Question

in William Jennings Bryan's famous speech, "The Cross of Gold", he called for

Answer 1

Free coinage of silver at the rate of 16:1 to gold. The idea is that anyone should be able to present silver bullion to the US Mint, and have it struck into coins that were legal tender. The conversion would such that 16 ounce of silver coins would have the same face value as 1 ounce of gold coins. In fact, this had been the practice before the Coinage Act of 1873, which stopped the Mint from accepting silver bullion and coining it.

You might wonder why this should be a raging issue, as it was from the 1870s through the 1890s (Bryan made is famous speech during the Democratic Convention of 1896.) The answer is that the actual market value of silver bullion in that period was substantially less than 1/16 the value of gold. So if people had been able to bring silver into the Mint and get money back, they would have significantly and magically increased the amount of value they owned. For example, under the Coinage Act, if I had 1 ounce of silver, I could sell it on the open market for about 1/40 ounce of gold (which was legal tender). Now if on the other hand Bryan's wish had been granted, I could instead of have turned into coins that had a legal (face) value of 1/16 ounce of gold. Presto! I have essentially doubled the money I have. Sweet!

When money is created out of think air like this, it always leads to inflation (prices rising), because more money chases the same amount of goods, leading to prices rising. However, the 1890s were already a period of deflation, with prices and wages dropping. The Silverites *wanted* to get a little inflation going, to raise prices, particularly for farmers. The opposition was afraid that, first, inflation would get out of control, as it often does, and, second, that it would make international trade difficult because the US dollar would no longer have a constant and dependable value internationally. Bryan, the rabble-rousing clown he was, dismisses both of these concerns in his speech.

The situation is actually quite similar to what you have today in the US housing market. The price of houses has been falling steeply since 2007, leading to much pain for people holding mortgages (the value of their asset plunges while the value of the loan they took out to buy it does not). In response, the Federal Reserve has essentially pursued Bryan's 1896 strategy. Not by coining silver, of course. But by printing money and using it to "buy" mortgages. This has indeed (as of 2012) stopped the decline in housing prices. It has also provoked significantly inflation in food and fuel (the price of gasoline has doubled in 3 years), but so far, that has not provoked very much outcry.