BLAND-ALLISON ACT

The Bland-Allison Act was a piece of legislation passed by the U.S. Congress in 1878, which required the U.S. Treasury to buy silver bullion and to mint $2 to $4 million worth of silver coin per month. The bill was introduced by Representative Richard Bland (1835–1899) of Missouri and was amended by Representative William Allison (1829–1908) of Iowa. Their constituents included many farmers who preferred the government to mint the coins. The U.S. economy went through a depression during the 1870s. While some clamored for the government to alleviate the situation by printing more greenbacks (paper currency issued to finance the Civil War), others advocated the coinage of silver. President Rutherford B. Hayes (1877–1881) vetoed the Bland-Allison Act. He feared that the re-monetarization of silver would cause inflation because U.S. currency had been based on the gold standard since 1874. But Congress was able to muster enough votes to overturn the veto and pass the bill into law. Under the act silver coins were minted on a standard of 16 ounces of silver per one ounce of gold.

In January 1879 the U.S. Treasury began paying gold for greenbacks; as a result the coinage of silver (which never exceeded $2 million per month) only had a mild inflationary effect. The Free Silver forces in the West advocated an unlimited coinage of silver versus the $2 to $4 million provided for in the legislation. On the other hand the gold standard forces called for an abandonment of silver coinage altogether. Both of them tried to replace the Bland-Allison Act. The Free Silver alliance won the day: In 1890 Congress repealed the Bland-Allison Act. It passed the Sherman Silver Purchase Act, doubling government purchase of silver to increase the money in circulation. The resumption of silver as a monetary standard had increased the activities of silver prospectors in the West. Mines began overproducing silver, causing prices to collapse. People in the United States responded by trading their silver dollars for gold dollars, draining federal reserves. In 1893 the Sherman Silver Purchase Act was repealed and the United States returned to the gold standard, which it retained until April 1933.