Trump, Tariffs, Silver and the American Dream
- R. Christopher Whalen
- Apr 6
- 8 min read
April 7, 2025 | In this issue of The Institutional Risk Analyst, we provide an excerpt of the upcoming second edition of “Inflated: Money, Debt and the American Dream,” to be release by Wiley Global on May 16th. You may pre-order a copy of the book by clicking the link below. The excerpt comes from a section of Chapter Two of Inflated, “Silver & Tariffs,” which discusses the role of import tariffs and free coinage of silver in the US economy in the years following the end of the Civil War.
When someone suggests to you that the import tariffs imposed by President Donald Trump in 2025 could cause a global economic depression like the 1930s, just remind them that tariffs were already high decades before the catastrophe. The Smoot-Hawley tariff did not cause the Great Depression. The history of the United States over the past century was largely written by liberal Democrats, who at least rhetorically opposed tariffs and embraced currency inflation as core progressive values. In fact, tariffs have been used by governments from all of the major political parties to protect consumers and industry since the inception of the American Republic.
Inflated: Money, Debt and the American Dream (2025)
“Silver and Tariffs”
As Congress slowly came around to the restoration of gold convertibility of dollars [following the Civil War], a great political debate developed about the restoration of silver coins as legal tender. Western silver interests made a straight-forward argument for government intervention to stop the slide in the price of silver relative to gold. The idea of returning silver coins to the money supply also appealed to farmers who believed that increasing the money supply would boost economic activity and thus prices for their goods, while reducing the real cost of servicing their debts.
“A whole generation of Americans was embroiled from the 1870s to the 1890s in the argument over silver,” Richard Hofstadter wrote in The Paranoid Style in American Politics. In the 1880s, the public clamored for an increase in the money supply. Dozens of proposals were floated in the Congress in the next several years either to require government purchases of silver, increase the money sup-ply, or both. Senator John Sherman (R-OH), the brother of General William Tecumseh Sherman of Civil War fame and a strong supporter of a return to the gold standard, introduced a bill in the Congress in January 1874 to increase the money supply.
Sherman’s proposal to purchase silver had the effect of increasing the money supply via the issuance of greenbacks, which were used to make the purchases The resulting expansion in the supply of paper dollars was less than was demanded by the inflationist, free silver proponents, but a larger amount than was acceptable to those in favor of resuming the gold standard. Known as the “Inflation Bill,” the Sherman legislation was debated for nearly four months. The measure eventually passed the Republican-controlled Congress, but on April 22, 1874, President Grant vetoed the legislation. This move would “make the stand of the Republican Party official” when it came to aligning itself with business interests rather than the working class, according to Grant biographer William McFeely.
From the time of the Grant veto of the Inflation Bill forward, the Republicans for a time became known as the party of sound money and business interests, and the Democrats as advocates of inflation and the working man. So passionate was the national debate over silver that the Republican Party divided over the question for years to come up to the present time. The debate over the free coinage of silver and the national money supply eventually was a factor in the undoing of the Republican Party’s control over Washington.
In 1888, President Grover Cleveland attempted to use the growing Treasury surplus and a reduction in the tariff as an issue to gain reelection, but he underestimated the attraction of protectionism—a theme that modern American politicians led by President Donald Trump rediscovered in the twenty-first century. The incumbent Cleveland won a slim majority in the popular vote, but when the votes were cast in the Electoral College, Cleveland lost by 233 to 168 to Benjamin Harrison from Ohio. This was an early example of the election-winning power of the Republican political machine. By 1890 the Treasury amassed a surplus of nearly $150 million in gold, a symbolic affront to farmers and populists who proclaimed the federal government to be “an octopus” that was strangling the economy. In that same year, a young lawyer from Nebraska, William Jennings Bryan, won his first term in the House of Representatives.
With the Republicans again in control of both houses of Congress and President Harrison in the White House, one of the more important items on the political agenda was raising the tariff. Known as the McKinley tariff after Rep. William McKinley (R-OH), the legislation only raised the national tariff slightly, but the political debate slowed the process to a crawl.
The Democrats initially opposed the bill but eventually decided to allow the measure to pass and go to the Senate in the hope of using the tariff issue in the 1892 election. President Harrison, passed the McKinley tariff, raising the average duty on imported goods to 50 per-cent. Forty years before the passage of Smoot Hawley in 1930 and long before the start of the Great Depression, tariffs on imports were already very high in the United States.
