Bland–Allison Act

Bland–Allison Act
Shorttitle	Bland–Allison Act
Longtitle	An act to authorize the coinage of the standard silver dollar, and to restore its legal-tender character.
Enacted by	45th
Effective date	February 28, 1878
Cite public law	45–20
Cite statutes at large	20 Stat. 25
Introducedin	House
Introducedby	Richard P. Bland (D–Missouri)
Committees	House Coinage
Passedbody1	House
Passeddate1	November 5, 1877
Passedvote1	163-34
Passedbody2	Senate
Passeddate2	February 15, 1878
Passedvote2	48-21
Signedpresident	Rutherford B. Hayes
Signeddate	February 28, 1878

Contents

Background and context
Legislative history
Provisions of the act
Impact and consequences
Repeal and legacy

Bland–Allison Act was a pivotal piece of federal legislation enacted in 1878 that mandated the U.S. Treasury to purchase large quantities of silver for coinage into silver dollars. The law represented a major victory for the Free Silver movement and Western mining interests, compelling the government to resume the bimetallic standard after the demonetization of silver. Its passage set the stage for decades of monetary debate, directly influencing subsequent policies like the Sherman Silver Purchase Act and shaping the economic platforms of the Democratic and Populist parties.

Background and context

The act emerged from the intense political and economic strife following the Panic of 1873. That financial crisis triggered a prolonged period of deflation that heavily burdened debtors, particularly in the agricultural South and West. These groups blamed their hardship on the so-called "Crime of 1873," the Coinage Act of 1873 which had effectively demonetized silver by ending the free coinage of silver dollars. This action placed the United States on a de facto gold standard, aligning with the preferences of Eastern bankers and creditors. In response, a powerful coalition of silver miners from states like Nevada and Colorado, agrarian activists, and bimetallism advocates formed the Free Silver movement, demanding the restoration of silver as legal tender to increase the money supply and create inflation.

Legislative history

The primary legislative vehicle was introduced in the House of Representatives by Missouri Democrat Richard P. Bland, a staunch Free Silver proponent. His original bill called for the unlimited free coinage of silver at the historic ratio of 16-to-1 against gold. The bill passed the House easily but faced significant opposition in the Senate, where Republican William B. Allison of Iowa proposed a critical compromise amendment. Instead of free coinage, the Allison Amendment required the Treasury to purchase between $2 million and $4 million worth of silver bullion each month at market prices to be coined into dollars. Despite a veto by President Rutherford B. Hayes, who argued it was a departure from sound money principles, the Congress swiftly overrode his veto, and the act became law on February 28, 1878.

Provisions of the act

The central provision directed the Secretary of the Treasury to purchase not less than $2 million and not more than $4 million worth of silver bullion every month at the prevailing market price. This bullion was to be coined into standard silver dollars, each containing 412.5 grains of silver, which were granted full legal tender status for all debts, public and private. The act also restored the legal tender status of the older trade dollar. However, it did not establish a fixed mint ratio between silver and gold, leaving the Treasury to manage the influx of silver coinage into a monetary system still anchored by gold.

Impact and consequences

The act failed to achieve its proponents' goal of significantly increasing inflation or raising the price of silver. The Treasury, under administrations from Rutherford B. Hayes to Chester A. Arthur, consistently purchased only the minimum $2 million monthly, which was insufficient to absorb the global silver surplus. Consequently, the market value of silver remained well below the official coinage price, causing the newly minted silver dollars to be undervalued relative to gold. This led to Gresham's Law in practice, where "bad money drives out good," as people hoarded gold and spent silver, creating a drain on the government's gold reserves. The massive coinage also resulted in a surplus of silver dollars that circulated poorly, often sitting in Treasury vaults.

Repeal and legacy