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July 9, 1996
"Speech on Economics Made Political History - 'A Cross of Gold,' 100 Years Later"
San Jose Mercury News
By Timothy Taylor
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ONE HUNDRED years ago, on July 9, 1896, William Jennings Bryan rocked the Democratic national convention with his famous ''cross of gold'' speech.

The New York Times, which never much liked Bryan's politics, reported on his speech the next day: ''Under the spell of the oratory of the gifted blatherskite from Nebraska, the convention went into spasms of enthusiasm. Amid roars of cheers, rising and falling like the noise of a tremendous storm, they lavished attentions on him.'' After five ballots, the convention nominated Bryan for president.

Today, although many people are dimly aware that a ''cross of gold'' speech was once given, they have no idea what Bryan was actually talking about. Here are his famous closing lines:

"If they dare to come out in the open field and defend the gold standard as a good thing, we will fight them to the uttermost. Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests, and toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind on a cross of gold."

In brief, Bryan's "cross of gold" was an argument over whether the nation should stick to a gold standard. This means that currency is convertible to gold, implying that the money supply is closely linked to the physical amount of gold.

As Milton Friedman and Anna Schwartz discuss in their classic 1963 work "A Monetary History of the United States," the world supply of gold increased by only 1.5 percent per year from 1867-1890, not enough to keep pace with growing economies around the world. Partly as a result, the U.S. economy grew sporadically, with several recessions in the late 1800s.

Bankers and financiers, who loomed large in the subscription area of the New York Times, believed that sticking to a gold standard was necessary to keep inflation low. But many farmers and workers in the Midwest and South, who were living through years of intermittent recession, depressed prices and tight credit, hearkened to Bryan's call.

Bryan proposed ''bimetallism,'' which meant that the country should expand its money supply by backing it with silver as well as gold. As a result, he said, loans and credit would be more available.

But just after Bryan lost the 1896 presidential election to Republican William McKinley, new gold discoveries were made in South Africa and Alaska, along with a new cyanide process for extracting gold. The growth rate of the world's gold supply more than doubled, so that gold was no longer a drag on the money supply or the economy.

Although Bryan was again nominated in 1900, bimetallism had become a crusade deprived of its original sin.

This capsule history helps explain why Steve Forbes sounded so peculiar during the Republican primaries when he upheld the memory of his big-money ancestors by arguing that America should return to a gold standard. After all, why have a nation's money supply determined by random events?

There is an economic case for bimetallism over a gold standard - basically, that random variations in gold and silver production may somewhat offset each other, and thus provide a more stable monetary base - but Bryan and his populist movement were not focused on the technical issues of managing the money supply. In his economic thinking, Bryan was the spiritual ancestor of the seven U.S. senators who voted in late June against confirming Alan Greenspan to another term as chairman of the Federal Reserve.

All seven are Democrats from Midwestern states from which Bryan drew his strength, like Tom Harkin of Iowa, Paul Wellstone of Minnesota, and Byron Dorgan of North Dakota. They believe that Federal Reserve is dominated by big banking and Wall Street interests who are hypersensitive about inflation, and eager to hold down the money supply.

However, the Clinton administration, 91 other senators, and most economists hold a different view: that the Federal Reserve should keep the money supply growing in step with the economy, and avoid herky-jerky money growth that leads to bursts of inflation and recession.

Although full-blooded populists like William Jennings Bryan do give authentic voice to the resentments and suspicions of average people, it's worth remembering that gaudy rhetoric and self-righteous anger tend to produce as much exaggeration as truth. True, the gold standard wasn't working especially well in the early 1890s, but the economy was still growing in fits and starts. The metaphor of crucifixion, implicitly putting Bryan's supporters in the role of Jesus Christ, was overheated and overdone.

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