TeachMeFinance.com - explain Sherman act
Sherman act -- The act of July 14, 1890, which ordered the
purchase each month by the Secretary of the Treasury of 4,-
500,000 ounces of silver bullion, or so much thereof as might be offered at the market price, provided the market price did not
exceed the coinage value, $1.29.29 an ounce. To pay for the
silver so purchased an issue of Treasury notes redeemable in
coin was authorized. There was also a clause in the act repealing
the purchasing clause of the Bland-Allison act of 1878 and
providing for the coining of 2,000,000 ounces of silver per
month until July I, 1891, when coinage should cease, except
when necessary to supply silver dollars for the redemption of
the Treasury notes. All the remaining bullion and that bought
thereafter was to be held in the Treasury as security for the
notes. Seigniorage was to accrue to the Treasury.
The purchasing clause in the act was repealed November i,
1893, it having been found that the government purchases of
silver not only failed to accomplish the result hoped for, viz.,
the maintenance of the price of silver at the coining parity
$1.29.29 an ounce but that silver was declining so rapidly in
value as to threaten both impairment of the security it offered
as backing for the notes and an entire upsetting of the monetary
stability of the country. A severe business panic had been
brought about, complicated by political considerations in
which the tariff also figured. Before the repeal the notes issued
under authority of the act were reissued after redemption.
Since 1893 they have been canceled when redeemed in silver
and the bullion so released has been coined, gradually reducing
the Treasury's holdings of bullion. The seigniorage also is
coined as it accrues.
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