Republican campaign poster of 1896 attacking free silver
Free silver was a major economic policy issue in late-19th-century America. Its advocates were in favor of an expansionary monetary policy featuring the unlimited coinage of silver into money on demand, as opposed to strict adherence to the more carefully fixed money supply implicit in the gold standard. Supporters of an important place for silver in a bimetallic money system making use of both silver and gold, called "Silverites", sought coinage of silver dollars at a fixed weight ratio of 16-to-1 against dollar coins made of gold. Because the actual price ratio of the two metals was substantially higher in favor of gold at the time, most economists warned that the less valuable silver coinage would drive the more valuable gold out of circulation.
While all agreed that an expanded money supply would inevitably raise prices, at issue was whether or not this inflationary tendency would be beneficial. The issue peaked from 1893 to 1896, when the economy was wracked by a severe depression—remembered as the Panic of 1893—characterized by falling prices (deflation), high unemployment in industrial areas, and severe distress for farmers.
The "free silver" debate pitted the pro-gold financial establishment of the Northeast, along with railroads, factories, and businessmen, who were creditors deriving benefit from deflation and repayment of loans with valuable gold dollars, against farmers who would benefit from higher prices for their crops and an easing of credit burdens. Free silver was especially popular among farmers in the Wheat Belt (the western Midwest) and the Cotton Belt (the Deep South), as well as silver miners in the West. It had little support among farmers in the Northeast and the Corn Belt (the eastern Midwest).
Free silver was the central issue for Democrats in the presidential elections of 1896 and 1900, under the leadership of William Jennings Bryan, famed for his Cross of Gold speech in favor of free silver. The Populists also endorsed Bryan and free silver in 1896, which marked the effective end of their independence. In major elections free silver was consistently defeated, and after 1896 the nation moved to the gold standard.
The debate over silver lasted from the passage of the Fourth Coinage Act in 1873, which demonetized silver and was called the "Crime of '73" by opponents, until 1913, when the Federal Reserve Act completely overhauled the U.S. monetary system.
Under the gold specie standard, anyone in possession of gold bullion could deposit it at a mint where it would be processed into gold coins. Less a nominal seigniorage to cover processing costs, the coins would then be paid to the depositor; this was free coinage of gold by definition. The objective of the free silver movement was that the mints should accept and process silver bullion according to the same principle, notwithstanding the fact that the market value of the silver in circulating coins of the United States was substantially less than face value.
As a result, the monetary value of silver coins was based on government fiat rather than on the commodity value of their contents, and this became especially true following the huge silver strikes in the West, which further depressed the silver price. From that time until the early 1960s the silver content in United States dimes, quarters, half dollars and silver dollars was worth only a fraction of their face values. Free coinage of silver would have amounted to an increase in the money supply, with inflation as the result.