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The Crime
Macroeconomic Consequences
Political Constituencies
The Cross of Gold Speech
The Elections
Gold Inflation
The Wonderful Wizard of Oz
Monetary History
Bryan lost the 1896 Presidential Elections. Why?

The Democrats lost the 1896 Presidential elections to the Republicans, with Mc Kinley. They also lost the next 2 elections, in spite of their strong backing in the popular classes.

Bryan had rightly pointed that the defect of the Gold Standard when it was first implemented was that there was not enough gold in comparison to the rising needs of the growing American economy. The effect was deflationary. If the USA had been on a bimetallic standard between 1875 and 1890, the economy could have expanded far more than it did, restricted as it was in its monetary straight jacket.

So, if Bryan was right, why did he lose the elections ?

According to Friedman, Bryan was right, but 20 years too late. He wanted the free coinage of silver at 16:1 in 1896, a very inflationnist proposal. If the bimetallic standard had been maintained in 1873, then deflation would not have occurred, and even a slight inflation would have been possible. Anyway, inflation came, but this time it was via gold. Go to next slide to learn why. Bryan himself admitted that what he sought with silver had been achieved by gold but, ever a wonderful orator, he didn't take it as a defeat : SLIDE BELOW !

Suppose the citizens of a town were divided, nearly equally, on the question of water supply, one faction contending that the amount should be increased, and suggesting that the increase be piped from Silver Lake, the other faction insisting no more water was needed; suppose that at the election the opponents of an increase won (no matter by what means); and suppose, soon after the election, a spring which may be described as Gold Spring, broke forth in the very center of the city, with a flow of half as much water as the city had before used; and suppose the new supply was turned into the city reservoir to the joy and benefit of all the people of the town. Which faction would, in such a case, have been vindicated ? Just such a result has followed a similar increase in the nation's supply of money to the joy of all - thus proving the contentions of the bimetallists.

From The Memoirs of William Jennings Bryan, 1925

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Why did Bryan lose ?

Bryan was trying to close the barn door after the horse had been stolen

The inflation he wanted with silver
was achieved by
gold after 1900.

The 1897-1914 period was very different from the precedent. With those fresh discoveries of gold and no big countries switching to the Gold Standard (that would have raised the demand for gold), gold became plentiful for monetary purposes. Add to this the expansion of the banking sector that helped "economize gold" (that is, you could make more paper money with a given quantity of gold), and you get the 7.5 % a year increase of the stock of money (compared to 6 % before) and the 2 % annual increase in prices (CPI). This period was stable politically, with fewer protests.

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