Goldbugs and Free Silver

Chapter 6 – “Will Cryptocurrency be the Money of the Future?”

By this time, most Americans had experience with different types of currency. There was an understanding that currency could be many different things. Despite this realization, in 1873 the country went back on the gold standard and many people like this policy decision. 

Supporters of gold at this time were called goldbugs. They argued that paper was worthless unless it was backed by gold. Why would people attribute any value to a piece of paper unless they knew they could get the exact amount of gold in return? 

Just because congress said paper had value didn’t mean anything. The goldbug’s arguments got philosophical and religious. Goldbugs argued that gold had “natural” value and that people across the world and across time saw gold as valuable. They even argued that God ordained that gold had value! 

Other Americans disliked the gold standard. There was only a limited amount of gold in the world and it was only mined slowly over time. If a person didn’t have any gold, it was hard to get much. 

People who had gold wanted to keep it because they could make money on it by lending notes on it and collecting interest from loans. The idea that one could make money just by having money offended many, particularly the poor and middle classes who made up a majority of the population.

While there was limited gold, the amount of working people and the amount of goods produced increased very quickly over time. With gold growing slowly and goods and labor growing fast, a person had to make a lot of goods or work a lot to get a little bit of gold. This is a deflationary economy, where the price of goods and wages decreased over time. 

Deflation was bad for workers and producers, so it was often producers and workers who argued for the return to greenbacks. Greenback supporters argued that if the government printed money that was not backed by gold but by fiat only, the government could print a lot of money and stop deflation. There was even a political party called the Greenback party that existed between 1874 and 1884 and advocated for this idea nearly exclusively.

“Will Cryptocurrency be the Money of the Future?”

 

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