The Bland-Allison Act, enacted on February 28, 1878, represents one of the early attempts by the U.S. Congress to address the contentious issue of currency and the broader economic concerns of the time. Driven by the “free silver” movement, the act mandated that the U.S. Treasury purchase $2 to $4M of silver every month to be coined into silver dollars. This policy was driven by economic motives and political pressures as interest groups grappled with the impact of monetary policy on their livelihoods. This act resulted in the first Morgan Silver Dollars being minted.
Historical Context for the Bland-Allison Act
An ongoing debate over the monetary standard marked the latter half of the 19th century in the United States. While we do not want to spend too much time on the history of what led to the Act, many factors contributed to the Panic of 1873, including overextension on the railroads, speculation, the Coinage Act of 1873, bank failures, and a decline in European investors.
The Coinage Act of 1873 placed the U.S. on the gold standard bypassing silver as a form of currency. There were two primary groups that put pressure on Congress to stick to the gold standard or to adopt a bimetallic coinage system.
The two primary camps were:
Gold Standard Proponents
These individuals believed in a monetary system where gold backed currency. They argued that a gold standard ensured stability and discouraged inflation.
Free Silver Advocates
This group sought the bimetallic coinage of both gold and silver. They believed that coining silver with gold would expand the money supply, leading to inflation benefiting debtors, particularly farmers and miners.
Legislative Details
The Bland-Allison Act emerged as a compromise between the pro-gold and pro-silver factions. The legislation was proposed by Representative Richard Bland (1835–1899) from Missouri and modified by Representative William Allison (1829–1908) of Iowa.
Key provisions of the Act included:
Silver Purchases
The U.S. Treasury had to buy between $2 million and $4 million worth of silver bullion each month.
Coinage
The purchased silver was to be minted into legal tender silver dollars, which would carry a monetary value far exceeding the market value of the silver contained within.
Legal Tender Status
The silver dollars coined under this Act were given full legal tender status, meaning they could be used to settle public and private debts.
Impacts of the Bland-Allison Act
The Bland-Allison Act played a critical role in the late 19th-century economic and political landscape of the U.S. While it reintroduced silver coinage, its impacts were limited by government actions and broader economic forces. The act’s legacy is not just in its immediate effects but also in the continued debates and policies it spurred in the following years.
Limited Inflation
Although the Bland-Allison Act did result in the minting of millions of silver dollars, it did not lead to the level of inflation its strongest advocates hoped for. The Treasury made purchases closer to the minimum amount required, limiting the expansion of the money supply.
Continued Debate
The act did not end the “free silver” debate. Economic pressures and populist movements in the following decades led to further legislation, like the Sherman Silver Purchase Act of 1890, and culminated in the debates of the 1896 presidential election.
Coin Collecting
An unintended outcome of the act was the creation of several silver dollar designs, such as the Morgan Silver Dollar, which remain popular with coin collectors today.
While the Bland-Allison Act appeased silver advocates, it did not entirely resolve the country’s monetary debate. Many pro-silver advocates viewed the Act as a half-measure, as it did not fully embrace free silver coinage. On the other side, gold advocates saw it as an unnecessary and potentially dangerous compromise that could undermine the stability of the U.S. economy.
These tensions culminated in the passage of the Sherman Silver Purchase Act in 1890, which increased the amount of silver the government was required to purchase. However, concerns about the gold reserves led to the repeal of the Sherman Act in 1893 and, eventually, to the firm establishment of the gold standard with the Gold Standard Act of 1900.
The Bland-Allison Act serves as a testament to legislators’ challenges in navigating complex economic pressures and political demands. While the Act represented a compromise, it was not a definitive solution to the monetary debates of the era. It stands as a chapter in the larger narrative of American economic history, reflecting the nation’s ongoing struggle to balance stability with growth and ensure prosperity for its citizens.
