As of this writing, America is experiencing the highest inflation rate in 40 years. Inflation shot up from 1.7% in 2020 to about 7% in 2021 and 2022, with the highest rate in 2022 being 9.1% in June! In spite of the fact that we’re shelling out more money at the grocery store (a friend of mine recently reported she spent over $100 on baking supplies for the holidays), the 7% this year is peanuts compared to 1920, when the nation had almost 24% inflation, or after the American Revolution in 1778 when inflation was 30%.
But there is one way to fight inflation: create a gold standard. This is exactly what people in the Gilded Age and Progressive Era did, though the results weren’t favorable to all. The concept of the gold standard is very difficult to explain and for people to wrap their heads around, so bear with me while I try to outline what it is and why it failed.
In 1900, Congress passed the Gold Standard Act which meant the value of American money was tied to the value of gold. Until then, the currency exchange was based on bimetallism (gold and silver). That meant people were able to buy gold or silver coins with paper money, which was to their advantage because these precious metals were much more stable in their value over time, whereas the value of paper money was basically determined by what federal or state officials determined it to be worth. It was also not an international currency (just as today when we can’t use British pounds to do our Walmart shopping in Cleveland) and it wasn’t even always, at that time, transferable from state to state, since states had their own paper money. So if you moved from Vermont to California and tried to cash a $20 Vermont bill in a California bank, you weren’t guaranteed to get the full $20 value of that bill in exchange.
The gold standard also meant silver was no longer an accepted exchange for paper money. People could only buy gold coins. There were a few problems with this. First, gold coins were in limited supply. Second, since gold was valued at the time at about $22.00 an ounce, people needed to shell out $22 in paper money for one ounce of gold ($1 bought them about 25 grams worth of gold).
Why did people even want to buy gold coins when they paid much more for them with paper money? Why didn’t they just keep the paper money? Because at that time, paper money was very unreliable in terms of value, as I explained above. Also, gold and silver were precious metals and scarce compared to paper money so they were worth more and their worth didn’t fluctuate as much.
The gold standard was such a hot-button issue that this campaign poster for the Republican party (with William McKinley as the presidential nominee and Theodore Roosevelt as the vice-presidential nominee) put the party’s support of the gold standard as the top political issue on their party’s agenda during the campaign.
Photo Credit: Headshots of William McKinley and Theodore Roosevelt against the American flag for a Republican party campaign poster during the 1900 elections, Library of Congress: Picryl/Public Domain
The gold standard became a major political issue in the Progressive Era because it was tied to class. The poor and working class were usually paid in paper money and used paper money to buy their goods, and since the value of paper money was now tied to the gold standard, they had to pay more for their purchases. For example, if something cost $2 gold coins, they would have to pay $44 in paper money for it.
Hence, the Populist movement was born. This movement largely consisted of farmers and poor people who wanted to convince congress to go back to the bimetal standard (because silver was valued less than gold and they were able to secure silver coins more easily than gold.) In 1896, the Populists merged with the Democratic party, as the two shared several items on their political agenda such as limiting the number of terms a president could serve and advocating an eight-hour work day, as well as the call for bimetallism. This accumulated in Democratic candidate William Jennings Bryan’s moving and rallying “Cross of Gold” speech.
Bryan ran for president in the Gilded Age and Progressive Era with bimetallism as one of his main themes three times and lost three times. But then, so did the gold standard, eventually. It was withdrawn in the early 1930s by FDR in an effort to combat the Great Depression. From the post-World War II era to the 1970s, the gold standard did make a comeback, but in 1971 Nixon abolished it, both to combat the inflation at the time and to keep foreign governments from buying up American gold supply with their dollars.
In my upcoming new release, The Mystery of the Golden Cat, the Gold Standard Act is in full force (the book takes place in 1904) and not everyone is happy about it. For one person, it leads indirectly to crime. Though the book comes out at the end of this month, it’s at a special preorder price now, so don’t wait to snag your copy!
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