Republican proponents of the Tariff Act said it was necessary to maintain the high standard of living of the American workingman, “but as the employers were fighting (hard) against the trade unions, and were willing to import the new immigrant labor to reduce wages, this could not be taken quite seriously,” wrote James Truslow Adams in Epic of America. Republicans also presented higher tariffs as a way to protect farmers and the new states in the western United States from foreign competition—and found a ready audience for that viewpoint. The McKinley tariff bill was signed into law in October 1890.
The political price extracted by the silver advocates for supporting the passage of the McKinley tariff was that Republicans would back legislation to increase purchases of silver and a resumption of free coinage of the metal. In addition to the tariff legislation, the Republicans, led by Henry Cabot Lodge in the House, pushed for new voting rights laws to protect black voters and Republican candidates in the South. Southern Democrats opposed the measures to protect black voting rights and dubbed the legislation the “Force Bill.” They claimed that the Republicans were prepared to use federal troops to enforce the political franchise of freed slaves in the South.
When Republicans brought the Force Bill to the floor of the Senate in December 1890, the leader of the silverites, Senator William Stewart of Nevada, seized his opportunity. In January 1891, Stewart used a procedural motion on the floor of the Senate to substitute legislation for the free coinage of silver for the Lodge voting rights legislation, and the pro-silver forces in both parties sustained his maneuver. The free coinage of silver and, importantly, inflation of the currency, was more popular politically than protecting voting rights in the South. In the winter of 1891, the American economy was again sinking into depression, with unemployment and business failures spreading around the country. A solution via increased issuance of paper currency was seen by politicians in both parties as the answer. Even Senator Sherman, who long guarded against allowing the silver advocates to push their inflationist agenda, was forced to concede that the political pressure behind free coinage of silver was irresistible. A majority of Republicans believed that the combination of the new tariff legislation and a pro-silver bill would protect them at the polls in 1890.
The compromise legislation crafted by Sherman in July 1890 repealed the Bland-Allison act and called for the Treasury to purchase four million ounces of silver per month, essentially equal to the amount of silver produced in the United States during that time. The Treasury paid for these purchases with paper dollars, and this had the effect of rapidly increasing the money supply. The increase in the supply of paper currency caused by the Sherman Silver Purchase Act placed a considerable drain on the government’s gold reserves.
Many Americans immediately exchanged the paper money for silver in order to buy gold coins. Even though demand for paper currency continued to rise, the preference for either gold or paper money over silver was pronounced and silver prices continued to fall. Imports of gold into the United States surged since the demand for the metal increased with the supply of greenbacks as the Treasury continued its required purchases of silver.
The fascination with silver was much like the craze surrounding crypto currencies in the twenty-first century but had an even more irrational quality. Treasury purchases of silver rose to 50 million troy ounces annually, but world production of silver rose from 63 million ounces per year in 1873 to over 150 million ounces in 1892. The market volumes expanded to meet the Treasury’s needs, and the price continued to fall. And silver advocates were unrelenting in their clamor for further government support.
Representative Edwin A. Conger of Iowa, who was chairman of the House Committee on Coinage, Weights, and Measures and supported limited coinage of silver, called the lobbying effort by the pro-silver forces prior to the passage of the Sherman Silver Purchase Act “the most persistent, courageous and audacious lobby upon this question I have ever seen since my term of service began here.”
Despite the passage of the National Bank Act several decades before, political meddling by Washington in the structure and com-position of the U.S. money supply resulted in nine different types of money being placed into circulation by the 1890s. The legal mandates placed upon the Treasury to redeem paper money with gold or silver, and to purchase and/or coin silver, became completely unmanageable and were depleting the once-large official reserves of gold. So great was the drain of gold from the Treasury and the increase in the money supply, as we discuss in the next chapter, that within three years of the passage of the Sherman Silver Purchase Act, the law was repealed.
The money supply of the United States grew dramatically during these final years of the nineteenth century, yet public confidence in banks, financial markets, the U.S. currency, and the economy was at a new low. America would see more political discord and economic upheaval than at any time since the Civil War—and most of it caused by the debate over the nature of money.
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