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Needed fewer and fewer farmers and farmers were

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needed fewer and fewer farmers, and farmers were forced by falling prices into industry. The Populist Party was officially formed in 1892, adopting “free coinage of silver” as a main part of its platform. The party was made up largely of farmers in debt to eastern banks and suffering from declining prices for agricultural products. In 1894, a bill per- mitting the coinage of silver then in the Treasury (the result of the silver purchase acts) passed House and Senate, but was vetoed by President Cleveland. (The bill would have constituted a devalua- tion.) The debate finally had to be settled in a presidential election, when silver advocates managed, in 1896, to get William Jennings Bryant nominated as the Democratic presidential candidate on a platform of free coinage of silver. The Republican candidate, McKinley, favored a monometallic gold standard. After Bryant’s nomination July 10, the flight from U.S. assets by both U.S. and GOLD: THE ONCE AND FUTURE MONEY 52
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foreign investors intensified. Gold flowed out of reserves and interest rates rose on fears of devaluation. The crisis passed instantly after Bryant lost the election. The cit- izenry of the United States had voted to maintain the gold standard. Silver would continue to be used in India and China, but in the major Western countries it had finally been abandoned. After thou- sands of years of experimentation, the global citizenry had, at the end of a long debate, finally whittled its monetary options down to one and one only. No longer would the United States, or any other major world financial power, allow itself to be wracked by the vagaries of bimetallism or any other basket standard. The United States formally adopted a monometallic gold standard with the Gold Standard Act of 1900. The closure of the western frontier with the creation of the state of Arizona in 1912 was followed in 1913 by the Sixteenth Amendment, which legalized the federal income tax. There was nowhere left to run from the tax collector. However, this allowed the federal govern- ment to finally free itself from its dependence on tariff revenue, which had offered continuous temptation toward protectionism. Since 1861, protection of big business had become standard policy. The purpose of protectionism is to achieve what every big business desires, monopoly control and the suppression of competitors. In response, antimonopoly agitation arose in the latter decades of the nineteenth century. Democratic president Woodrow Wilson desired lower tariffs, but felt he had to make up for lost revenue by enacting an income tax, which began at 1 percent on personal or corporate income over $4,000 (about $70,000 today) and had a top rate of 7 percent on income over $500,000 ($8.750 million today). Though these rates may seem minuscule by today’s standards, they were, except for during the Civil War, the first income taxes the country had ever seen. Even with the tariff reduction, the economy went into recession in 1913–1915 until the flood of overseas demand for war materials and domestic war spending counteracted the contraction in 1916. Northeastern business interests attempted once more, in Money in America 53
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