gold, silver, and the elusive gold standard -- 4/8/24

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Today's selection -- from The Money Kings by Daniel Schulman. In the late 1800s, the energetic political debate was around whether to keep a more conservative gold standard, the position favored by Wall Street bankers, or to loosen the money supply by including silver, the position favored by farmers and referred to as the bimetallic standard. Wall Street, led by the legendary Jesse Seligman, concluded that a bimetallic standard would only be possible if the major countries of Europe adopted it as well:

“An ovation greeted [prominent Wall Street banker] Jesse Seligman as he entered the dining room of [the elite restaurant] Delmonico's with Jacob Schiff, the older banker leaning on the arm of the younger. It was eight p.m. on October 1, 1891, a Thursday, and some two hundred men stood in applause beside long rows of tables decorated with roses and smilax, while Seligman’s three daughters, Alice, Emma, and Madeleine, looked on from a balcony overhead. Familiar faces populated the crowd: ex-mayor Abram Hewitt; Columbia University president (and future New York City mayor) Seth Low; Marcus Goldman, with sons Julius and Henry and son-in-law Sam Sachs; Solomon Loeb; and Emanuel Lehman, who with Schiff, the master of ceremonies, had helped to arrange this banquet honoring Seligman for his lifetime of charitable and patriotic service. 

“The following day Jesse would sail for Europe on the first leg of a yearlong trip, during which he would undertake a diplomatic mission, before heading to Egypt to spend the winter. President Harrison had tasked the well-connected banker with visiting European finance officials to test the waters about forging an international compromise on a monetary standard based on both gold and silver.

“The United States had operated on the bimetallic standard prior to the Civil War, when the cash-strapped Lincoln administration began printing greenbacks. But when Ulysses Grant signed the Coinage Act of 1873, drastically limiting the minting of silver-based currency, he had placed the nation on the path to adopting the gold standard alone, as many European nations had already done and as others would do in the years to follow.

A silver écu, minted in 1784, depicting Louis XVI, King of France.

“Decried as the ‘Crime of '73’ by its detractors, the law touched off decades of acrimonious political debate, pitting the East Coast financial establishment, whose constituents argued for ‘sound money’ backed by gold, against midwestern farmers and the citizens of western mining outposts, who pushed for a vast expansion of silver-based currency. Ballooning the money supply was attractive to debtors struggling to repay their loans, and farmers hoped it would increase the price of their crops; for the miners of Montana and Nevada, where the Comstock Lode had been discovered in 1859, it would almost literally give them the ability to mint money.

“But bankers such as Seligman warned that unilaterally returning to bimetallism could have disastrous economic results, crippling international trade and causing precious gold to flee across the Atlantic while Europe dumped its silver on the U.S. Treasury. ‘A standard different from that of the commercial world would affect the vast mass of our imports and exports,’ Jesse cautioned in an essay published in The North American Review, ‘and but little less directly every other industry touching these at any point.’ One possible solution to America's monetary impasse was convincing key European trading partners—such as Britain, France, and Germany—to adopt international bimetallism and establish a commonly accepted ratio between gold and silver. Seligman's mission was to gauge European attitudes and pave the way for an international conference where the silver question might finally be settled.”

author:	Daniel Schulman
title:	The Money Kings: The Epic Story of the Jewish Immigrants Who Transformed Wall Street and Shaped Modern America
publisher:	Knopf
pages:	146-147