Goldbugs, Silverites and Greenbackers
Anyway, whether in the name of the South or for the interests of bankers, over Lincoln’s dead body, the National Banking Acts that some say he would have swept away. In the decade following his death, things would develop quickly. A sharp restriction in the money supply would follow, and a regular calling in of greenbacks.
Along with the issue of the South and the former slaves, the dominant issue of American politics after the war, was the gold-silver-greenbacks money issue, what money actually is.
There were the Gold Bugs, who insisted that gold was natural money; and there were the Silverites who accepted the argument about the intrinsic value of precious metals, but wanted to include silver in a bimetallic system, using the silver there was in abundance, and urgently increase the money in circulation in what had become severely contracted times.
Silverites projected a very romantic idea about silver, putting around the phrase the dollar of our daddies, as well as throwing around a lot of allegations about foreign bankers conspiring to control America.
And, of course, there were the Greenbackers, arguing that paper money served the function of facilitating the economy, and just enough of it should be made available by the government.
The banking community were very active lobbyists in the years after Lincoln. Within a year of his killing came the Contraction Act of 1866, which started to take greenbacks out of circulation and contract the money supply. Hard times ensued. Debts were called in, new credit wasn’t forthcoming, over 50,000 businesses went to the wall and, no doubt, to fire sales. The currency in circulation per American citizen fell dramatically and would keep on falling for a long time.
The media were spreading the message about the necessity for America’s money to be backed by gold. This, the gold bugs claimed, would bring the stability America’s money needed. Other Acts would follow to strengthen bankers’ interests and take more greenbacks out of circulation.
Bill Still said in the film he made about the period, The Secret of Oz:
After the death of President Lincoln, the bankers begin to reassert their control over America’s money. This was no easy task; Lincoln’s greenbacks, just like Rome’s plentiful debt-free coins and England’s debt-free tally sticks, were generally popular, and their existence had let the genie out of the bottle.
And as well as greenbacks, if it was the banking world’s objective to maintain monopoly control over America’s money, the silver discovered in the new west was a problem, because it was plentiful. The Silverites’ slogan was 16 to 1, referring to the ratio of sixteen ounces of silver being equal in value to one ounce of gold. Gold is much scarcer, hence much easier to monopolise and manipulate, as events seem to illustrate.
Somebody had wanted Lincoln dead for some reason, and among Gerry McGeer’s allegations about the motives was that bankers saw Lincoln as an obstacle to basing America’s currency on gold, that is, their own gold. McGeer had said:
They were the men opposed to his national currency programme and who had fought him throughout the whole Civil War on his policy of green-back currency.
They were the men interested in the establishment of the gold standard system and the right of the bankers to manage the currency and credit of every nation in the world.
With Lincoln out of the way they were able to proceed with that plan and did proceed with it in the United States. Within eight years after Lincoln's assassination silver was demonetized and the gold standard money system set up in the United States.
Gold Bugs, generally of the east, and generally of the wealthy, banking classes, the kind of people who owned gold, denounced greenbacks as an empty lie, a fraud. They kept up pressure to call in the greenbacks and burn them all, bring back real money, the natural metal of the Anglo-Saxon race in some of the discourse of the time. Politics of this era is really nasty, greenbacks often get entangled with observations about the worth of ex-slaves.
Gold Bugs naturally had lots of political influence, and so, the Coinage Act of 1873 was passed, which made gold the sole basis for American currency. The minting of silver dollars ceased from this moment. It’s clear that it stank to everyone and came to be known as the Crime of 73. Money now became scarcer still, and completely in the control of the primary holders of gold in America, the banks.
Silverites were enraged at the Coinage Act, and lashed out with attacks on international bankers, claiming that Congress were bribed. The claim in these years, and often to this day, is that the Bank of England wanted control of America’s money and the way to get that was through a gold-based money system.
This was followed by the Specie Resumption Act of 1875, which required currency to be backed by gold and which took more greenbacks out of circulation, a further contraction which caused deeper depression.
