Can Rhetoric Create a Recession? It Has Before

Remembering 1896, when a William Jennings Bryan speech about monetary policy sparked a financial panic

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For the first time in a century, monetary policy stands at the center of our political debate. A number of leading contenders for the Republican presidential nomination are vying to persuade voters of the depth of their hostility to the Federal Reserve. Last month, Texas Governor Rick Perry suggested that further action from the Fed might be "treasonous," and that if it were pursued, "we would treat [Fed Chairman Ben Bernanke] pretty ugly down in Texas." Rick Santorum called for a "sound-money Federal Reserve," Newt Gingrich labeled the Fed "dangerous" and Michele Bachmann accused it of wielding "almost unlimited power over the economy." And then there's the Fed's most passionate critic, Ron Paul, who accuses it of being "a full time counterfeiting operation to sustain monopolistic financial cartels."

The idea that it is not merely mistaken, but positively immoral, for the federal government to manipulate the money supply is as old as the republic. It has found its greatest popularity during moments of economic crisis, as voters search for a single identifiable cause, and cure, to the tangled problems they face. That poses an almost-irresistible temptation to politicians hoping to win office by tapping popular frustrations. But they are playing with fire. The last time a major political party fused moral fervor and monetary policy in this fashion, it plunged a stalling economy back into recession and sentenced itself to two decades of political irrelevance.

THE LESSONS OF 1896

The Depression of 1893 paralleled, in many ways, our current plight. It started as a financial panic, and soon deepened into the worst economic crisis the nation had ever faced. Confidence plummeted, banks failed, businesses went bankrupt, and unemployment soared.

Bryan's speech is well remembered. Its consequences are not.

The economic crisis struck amidst a simmering political insurgency. The People's Party, better known as the Populists, had enjoyed considerable success in the election of 1892, particularly in agricultural regions that were already suffering economically. To build on its triumphs, the party searched for a defining issue that could speak to the economic malaise. Out of the mass of proposals emerged a single, simple idea that almost all factions could back: bimetallism.

The persistent deflation of the previous decades had tipped the scales in favor of creditors, and the rigidity of the gold standard fed the era's boom-and-bust cycle. Populists of almost every stripe rallied to the idea that allowing currency to be convertible into silver as well as gold could expand the supply of cash and thereby inflate away their troubles. Silver coinage served both as a specific and concrete proposal around which to rally, and a symbolic issue capable of differentiating honest, common Americans from exploitative elites.


Like modern-day Fed bashers, advocates of silver reveled in their defiant rejection of economic orthodoxy, and delighted in mocking the academic consensus. They dismissed concerns that America, heavily reliant on European investment to finance its expanding economy, would watch that capital disappear and its economy contract should it embrace inflation. The most popular pamphlet on bimetallism featured a befuddled professor of political economy, his chair "endowed with the money of bankers," and his arguments unequal to the common-sense propositions of his opponents. It sold a half-million copies.

Into the fray stepped a young and ambitious Democratic Congressman from Nebraska, William Jennings Bryan. A gifted orator, Bryan styled himself a champion of the common people, giving voice to the long-simmering resentments of the farmers in his district who had been left behind by social and economic change. Although not himself a member of the People's Party, Bryan sought to tap into the passions it aroused, and to co-opt its signature proposal. In late 1893, he delivered a series of rousing speeches on the floor of the House, laced with passages from Job, Jeremiah and Joshua, and equating the struggle for silver coinage to the defense of "Christian civilization." Bryan found his defining issue, and the silverites found their champion.

By the summer of 1894, after eighteen long months, the economy showed the first signs of a fragile recovery. It remained well off the pre-recession highs at the end of 1895, when a financial crisis in Europe and tension with Britain sparked another minor panic. It hung in the balance in the spring of 1896, as the Democrats debated the choice of a successor to President Grover Cleveland. 

At the Democratic Convention in July, Bryan took the rostrum, and delivered a riveting speech. He blasted the moneyed elites, and denounced the gold standard, building to a thunderous climax:

Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the 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 upon a cross of gold.

As he finished speaking, Bryan lowered his hands from his own brow and stretched them out to either side. For five long seconds, he hung suspended from the imagined cross before a silenced crowd. Then he descended from the stage, and the convention hall exploded.

Presented by

Yoni Appelbaum is a social and cultural historian of the United States. He is a lecturer on history and literature at Harvard University.

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