Resumption Act of 1875

Definition

The Resumption Act of 1875 was a piece of legislation aimed at restoring the U.S. government's commitment to redeeming paper money in gold, effectively reinstating the gold standard. This act marked a significant shift in monetary policy following the economic turmoil caused by the Panic of 1873, as it was part of a broader effort to stabilize the economy and reassure investors and creditors about the value of U.S. currency.

5 Must Know Facts For Your Next Test

1. The Resumption Act declared that as of January 1, 1879, the U.S. government would resume the payment of gold for paper currency.
2. The act aimed to rebuild public confidence in the nation's finances after the economic instability caused by the Panic of 1873.
3. It required the Treasury to hold enough gold reserves to back all greenbacks in circulation, setting a precedent for future monetary policy.
4. Opposition to the act came from those who favored inflationary measures and wanted to maintain greenbacks as legal tender without a gold backing.
5. The Resumption Act is seen as a pivotal moment in U.S. monetary policy that ultimately contributed to the establishment of a more stable financial environment.

Review Questions

• How did the Resumption Act of 1875 relate to the economic conditions following the Panic of 1873?
  • The Resumption Act of 1875 was directly influenced by the economic instability that followed the Panic of 1873. The panic led to widespread financial distress, bank failures, and loss of public confidence in paper currency. By committing to redeeming paper money in gold, the act sought to restore faith in the U.S. financial system and stabilize the economy during a time of turmoil.
• What were some of the key arguments for and against the Resumption Act, and how did these reflect broader economic beliefs at the time?
  • Supporters of the Resumption Act argued that it would restore confidence in U.S. currency and stabilize the economy by returning to a gold standard. Conversely, opponents believed that maintaining greenbacks as legal tender without gold backing would provide necessary liquidity and prevent deflationary pressures. This debate highlighted broader economic beliefs regarding inflation versus deflation and the role of government in managing currency.
• Evaluate the long-term implications of the Resumption Act on U.S. monetary policy and economic stability in subsequent decades.
  • The Resumption Act set a significant precedent for U.S. monetary policy by reinforcing a commitment to the gold standard, which influenced monetary practices for several decades. Its enactment helped to create a more stable financial environment that attracted investment and fostered economic growth in the late 19th century. However, this rigid adherence to gold would later contribute to tensions during economic downturns, especially during periods when flexibility in monetary policy might have been beneficial.

Related terms

Gold Standard: A monetary system where a country's currency or paper money has a value directly linked to gold.

Panic of 1873: A financial crisis that triggered a severe economic depression in Europe and North America, marked by bank failures and widespread unemployment.

Greenbacks: Paper currency issued during and after the Civil War that was not backed by gold or silver, leading to debates about monetary policy.