At this time in the USA there was a political party, the Greenback Labor Party, who had 14 members in Congress in 1878, pleading for the money supply to be loosened with greenbacks, arguing that wealth comes from labour and not from the intrinsic wealth of a precious metal, and the money supply should be dictated by society’s need to exchange the produce of their labour. There were also 21 independents, mostly greenbackers. The Greenback Labor Party would later become the People’s Party and part of the whole Populist movement of the 1880s onwards.
It would be a vicious debate that raged on in these years, and maybe wasn’t just about money, there were other subtexts. Increasingly, at this time, Americans were doing business with cheques and new forms of credit were developing, still this debate got louder and louder as the money in circulation got tighter and tighter.
And it is a strange history. America is expanding westwards, a flow of immigration is fuelling an ever expanding economy, technology and industry are developing, but there was an imperative to limit the amount of currency in circulation, and to keep tightening. By 1886 there would be an 84% decline in the money supply over 20 years.
During this period, the money powers stand accused of ruling by keeping money scarce to keep labour cheap, and to cause regular panics to convince people that the solution to having stable currency could only come from centralised banking control, drive them to such desperation to be ready to accept this solution.
The common people did suffer desperately in these waves of hard times, which there was a inkling of in our notes about Henry George’s life. By 1876, one third of America’s workforce were unemployed, absurd in a land of plenty. There was unrest amongst the people and things were starting to get ugly.
So, Congress had the United States Silver Commission examine the whole issue of money, and the Commission comes to a clear and unambiguous conclusion that the malady was the bankers’ policy of currency contraction. Despite commissioning the report, Congress ignored it at first, despite the report drawing this lesson from history:
The disaster of the Dark Ages was caused by decreasing money and falling prices. Without money, civilisation could not have had a beginning, and with a diminishing supply, it must languish, and unless relieved, finally perish. At the Christian era, the metallic money of the Roman Empire amounted to $1,800,000,000. By the end of the 15th century, it had struck to less than $200 million. History records no other such disastrous transition as that from the Roman Empire to the Dark Ages.
How much money is going around is all that matters. Too much is certainly a problem (and probably no one knows how much is in the world at the moment) and not enough is definitely a problem.
Pressure was building in 1877. And the powerful bankers wouldn’t let go of what they had.
There’s an infamous letter, we can’t absolutely pin it down. It’s been much used on the Web for a while and we’ve never found any suggestion that it’s a forgery. The quote is from James Buel, Secretary of the American Bankers’ Association, in a letter to the membership in 1877.
It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the agricultural and religious press, as will oppose the greenback issue of paper money. And that you will also withhold patronage from all applicants who are not willing to oppose the government issue of money. To repeal the act creating bank notes, or to restore to circulation the government issue of money, will be to provide the people with money and will therefore seriously affect our individual profits as bankers and lenders. See your Congressman at once and engage him to support our interests, that we may control legislation.
But it does seem absurdly explicit. This maybe isn’t to be trusted yet, it could be just what people at the time imagined could have been said. It gives the general idea of what people thought was going on, concerted use of power that they may control legislation, and to do this by controlling opinion making, by funding those who support their cause and withholding credit from those who do not; bribing, coercing, corrupting people and organisations.
The allegation that depressions are actually just manipulations of money supply by financial elites to achieve political and commercial ends has a long history.
In 1877, riots started breaking out across America, torches burning on the streets, windows getting broken. In San Francisco there was a two day pogrom against the Chinese community in San Francisco, four deaths, beatings, and a lot of smashed up property.
The San Franciscan riots were all happening outside Henry George’s door as he wrote Progress and Poverty. There were strikes and riots in cities right across the USA, not the kind of thing encountered much in American cinematic history. The New York Times, on July 23rd of that year, spoke of The Excitement in Philadelphia. The US Army stood ready.
And then there was some relenting at last. Early in 1878, Congress passed the Bland-Allison Act, which pumped millions of silver dollars per month into the parched American economy. The banks loosened up on lending and the long post-Civil War depression lifted.
This wasn’t the Free Silver demanded by the Silverites, who wanted to return to the days before the Crime of 73 when a hunk of silver could be taken to a US mint and struck into a coin.
In 1879, Henry George finished Progress and Poverty, and the same year, Thomas Edison created the first proper light bulb. It was a great year for illumination.