proportional weight and fineness as the half dollar, quarter, and dime. These silver dollars were legal tender in amounts up to $5 but in 1877 the Treasury discontinued minting the silver dollars, due to a lack of interest.

Before the act silver owners could sell silver to the mint for $1.292 per ounce, but the market value of silver was $1.298 per ounce, creating an opportunity to melt down minted silver and sell it for a profit, causing silver dollars to disappear from circulation. The high market value of silver in 1873 probably accounts for the lack of public controversy at the time Congress passed the Coinage Act of 1873. The discovery of additional silver reserves in the western states, coupled with deflationary trends, pushed the market price of silver below the mint price. As deflationary trends made themselves felt, culminating in the depression of the 1890s, the silver interests missed the Treasury market for silver and depressed regions saw silver coinage as the answer to economic woes.

Abandonment of the bimetallic standard and cessation of silver as a monetary standard of value were in step with international currents at the time. Europe was rapidly turning to a gold standard that was associated with England’s commercial success. The failure of William Jennings Bryan to win a presidential bid assured that the United States would remain on a gold standard, which became official with the Gold Standard Act of 1900. The discovery of new sources of gold relieved the monetary tightness of the late 1800s, effectively defusing the silver protest, and letting the Crime of ’73 fade into political oblivion.