For lack of proper machinery of credit for carrying on the process of exchange, there seemed to be an absolute shortage in the amount of money in circulation, and it was this circumstance that had given such force to the Greenback Movement.Although that movement was defeated, its supporters urged that, if the Government could not supply additional note issues, it should at least permit an increase in the stock of coined money.This feeling was so strong that as early as 1877 the House had passed a bill for the free coinage of silver.For this, the Senate substituted a measure requiring the purchase and coinage by the Government of from two to four million dollars' worth of silver monthly, and this compromise was accepted by the House.As a result, in February, 1878, it was passed over President Hayes's veto.
The operation of this act naturally tended to cause the hoarding of gold as the cheaper silver was equally a legal tender, and meanwhile the silver dollars did not tend to pass into circulation.In 1885, in his first annual message to Congress, President Cleveland mentioned the fact that, although 215,759,431silver dollars had been coined, only about fifty million had found their way into circulation, and that "every month two millions of gold in the public Treasury are paid out for two millions or more of silver dollars to be added to the idle mass already accumulated." The process was draining the stock of gold in the Treasury and forcing the country to a silver basis without really increasing the amount of money in actual circulation or removing any of the difficulties in the way of obtaining supplies of currency for business transactions.President Cleveland recommended the repeal of the Silver Coinage Act, but he had no plan to offer by which the genuine complaints of the people against the existing monetary system could be removed.Free silver thus was allowed to stand before the people as the only practical proposal for their relief, and upon this issue a conflict soon began between Congress and the Administration.
At a convention of the American Bankers' Association in September, 1885, a New York bank president described the methods by which the Treasury Department was restricting the operation of the Silver Coinage Act so as to avoid a displacement of the gold standard.On February 3, 1886, Chairman Bland of the House committee on coinage reported a resolution reciting statements made in that address, and calling upon the Secretary of the Treasury for a detailed account of his administration of the Silver Coinage Act.Secretary Manning's reply was a long and weighty argument against continuing the coinage of silver.He contended that there was no hope of maintaining a fixed ratio between gold and silver except by international concert of action, but "the step is one which no European nation...will consent to take while the direct or indirect substitution of European silver for United States gold seems a possibility."While strong as to what not to do, his reply, like most of the state papers of this period, was weak as to what to do and how to do it.The outlook of the Secretary of the Treasury was so narrow that he was led to remark that "a delusion has spread that the Government has authority to fix the amount of the people's currency, and the power, and the duty." The Government certainly has the power and the duty of providing adequate currency supply through a sound banking system.The instinct of the people on that point was sounder than the view of their rulers.
Secretary Manning's plea had so little effect that the House promptly voted to suspend the rules in order to make a free coinage bill the special order of business until it was disposed of.But the influence of the Administration was strong enough to defeat the bill when it came to a vote.Though for a time, the legislative advance of the silver movement was successfully resisted, the Treasury Department was left in a difficult situation, and the expedients to which it resorted to guard the gold supply added to the troubles of the people in the matter of obtaining currency.The quick way of getting gold from the Treasury was to present legal tender notes for redemption.To keep this process in check, legal tender notes were impounded as they came in, and silver certificates were substituted in disbursements.But under the law of 1878, silver certificates could not be issued in denominations of less than ten dollars.Ascarcity of small notes resulted, which oppressed retail trade until, in August, 1886, Congress authorized the issue of silver certificates in one and two and five dollar bills.
