Mike Landis
The state of the economy in 1876 was shaped by several key events; one of them being the Coinage Act of 1873. What the act entailed was the demonetization of silver and the emergence of the gold standard. The act, branded the “crime of 1873,” was blamed for the five year American depression that lasted from 1873 until 1878. Passed by a House vote of 110 to 13 and a Senate vote of 36 to 14, the Coinage Act of 1873 initially seemed to be a harmless piece of legislation. However, shortly after its passing, the effects of the act were felt across the nation.
With the demonetization of silver came economic hardships for silver miners, which, in turn, led to economic hardships for the U.S. government. As gold was embraced as the value in which money was based, an overabundance of silver existed having little, if any value. In an attempt to provide relief to silver miners in 1873 and the years that followed, the U.S. was confronted by economic crisis.
Farmers and peasants were equally hurt by the demonetization of silver. The values of their debts continued to rise as the value of their crop outputs declined by 3% per year. Governmental aid could not reach them fast enough and many of these farmers lost everything.
The sharp rise of the gold to silver ratio also contributed to the growing price and declining value of gold as well as the proportional increase in the costs of goods and services. Massive deflation of 1.7% per year in the United States and 0.8% per year in the United Kingdom occurred between 1875 and 1896. In 1876, the Greenback party came into existence with the plan to issue more greenbacks to combat deflation with inflation. The establishment of the Greenback party ultimately led to the passing of the Bland-Allison bill in 1878. This bill granted permission to the Treasury to purchase, at market prices, limited amounts of silver.
In 1876, however, the negative effects of the Coinage Act of 1873 were at their worst. It would not be until 1878 and 1879 that relief in broader terms would come.
