Gold and the Gold Standard.pdf

GOLD AND THE GOLD STANDARD
money. Congress, ultimately forced by public opinion
to make concessions to this inflationary sentiment,
passed a·law on May 31,1878, prohibiting a further
reduction in the greenback circulation. This gave
the country a permanent greenback issue of $347
million, which it retains to this day.
Secretary Sherman believed that the lowest gold
reserve consistent with safety with which the country
would be able to resume specie payments, was 40 per
cent, or about $138 million. By January 1, 1879,
he had accumulated $133 million. About two-thirds
of this came from the sale of bonds and onethird
from surplus revenue. Under his strong policy,
the gold value of the greenbacks slowly but surely
advanced, and 2 weeks before January 1,when
resumption began, they were quoted at par.
THE GOLD STANDARD IN OPERATION, 1879 TO 1914
For the 36 years from 1879 to the outbreak of the
First World War, the American gold standard
functioned well and in a normal way, except for some
compromising silver legislation and for a considerable
appreciation in the value of gold during the first half
of. the period. These difficulties will be considered
briefly before we describe the otherwise satisfactory
functioning of the new gold-standard system.
Declining Commodity Prices
From the early eighties until a few years before
the end of the century, commodity prices in the
[ 88 ]