jul 14, 1890 - Sherman Silver Purchase Act
Description:
A federal law passed in response to the growing demand for free silver from farmers and miners. Many farmers at the time were poor and wanted silver to influence the value of the dollar in order to generate inflation, allowing them to pay off their large debts. At the same time, mining companies had discovered large quantities of silver, which drove down the prices to the point at which silver could be extracted profitably. The Sherman Silver Purchase Act did not create free silver, but it did expand the amount of silver the federal government was required to purchase every month to 4.5 million ounces. The government became the second largest buyer of silver in the world, after only the British Crown, as the Indian rupee (the currency of a British colony) was based off of silver rather than gold. However, investors found out that they could manipulate the low market prices and government exchange rates for gold and silver to make a profit by purchasing silver, exchanging it for gold at the Treasury, then selling the gold back to the market for a profit. This put a heavy drain on US gold reserves, and the act was repealed in 1893 by President Cleveland to protect what remained.
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