TheSherman Silver Purchase Act was aUnited States federal law enacted on July 14, 1890, which increased the amount of silver the government was required to purchase on a recurrent monthly basis to 4.5 million ounces, roughly the entirety of the American output.[1][2][3][4]
The act did not authorize the free and unlimited coinage ofsilver that theFree Silver supporters wanted. Instead, it had been passed in response to the growing complaints of farmers' and miners' interests. Farmers are usually debtors, with mortgages on their farms and loans on their crops;deflation meant that they had to pay back these loans in moreexpensive dollars, and this act promotesinflation.[5] Mining companies, meanwhile, had extracted vast quantities of silver from western mines. The resulting oversupply drove down the price of their product, often to below the point at which the silver could be profitably extracted. They hoped to enlist the government to increase the demand for silver.[6]
Originally, the bill was simply known as the Silver Purchase Act of 1890. Only after the bill was signed into law did it become the "Sherman Silver Purchase Act."[7] SenatorJohn Sherman, an Ohio Republican and chairman of the Senate Finance Committee, was not the author of the bill, but once both houses of Congress had passed the Act and the Act had been sent to a Senate/Houseconference committee to settle differences between the Senate and House versions of the Act, Sherman was instrumental in getting the conference committee to reach agreement on a final draft of the Act.[7] Nonetheless, once agreement on the final version was reached in the conference committee, Sherman found that he disagreed with many sections of the act.[7] So tepid was Sherman's support that when he was asked his opinion of the act by PresidentBenjamin Harrison, Sherman ventured only that the bill was "safe" and would cause no harm if the President signed it.[2]
The act was enacted in tandem with theMcKinley Tariff of 1890.William McKinley, an Ohio Republican and chairman of theHouse Ways and Means Committee, worked with John Sherman to create a package that could both pass the Senate and receive the President's approval.
Under the Act, the federal government purchased millions of ounces of silver, with issues of paper currency. It became the second-largest buyer in the world, after the British Crown in India, where theIndian rupee was backed by silver rather than gold. Instead of the$2 million to$4 million that had been required by theBland–Allison Act of 1878, the US government was now required to purchase 4.5 millionounces of silverbullion every month.[2] The law required theTreasury to buy the silver with a special issue ofTreasury (Coin) Notes that could be redeemed for either silver or gold. The result was the substantial expansion in the volume of circulating dollars without a proportionate growth in the gold stock. The crash in the silver dollar's bullion value in the 1890s from 80 cents to approximately 50 cents increased public anxiety on their continued ability to convert silver dollars and banknotes into gold. The result was a run on the Treasury's gold stock and the onset of thePanic of 1893. PresidentGrover Cleveland summoned an emergency session of Congress on August 7, 1893, for the repeal of the act to prevent the further depletion of the government's gold reserves.[8]
In 1890, the price of silver dipped to$1.16 per ounce. By the end of the year, it had fallen to$0.69. By December 1894, the price had dropped to$0.60. On November 1, 1895, US mints halted production of silver coins, and the government closed theCarson City Mint. Banks discouraged the use of silver dollars.[6] The years 1893–95 had the lowest productions ofMorgan dollars for the entire series, creating several scarce coins.[9]
The full text ofPresident Cleveland Message on the Repeal of the Sherman Silver Purchase Act at Wikisource
