Singing Bi, Bi, For Our Money Supply...
The Populist Party reached their zenith in the 1890’s. Although they won state and local elections here and there, before and after this decade, their only real shot at the Presidency came in the Elections of 1896 and 1900. Both times they ran William Jennings Bryan as their candidate, and both times the Democratic Party gave in and joined them in the nomination.
Both times they were defeated by Republican William McKinley. So, that must have sucked for them.
Historians argue (as historians love to do) about the extent to which Populism impacted the Progressive movement a few decades later or the New Deal after that, but the cause/effect relationship between them isn’t nearly as important as the underlying question behind ALL of them:
How much should the government help? How do we balance freedom – including personal liberty and capitalistic choice – with security? Even assuming the government has the ability to deftly swoop in and regulate the economy and interactions of a nation into perfectly balanced equity, is this a good idea?
I mean, Harry Potter was safe and secure at the Dursley’s under the stairs – literally and completely. No harm could come to him. As the series progressed, he grew increasingly autonomous and faced greater and greater danger. Finally, released even from the rules of Hogwarts or the direction of Dumbledore – completely and totally independent – he frickin’ DIES!
Er… at least for a bit.
The same tension exists in owning a dog, managing a school, or legislating a nation. Too many restrictions stifle growth, maturity, progress, and basic fun. Too few, and it’s chaos.
Not that most American farmers in the late 19th century were pondering such abstractions. Mostly they’d joined their voices – and their votes – to demand a few basic policy changes to compensate for what they perceived as gross imbalance in the economic order of things. They didn’t see themselves as wanting ‘help’ so much as fighting to remove cancers in the system.
What did they want?
First, government regulation (or even ownership) of railroads, telegraphs, banks, etc. - anything so ubiquitous as to essentially be a public utility. In the same way government today regulates the companies providing gas, water, or electric in your home, they considered certain services too essential to be left to the whims and biases of the free market.
Second, they wanted a progressive income tax. Under a flat tax, everyone paid the same percentage of their income. You made $10,000 this year? Pay ten percent. You made $50,000? Ten percent. $250,000? Ten percent. Those making the least paid the least; those making the most paid the most.
The Populists wanted a weighted system. If you made $10,000 this year, you pay little, or nothing. You made $50,000? Ten percent. $250,000? Twenty percent. $1,000,000? Fifty percent. Those making the most were still left with more than everyone else, and those making the least were freed from the burden of paying at all.
The Populists called this equitable. Those who felt they were being punished for staying in school or working hard disagreed. The basic argument continued for the next million years.
Third, and maybe biggest on the list, the Populists wanted to dramatically increase the money supply. They wanted more coins minted, and they wanted to allow paper money to be printed backed up by silver in the national treasury as well as gold. This was called a 'bimetallic standard' - 'bi', of course, meaning 'two'.
If you're a bi... cycle, you have two wheels.
If you're bi... lingual, you speak two languages.
If you're bi... polar, you have two emotional extremes.
If you're bi... pedal, you walk upright, on two feet.
If you're bi...
Huh. I can't think of any other examples. But you get the idea.
In any case, today all paper money is backed up by the ‘full faith and credit of the federal government’ – so THAT should make us all feel MUCH, MUCH better about things. But not then - then it was actual specie. Metal value.
Silver is valuable and not at all common, but it’s far more plentiful than its friend gold. The change would be dramatic. More money in circulation lowers the value of each dollar – counterintuitively helping those with less money and especially those in debt.
Explaining this in class makes everyone’s brain hurt.
Talking economics in high school is like trying to diagram sentences in another language. Students’ brains are not acclimated to this sort of information; they’ve experienced relatively little of the real world, financially speaking.
Then again, when it comes to economics, WE don’t actually know what we’re talking about half the time. Most economic theories are made up AFTER stuff happens, then applied backwards to prove that whatever happened HAD to, and explaining why – until next time, when it works differently. It can be a bit of a mess.
But imagine a student – Jacobie - shows up to class one day with a pizza box. He was in charge of snacks for Students Obesity Club that day, and has a half-dozen slices left over.
The food quickly draws attention and Max offers him a dollar for one of the slices. He accepts.
Oliana buys another two at a dollar each, and as supply dwindles and more students arrive – thus increasing demand – Jacobie sells another two for a total of five dollars. He may have thrown in the last packet of parmesan for cash up front.
As he’s about to either eat or auction off the final slice, Leena approaches him with head down but eyes coyly up. Batting her sad little lashes, she tells Jacobie that she has no money – BUT, if he’ll “loan” her this last slice of pizza – because she’s soooooo huuuunnngryyyyyy – she’ll repay him double tomorrow.
Two hundred percent. In 24 hours.
He of course relents. The pizza is gone.
Vic has been watching this entire process, and believes he’s found the key to both popularity and prosperity. The next day, he shows up in class with a towering stack of pizza goodness – 12 full-size pizzas of various toppings – and two very nicely printed and laminated signs declaring he’s offering them today only for $2.00 per slice.
He sells most of the first box, but things quickly slow. Lowering the price to $1.00 helps a little, but it still looks like he’ll be stuck with 9 or 10 boxes of pizza with ten minutes to go. He panics and drops to 50 cents a slice… then a quarter… and manages to move enough that he’s only losing a little money for his troubles.
He might have broken even if he hadn't splurged on the #$@% signs.
Just before the bell, Leena slides up and hands him two quarters. She takes two slices of pizza in a napkin, glides sweetly over to Jacobie, and presents them to him with an appreciative smile. “Here you go – we’re even,” she states.
Has Jacobie made a profit?
On the one hand, he loaned ONE piece of pizza and was repaid with TWO. That’s doubling his investment by any definition, surely?
On the other hand, he loaned out $2.50 worth of pizza, and was repaid with 50 cents worth of pizza. Framed in those terms, he lost roughly 80% of what he put in.
So it is with paper money.
When there’s not very much of it, it’s worth more. This benefits those few who have the money – Jacobie and his limited supply of pizza. It makes things hard for everyone else, but the haves will sometimes loan to the have-nots in a gesture of goodwill and a reasonable return.
Increase the supply, and the value of each individual dollar – or slice – goes down. This benefits the masses, but hurts the people holding the pizza boxes. It particularly chafes creditors. They may be repaid, but they’re being repaid in dollars worth far less than those they loaned. The numbers say they’re making more, but the value says they’re losing – severely.
The Populist tended to have less money, and to owe more than they had to banks and other creditors. The idea of ‘freeing up’ the money supply was quite appealing to them – ironic, in a way, given that much of their distressed circumstances sprang from overproduction of something.
Add some silver to the existing gold reserves, and we have a path to prosperity – a road along which anything might be possible. And you can bring your dysfunctional singing friends, too.
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