Talk:Crime of 1873

Argentina

I'm not claiming to be an authority, but isn't the bit on Argentina superflous?

Could be, I was trying to use it as an educational example. I thought about it when I put it in. This is an abreveation of what I wrote for my history class, I edited most of what I had written out, I will probably edit it some more. WikiDon

POV?

This article seems to contain some POV. It's also not a very encyclopedic style -- Nik42 28 June 2005 06:24 (UTC)

Disputes

• In emerging countries, and/or especially those with natural resources ... it is best to back your currency with a valuable resource (s). In prior centuries the resources of choice became gold and silver. For these countries to get credit from other countries (for the U.S. this mainly meant France and Britain) they needed to “back”, or guarantee, their government bonds with one of these acceptable metals.
  • This is not what backing, at least not in this context, means. In the 19th century and earlier, gold and silver WERE the money. Paper currency was merely something that could be exchanged for the coins.
• European countries, noticing that the supply of silver was increasing, starting switching to a gold only standard between 1871 and 1900 (England went off first in 1816)
  • The reasons for switching to a gold standard were more complex than merely an increase in the silver standard. The main factor is that once a couple of large nations had gone to the gold standard, their silver coins were melted down, increasing the bullion supply of silver, decreasing its value relative to gold.
• By 1900 China was the only major country left on the bimetallic standard.
  • China was actually on a silver standard.
• Over time the world prices for gold and silver will fluctuate with supply and demand. The world price will be different, or become out-of-balance with, the government set standard. This means that if one metal goes up in relation to the other, miners and people holding the lower price metal will go to the U.S. mint and switch, or exchange, it for the higher priced metal. This leaves someone, in this case the U.S. Government and the U.S. tax payer, suffering a loss. This practice becomes inflationary, wasteful spending with no productivity gain, and thus bad for an individual, company, or country.
  • This is not correct. What happens is that people bring the cheaper metal in to be coined. This causes the cheaper metal to become less common on the bullion market, raising its value, thereby keeping the ratio fairly constant. This worked until Germany left bimetallism after the Franco-Prussian War, knocking the ratio off too far. It is not inflationary by itself, nor does it cost governments any money. Inflation is caused by the increase in money supply (oversimplifying somewhat), which can be caused by an increase in mining under a metal-based currency, whether monometallic or bimetallic.
• The U.S. Government and its tax payers were getting shafted, or hurt economically, to help out the silver miners
  • Neither the US government nor its taxpayers were being hurt by that. What was happening was that we were becoming a de facto silver standard. Because of the increase in silver, inflation was occurring. This helped some people and hurt others. (Incidentally, that "getting shafted" is an example of what I meant by POV)
• The Kansas farmer ("The Tinman" in the Wizard of Oz; the book, by L. Frank Baum, is a parable for the politics of this at the time) who didn’t know to switch to gold before the change was left with devalued money.
  • The money was not devalued. All the currency predating 1873 remained legal tender. In fact, the switch to the gold standard encouraged deflation, which meant that individual coins became more valuable. What happened was that silver coins became tokens rather than intrinsically valued. In other words, previously a quarter had been worth a quarter because it contained a quarter-dollar's worth of silver. Afterwards, it was worth a quarter only because 4 of them could be exchanged for a single gold dollar
  • Also, the bit about the Wizard of Oz is an urban legend. Unfortunately, at the moment I can't find a rebuttal to it. I'll keep looking
  • The common man was hurt by the deflation engendered by the switch to gold-only coinage, because gold coinage couldn't keep pace with industrial capacity. Deflation hurt many farmers and others who held large amounts of debt, because it meant their debt was larger in real terms. The bankers to whom they owed these debts profitted for the same reason
• Countries that hold their currency to gold, silver, bimetallic, or in the last half of the twentieth century the U.S. dollar, must continually evaluate and adjust it to meet “real-world” supply and demand
  • I don't know of any current nations that do that, and formerly this was not an issue, as the gold and silver were the currency. The US dollar had the same silver definition from the Coinage Act that established the US currency until 1873, and gold was altered only once, to adjust the ratio from 15:1 to 16:1. The US dollar remained theoretically 35 to the dollar from the 1930's, when FDR changed it, until the 1970's
• Look what has happen to Argentina over the years, they run their government like a get-rich-quick-scheme. They print money with no real productivity gains. This is not good government policy.
  • This wording is POV. I don't know enough about Argentina to say whether it's factually accurate, though. Though, I do know that for a long time, the Argentine peso was pegged to the US dollar, so that 1 Argentinian peso could be exchanged for 1 US dollar.
• The Bland-Allison Act (Richard Bland D-MO & William Allison R-IA) set the new free coinage ratio at 16-to-ONE, and allowed the U.S. Treasury to purchase between $2 and 4 million of silver per month. The government would always stick to the minimum purchase of $2 million
  • This was not "free coinage". Free coinage means that the coinage is free. That you can bring a silver bar up to the mint and get it made into coins. This is the way it was with both gold and silver before 1873, and how it was still with gold afterwards. Silver, on the other hand, was only minted in limited quantities.
• Government subsidies and/or controls don’t work. Dollar, gold, silver or bimetallic standards can cause a country to go into unforeseen inflation, deflation, recession, and/or depression, just based on the price of the metal that the currency is tied to.
  • POV and disputed besides. While I personally agree that for a modern industrialized nation fiat currency is best, there are those who would disagree. And such standards do have the advantage of conferring stability, while fiat currencies can have a tendency to run into hyperinflation.

Most of the POV problems I had were more with the general tone of the article.